UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 20-F
(Mark One)
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REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
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OR
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 5(d) OF THE SECURITIES ACT OF 1934
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For the fiscal year ended June 30, 2020
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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OR
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SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Date of event requiring this shell company report
Commission file number 001-38442
IBEX LIMITED
(Exact name of Registrant as specified in its charter
and translation of Registrant’s name into English)
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Bermuda
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(Jurisdiction of Incorporation or Organization)
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Crawford House, 50 Cedar Avenue
Hamilton HM11, Bermuda
(441) 295-6500
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(Address of principal executive offices)
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Robert Dechant, Chief Executive Officer
IBEX LIMITED
1700 Pennsylvania Avenue NW, Suite 560
Washington, DC 20006
(202) 580-6200
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(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
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Securities registered or to be registered pursuant to Section 12(b) of the Act.
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Common shares
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IBEX
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Nasdaq Global Market
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Securities registered or to be registered pursuant to Section 12(g) of the Act. None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
1 Series A Convertible Preferred Shares, par value $0.000111650536 per share
11,083,691.3814 Series B Convertible Preferred Shares, par value $0.000111650536 per share
111,986.4786 Series C Convertible Preferred Shares, par value $0.000111650536 per share
1,851,788 Class B Common Shares, par value $0.000111650536 per share
(Upon the consummation of our initial public offering, all Convertible Preferred Shares and Class B Common Shares automatically converted into an aggregate of 14,833,032 common shares)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
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☐ Yes
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☒ No
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If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
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☐ Yes
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☒ No
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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☒ Yes
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☐ No
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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit such files).
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☒ Yes
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☐ No
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging
growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer ☐
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Accelerated filer ☐
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Non-accelerated filer ☒
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Emerging growth company ☒
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If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section
404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
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U.S. GAAP ☐
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International Financial
Reporting Standards as issued
by the International Financial
Reporting Standards Board ☒
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Other ☐
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If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
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Item 17 ☐
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Item 18 ☐
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If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
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☐ Yes
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☒ No
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52 | |
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52 | |
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75 | |
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91 | |
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98 | |
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| ITEM 16A. | 105 | |
| ITEM 16B. | 106 | |
| ITEM 16C. | 106 | |
| ITEM 16D. | 106 | |
| ITEM 16E. | 106 | |
| ITEM 16F. | 106 | |
| ITEM 16G. | 106 | |
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| F-1 |
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INTRODUCTION
Unless otherwise indicated or the context otherwise requires, all references in this annual report on Form 20-F to the terms “IBEX,” “IBEX Limited,” the “Group,” the “Company,” “we,” “us,” and “our” refer to IBEX
Limited and our wholly-owned subsidiaries for all periods presented in this Form 20-F.
On August 7, 2020, our common shares were listed on the Nasdaq Global Market and began trading under the ticker symbol “IBEX”.
PRESENTATION OF FINANCIAL INFORMATION
Our fiscal year ends on June 30. Our audited consolidated financial statements for the three years ended June 30, 2020 have been prepared in accordance with International Financial Reporting Standards (“IFRS”),
as issued by the International Accounting Standards Board (“IASB”). None of our financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Our financial information is presented in U.S. dollars. All references in this annual report on Form 20-F to “$” mean U.S. dollars.
We have made rounding adjustments to some of the figures included in this annual report on Form 20-F. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the
figures that preceded them.
This annual report contains forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended (“Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”) and as defined in the Private Securities Litigation Reform Act of 1995 (“PSLRA”) that are subject to
risks and uncertainties. All statements other than statements of historical fact included in this annual report are forward-looking statements.
Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. In some cases, you can identify forward-looking
statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,” “should,” “can
have,” “likely” and other words, the negative forms of such words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. These statements relate to
events that involve known and unknown risks, uncertainties and other factors, including those listed under “Risk factors,” which may cause our actual results, performance or achievements to be materially different from any future results,
performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements contained in this annual report include, but are not limited to, statements about:
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•
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The developments relating to COVID-19, including the scope and duration of the pandemic and actions taken by federal, state and local governmental authorities in the
United States, local governmental authorities in our international sites and our clients in response to the pandemic and the effect on our operations, operating budgets, cash flows and liquidity.
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•
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The effect on our business, financial conditions, results of operations and cash flows in connection with the Frontier restructuring and its proceedings under Chapter 11
of the United States Bankruptcy Code.
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•
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The effect of cyberattacks on our information technology systems.
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•
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Our ability to attract new business and retain key clients.
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•
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Our ability to enter into multi-year contracts with our clients at appropriate rates.
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The potential for our clients or potential clients to consolidate.
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Our clients deciding to enter into or further expand their insourcing activities.
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Our ability to operate as an integrated company under the IBEX brand.
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Our ability to manage portions of our business that have long sales cycles and long implementation cycles that require significant resources and working capital.
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Our ability to manage our international operations, particularly in Pakistan and the Philippines and increasingly in Jamaica and Nicaragua.
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Our ability to comply with applicable laws and regulations, including those regarding privacy, data protection and information security.
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Our ability to manage the inelasticity of our labor costs relative to short-term movements in client demand.
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Our ability to realize the anticipated strategic and financial benefits of our relationship with Amazon.
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Our ability to recruit, engage, motivate, manage and retain our global workforce.
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Our ability to anticipate, develop and implement information technology solutions that keep pace with evolving industry standards and changing client demands.
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Our ability to maintain and enhance our reputation and brand.
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We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are
reasonable, we caution that it is very difficult to predict the impact of known factors, and, it is impossible for us to anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ
materially from our expectations, or cautionary statements, are disclosed under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this annual report. All written and oral
forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements as well as other cautionary statements that are made from time to time in our other SEC
filings and public communications. You should evaluate all forward-looking statements made in this annual report in the context of these risks and uncertainties.
We caution you that the important factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or
developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements included in this annual report are made only
as of the date hereof. We undertake no obligation to update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.
Not applicable.
Not applicable.
| A. |
Selected Financial Data
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The following selected consolidated statements of profit or loss and other comprehensive income data for fiscal years 2020, 2019 and 2018 and the selected consolidated statement of financial
position data as of June 30, 2020 and 2019 have been derived from our audited consolidated financial statements included at the end of this annual report. The selected consolidated statement of financial position data as of June 30, 2018 have
been derived from our audited consolidated financial statements not included in this annual report.
Our statements of financial position data and our statements of profit or loss and other comprehensive income data for the fiscal years presented herein reflect the impact of our adoption,
effective July 1, 2018, of IFRS 15 – Revenue from Contracts with Customers and IFRS 16 – Leases. Our statements of financial position data at June 30, 2019 and our statements of profit or loss and other comprehensive income data for the fiscal
years ended June 30, 2019 and 2018 reflect our disposition of Etelequote Limited to our parent company, The Resource Group International Limited (“TRGI”), on June 26, 2019 and its treatment as a discontinued operation. For additional detail on
the impact of the adoption of IFRS 15 and IFRS 16 and the treatment of Etelequote Limited as a discontinued operation and their impact on the comparability of our financial position at June 30, 2019 and 2018 and our results of operations for
the years then ended, see “Item 5A. Results of Operations.” For more information about our disposition of Etelequote Limited, refer to Note 30.2 of our audited consolidated financial statements included at the end of this annual report.
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As of and for the years ended June 30,
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US$ in thousands, except per share amounts
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2020
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2019
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2018
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Statements of Profit or Loss and Other Comprehensive Income / (Loss) data
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Revenue
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$
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405,135
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$
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368,380
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$
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342,200
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Income / (loss) from operations
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19,513
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6,805
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(17,777
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)
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Net income / (loss) for the year, continuing operations
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7,770
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(4,519
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)
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(20,870
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)
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Net income on discontinued operation, net of tax
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-
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15,484
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4,881
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Net income / (loss) for the year
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$
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7,770
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$
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10,965
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$
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(15,881
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)
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Loss per share from continuing operations attributable to the ordinary equity holders of the parent
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Basic loss per share
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$
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-
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$
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-
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$
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-
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Diluted loss per share
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$
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-
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$
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(0.36
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)
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$
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(1.85
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)
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Loss per share attributable to the ordinary equity holders of the parent
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Basic loss per share
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$
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-
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$
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-
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$
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-
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Diluted loss per share
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$
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-
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$
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-
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$
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(1.42
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)
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Weighted average number of ordinary shares outstanding - basic
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1,176,370
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956,835
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-
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Weighted average number of ordinary shares outstanding - diluted
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12,936,962
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12,461,182
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11,195,649
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Statement of Financial Position Data
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Cash and cash equivalents
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$
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21,870
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$
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8,873
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$
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13,519
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Total assets
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195,236
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188,302
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157,081
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Borrowings, non-current
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3,782
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7,184
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9,880
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Total non-current liabilities
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73,435
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68,293
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12,894
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Total liabilities
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179,088
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179,674
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129,128
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Share capital
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12
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12
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12
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Total equity
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$
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16,148
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$
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8,628
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$
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27,953
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Dividends declared per share
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$
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-
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$
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-
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$
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-
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| B. |
Capitalization and Indebtedness
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Not applicable.
| C. |
Reasons for the Offer and Use of Proceeds
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| D. |
Risk Factors
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We are subject to certain risks and uncertainties described below. The risks and uncertainties described below are not the only risks we face. Additional risks and uncertainties that are not
presently known or are currently deemed immaterial may also impair our business and financial results.
Risks Related to Our Business
The COVID-19 pandemic has adversely impacted our business and results of operations. The ultimate impact of COVID-19 on our business, financial
condition and results of operations will depend on future developments which are highly uncertain and cannot be predicted at this time, including the scope and duration of the pandemic and actions taken by federal, state and local governmental
authorities in the United States, governmental authorities in our international sites and our clients in response to the pandemic.
In March 2020, the World Health Organization declared the outbreak of COVID-19 as a global pandemic (“Pandemic”). The Pandemic has had a widespread and detrimental effect on the global
economy and has adversely impacted our business and results of operations. We have experienced travel bans, states of emergency, quarantines, lockdowns, “shelter in place” orders, business restrictions and shutdowns in most countries where we
operate. While we are unable to accurately predict the full impact that the Pandemic will have on our results from operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the duration and severity of
the Pandemic and its containment measures, our compliance with these measures has impacted our day-to-day operations and disrupted our business. Because the severity, magnitude and duration of the Pandemic and its economic consequences are
highly uncertain, rapidly changing and difficult to predict, the ultimate impact of the Pandemic on our business, financial condition and results of operations is currently unknown.
The extent to which the Pandemic continues to adversely impact our business and results of operations will depend on numerous evolving factors that are difficult to predict and outside of our
control, including: the duration and scope of the Pandemic; actions taken by governments and other parties, such as our clients, in response to the Pandemic; the impact of the Pandemic on economic activity and actions taken in response; the
effect of the Pandemic on our clients and client demand for our services and solutions; the ability of our clients to pay for our services and solutions on time or at all; our ability to sell and provide our services and solutions to clients
and prospects; and the ability of our employees to successfully work remotely without suffering productivity issues due to, among other things, their own illness or the illness of family members, distractions at home, including family issues or
virtual school learning for their children; and/or unreliable or unstable internet connections.
In the interest of the health and safety of our employees and due to restrictions imposed by national or local governments in places such as the Philippines, Jamaica, Nicaragua, Pakistan and
the United States, we have rapidly mobilized our operations to deliver our services remotely from the homes of our individual employees to accommodate for social distancing in our sites, government imposed quarantines and other restrictions
imposed by national or local governments. This effort has posed, and continues to pose, numerous operational risks and logistical challenges and has amplified certain risks to our business, including increased demand on our information
technology resources and systems that were designed for most of our employees to work from our sites and not remotely, enhanced risk that remote assets like computers or routers might be damaged or not returned, the movement of assets from a
tax free zone to a work from home location might trigger new increased taxation, the inability to logistically share equipment and workspaces, increased phishing, ransomware and other cybersecurity attacks as cybercriminals try to exploit the
uncertainty surrounding the Pandemic, and increased data privacy and security risks as our employees are working from environments that may be less secure than those of our sites. Any failure to effectively manage these risks, including to
timely identify and appropriately respond to any cyberattacks, may adversely affect our business.
In addition, certain of our clients have not consented to or limited programs eligible for work-at-home arrangements in connection with the services we deliver to them or certain of our
employees were logistically prohibited from providing services because of broadband and/or work environment deficiencies, and as a result we have been unable to fully staff as needed and to deliver at the same volumes to the same extent we were
prior to the onset of the Pandemic. We are also exposed to the risk that continued government-imposed restrictions or frequently changing government-imposed restrictions such as enhanced quarantine areas, lock downs, cessation of transportation
which adversely affect our employees’ ability to access our facilities could disrupt our ability to provide our services and solutions and result in, among other things, terminations of client contracts and losses of revenue or additional costs
borne by us to provide temporary housing or transportation to our employees to allow them to access our facilities. Even after implementing social distancing, enhanced cleaning procedures and other mitigating measures, there is no guarantee
that we will not have an outbreak of COVID-19 at one of our facilities, resulting in a significantly reduced workforce due to infection or a significant percentage of our workforce in a facility being quarantined due to exposure as a result of
contact tracing, or that a governmental authority may close our facility as a result, which could impact cash flows from operations and liquidity. Further, even with respect to clients who have consented to work-at-home arrangements for some or
all of their programs, there is no guarantee that these clients will continue to permit these work-at-home arrangements and revocation by any clients of their consent to these arrangements could also result in loss of revenue in the future.
The significant personal and business challenges presented by the Pandemic, including the potentially life-threatening health risks to employees and their families and friends, the closures
of schools and the unavailability of various services our employees may rely upon, such as childcare, are a cause of employee morale concerns and may adversely impact employee productivity and result in increased absenteeism and leaves of
absence. Further, as we look to backfill vacant positions and add headcount in preparation for ramp season, our time to fill and cost per hire could increase due to external factors beyond our control.
We may experience reluctance of the workforce to return to the sites during the Pandemic due to concerns related to returning to a communal workplace including, for their own health if they
are part of a vulnerable population or have vulnerable family members at home and enhanced federal government unemployment incentives that may result in temporarily higher income from unemployment that may exceed local prevailing wages and may
make it more difficult for us to encourage our workforce to return to work or hire a sufficient number of employees to support our contractual commitments or may result in higher costs, lower contract profitability, higher turnover and reduced
operational efficiencies, which could, in the aggregate, have a material adverse impact on our results of operations. While our employees in the United States were designated as essential critical infrastructure workers pursuant to the Order
from the Cybersecurity and Infrastructure Agency, there is no guarantee that such designation may not change in the future. Similarly, in some of our non-U.S. locations, certain of our clients in the telecommunications, shipping and delivery
and fulfillment services industries were deemed to be essential and by virtue of such designation, our employees were considered to be essential workers. However, there is no guarantee that such designation may not change in the future.
The post-Pandemic social distancing rules and other government mandates are likely to permanently impact the structure and configuration of our sites, where employees work in close proximity.
These new regulatory requirements may force us to make significant capital investments to reconfigure our existing facilities and to accept lower capacity utilization than the utilization priced under our multi-year contracts or to expand our
capacity into new space in certain geographies to accommodate our workforce, which will result in increased capital expenditures and a degradation of our gross margin and profitability under the negotiated cost structures for the client. If we
are unable to renegotiate our contracts to recoup these additional costs or adjust our cost structure to absorb them, our margins and profitability will be impacted and will result in adverse impact on our results of operations. Our ability to
develop and implement agile workforce strategies while navigating sudden and massive workforce shifts may result in increased capital expenditures and a degradation of our gross margin and profitability under the negotiated structures for the
client. Furthermore, there has been a significant upward trend in general with respect to labor litigation related to the impact of the Pandemic on the workforce, including workplace safety, Family Medical Leave Act and disability
accommodations for vulnerable populations. As a result, this could result in increased claims related to the Pandemic or we may incur increased costs to accommodate the vulnerable population which could, in the aggregate, have an adverse effect
on our results of operations. We could also see an increase in health care costs for employees due to emerging regulations regarding COVID-19 testing, telemedicine and extended COBRA coverage. Historically, pandemic conditions have led to
sweeping changes in governmental regulations regarding the use and payment of sick time and vacation/leave time, which could have a material adverse effect on our future labor costs. Finally, periods of sustained high unemployment have
historically led to increases in minimum wage rates, which could also have a material adverse effect on our future labor costs.
The effects of the Pandemic could result in slowed decision-making and delayed planned work by our clients. Our clients may also experience reduced volume to their business as a result of the
Pandemic which could result in over-staffing or requests for reduced staffing on certain client accounts. As clients face reduced demand for their products and services, reduce their business activity and face increased financial pressure on
their businesses, we have faced and expect to continue to face downward pressure on our pricing and gross margins due to pricing concessions to clients and requests from clients to extend payment cycles. In addition, clients have requested and
may continue to request extended payment cycles, which may have an adverse effect on our cash flows from operations. We could also face a significantly elevated risk of client insolvency, bankruptcy or liquidity challenges where we may perform
services and incurred expenses for which we are not paid.
The overall uncertainty regarding the economic impact of the Pandemic and the impact on our revenue growth could impact our cash flows from operations and liquidity. Asset impairment charges,
increased currency exchange-rate fluctuations and an inability to recover costs or lost revenues or profits from insurance carriers could all adversely affect us, our financial condition and our results of operations. Additionally, the
disruptions and volatility in the global and domestic capital markets may increase the cost of capital and limit our ability to access capital. Furthermore, the impact of the Pandemic on our lenders may limit our ability to borrow under our
existing credit facilities.
Our efforts to mitigate the negative effects of the Pandemic on our business may not be effective, and we may be affected by a protracted economic downturn. Even after the Pandemic has
subsided, we may continue to experience negative effects as a result of the Pandemic’s global economic impact. Further, as this Pandemic is unprecedented and continuously evolving, it may also affect our operating and financial results in a
manner that is not presently known to us or in a manner that we currently do not consider will present significant risks to us or our operations. Addressing the significant personal and business challenges presented by the Pandemic, including
various business continuity measures and the need to enable work-at-home arrangements for many of our employees, has demanded significant management time and attention and strained other corporate resources, and is expected to continue to do
so.
For more information, see “Item 5A. Operating Results – Key Factors Affecting Our Performance.”
Frontier, our largest client as of June 30, 2020, has filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code, which
could have a material adverse effect on our business, financial condition, results of operations and cash flows.
On April 14, 2020, Frontier Communications Corporation (“Frontier”), our largest client as of June 30, 2020, representing 18.2% of revenue for the fiscal year then ended, filed a petition
under Chapter 11 of the United States Bankruptcy Code (“Bankruptcy Code”) in the U.S. Bankruptcy Court for the Southern District of New York (“Bankruptcy Court”), along with certain of its subsidiaries. Frontier announced that this Chapter 11
filing is intended to effectuate a pre-arranged financial restructuring in accordance with a Restructuring Support Agreement, entered into by Frontier with certain of its creditors. According to Frontier, if implemented in accordance with the
Restructuring Support Agreement, the pre-arranged financial restructuring is expected to reduce Frontier’s debt by more than $10 billion and provide significant financial flexibility to support continued investment in its long-term growth.
Frontier’s ability to successfully complete a reorganization process in its Chapter 11 proceedings is subject to a number of risks and uncertainties. A Chapter 11 bankruptcy proceeding is
an unpredictable process that can involve contested matters, evidentiary hearings, and trials over issues that can be raised by creditors or other parties in interest at any time during the course of the Chapter 11 case. These risks and
uncertainties could delay, impair, or frustrate Frontier’s efforts to: (i) obtain and retain sufficient financing and/or access to cash, including cash collateral, to operate its business and pay its restructuring expenses; (ii) meet the
deadlines and milestones set forth in the Restructuring Support Agreement; (iii) obtain timely Bankruptcy Court approval of other relief sought by it in the Chapter 11 proceeding that is integral to the Restructuring Support Agreement; (iv)
avoid any adverse effect on liquidity, creditor support or business operations as a result of its Chapter 11 proceedings; (v) obtain the requisite regulatory approvals for consummation of the Chapter 11 Plan; (vi) comply with the terms and
conditions of the debtor-in-possession financing (“DIP Financing”) and any other financing arrangements; and (vii) consummate the Chapter 11 Plan and emerge from bankruptcy in a timely fashion. All of these direct and indirect uncertainties
regarding Frontier may affect, among other things, our ability to be paid by Frontier for services rendered to Frontier by us in a timely and compete manner, our ability to sustain or increase the volume of our business with Frontier, and the
possibility of potential preferential transfer claims by or on behalf of Frontier against us with regard to payments made to us by Frontier in the 90 days prior to its Chapter 11 filing. In each case, the actions of Frontier and other parties
in interest in Frontier’s Chapter 11 proceedings and the decisions of the Bankruptcy Court may affect these and other aspects of the Frontier Chapter 11 proceedings and the resulting implications for us. Because of the significant volume of
business that we currently undertake with Frontier, any detrimental impact on Frontier’s Chapter 11 proceedings, the timing or availability of financing, or its ability to timely obtain requested relief in the Chapter 11 proceedings could
significantly and adversely affect the collectability our existing or future receivables, result in a decline in our revenues and profits, and have a material adverse impact on our business and financial conditions, results of operations, and
cash flows.
For more information, see “Item 5A. Operating Results – Key Factors Affecting Our Performance – Frontier Chapter 11 Petition.”
We were the target of a cybersecurity attack that impacted a portion of our information technology systems.
On August 17, 2020, we detected a ransomware attack that briefly impacted a portion of our information technology systems. Immediately upon becoming aware of the attack, we implemented containment measures to
prohibit access by the threat actor to our extended network which also prevented its access to our client’s networks and systems. Normal IT operations continued, leveraging our redundant infrastructure and immediately restoring the impacted
systems from online backup systems. At no time did the attack impact our business operations, but the unauthorized access included the exfiltration of non-production data files from a file server in our backup data center. In conjunction with
our containment activities, we launched an investigation, notified our insurance broker and carrier, and engaged an incident response team and cybersecurity forensics firm. We have been working with industry-leading cybersecurity firms who
have implemented a series of additional containment and remediation measures to address the incident and reinforce the security of our information technology systems.
Based on the preliminary assessment and on the information currently known, we do not believe the incident will have a material impact on our business, financial condition or results of operations. However, the
investigation of the incident is ongoing, and we may incur losses associated with claims by third parties, as well as fines, penalties and other sanctions imposed by regulators relating to or arising from the incident, which could have a
material adverse impact on our business, financial condition or results of operations in future periods. While we continue to harden our cyber security infrastructure to address the constantly evolving threat landscape, we cannot provide
assurance that our security frameworks and measures will be successful in preventing future cyberattacks. Further, the incident may have a negative impact on our reputation and cause customers, suppliers and other third parties with whom we
maintain relationships to lose confidence in us. We are unable to definitively determine the impact to these relationships and whether we will need to engage in any activities to rebuild them.
For more information, please refer to “Item 3D. Risk Factors—Risks Related to Our Business—Unauthorized or improper disclosure of Personally Identifiable Information or breach of privacy, whether inadvertent or
as the result of a cyber-attack or improperly by our employees, could result in liability and harm our reputation which could adversely affect our business, financial condition, results of operations and prospects” and “Item 3D. Risk Factors—
Risks Related to Our Business—Our business is subject to a variety of U.S. and international laws and regulations, including those regarding privacy, data protection and information security, and our customers may be subject to regulations
related to the handling and transfer of certain types of sensitive and confidential information. Any failure to comply with applicable laws and regulations would harm our business, results of operations and financial condition.”
Our business is dependent on key clients, and the loss of a key client could have an adverse effect on our business and results of operations.
We derive a substantial portion of our revenue from a few key clients. Our top three clients accounted for 43.7%, 50.6%, and 56.9% of our
revenues for the fiscal years ended June 30, 2020, 2019, and 2018, respectively. Our largest client as of June 30, 2020 was responsible for 18.2%, 18.2%, and 18.5% of our revenue for the fiscal years ended June 30, 2020, 2019, and 2018,
respectively. Our second largest client as of June 30, 2020 was responsible for 16.0%, 20.3%, and 23.0% of our revenue for the fiscal years ended June 30, 2020, 2019, and 2018, respectively. Our third largest client as of June 30, 2020 was
responsible for 9.5%, 12.1%, and 15.4% of our revenue for the fiscal years ended June 30, 2020, 2019, and 2018, respectively. The loss of business with, or the failure to retain a significant amount of business with, any of our key clients
could have a material adverse effect on our business, financial condition and results of operations. In addition, our ability to collect revenue could be impacted by the financial condition of our clients.
We enter into multi-year contracts with our clients. Our failure to price these contracts correctly may negatively affect our profitability.
The pricing of our solutions is usually included in statements of work entered into with our clients, many of which are for terms of two to five years. In certain cases, we have committed to
pricing over this period with limited to no sharing of risks regarding inflation and currency exchange rates. In addition, we are obligated under some of our contracts to deliver productivity benefits to our clients, such as reduction in handle
time or speed to answer. If we fail to accurately estimate future wage inflation rates, unhedged currency exchange rates or our costs, or if we fail to accurately estimate the productivity benefits we can achieve under a contract, it could have
a material adverse effect on our business, results of operations and financial condition.
The terms of our client contracts may limit our profitability or enable our clients to reduce or terminate their use of our solutions.
Most of our client contracts do not have minimum volume requirements, and the profitability of each client contract or work order may fluctuate, sometimes significantly, throughout various
stages of the program. Certain contracts have performance-related bonus (penalty) provisions that require the client to pay us a bonus (require us to issue the client a credit) based upon our meeting (failing to meet) agreed-upon service levels
and performance metrics. In addition, certain of our client contracts may subject us to potential liability and / or rebate payments in certain circumstances. Moreover, although our objective is to sign multi-year agreements, our contracts
generally allow the client to terminate the contract for convenience or reduce their use of our solutions. There can be no assurance that our clients will not terminate their contracts before their scheduled expiration dates, that the volume of
services for these programs will not be reduced, that we will be able to avoid penalties or earn performance bonuses for our solutions, or that we will be able to terminate unprofitable contracts without incurring significant liabilities. For
these reasons, there can be no assurance that our client contracts will be profitable for us or that we will be able to achieve or maintain any particular level of profitability through our client contracts.
The consolidation of our clients or potential clients may adversely affect our business, financial condition, results of operations and prospects.
Consolidation of the potential users of our solutions, particularly those in the telecommunications, technology and cable industries, may decrease the number of clients who contract our
solutions. Any significant reduction in or elimination of the use of the solutions we provide as a result of consolidation would result in reduced revenue to us and could harm our business. Such consolidation may encourage clients to apply
increasing pressure on us to lower the prices we charge for our solutions, which could have a material adverse effect on our business, financial condition, results of operations and prospects.
If our clients decide to enter into or further expand insourcing activities in the future, or if current trends toward outsourcing services and/or
outsourcing activities are reversed, it may materially adversely affect our business, results of operations, financial condition and prospects.
Our current agreements with our clients do not prevent our clients from insourcing services that are currently outsourced to us, and none of our clients have entered into any non-compete
agreements with us. Our current clients may seek to insource services similar to those we provide. Any decision by our clients to enter into or further expand insourcing activities in the future could cause us to lose a significant volume of
business and may materially adversely affect our business, financial condition, results of operations and prospects.
Moreover, the trend towards outsourcing business processes may not continue and could be reversed by factors beyond our control, including negative perceptions attached to outsourcing
activities or government regulations against outsourcing activities. Current or prospective clients may elect to perform such services in-house that may be associated with using an offshore provider. Political opposition to outsourcing services
and / or outsourcing activities may also arise in certain countries if there is a perception that such actions have a negative effect on domestic employment opportunities.
In addition, our business may be adversely affected by potential new laws and regulations prohibiting or limiting outsourcing of certain core business activities of our clients in key
jurisdictions in which we conduct our business, such as in the United States. The introduction of such laws and regulations or the change in interpretation of existing laws and regulations could adversely affect our business, financial
condition, results of operations and prospects.
Natural events, health epidemics (including the outbreak of COVID-19), wars, widespread civil unrest, terrorist attacks and other acts of violence
involving any of the countries in which we or our clients have operations could adversely affect our operations and client confidence.
Natural events (such as floods and earthquakes), health epidemics (including the outbreak of COVID-19), wars, widespread civil unrest, terrorist attacks and other acts of violence could
result in significant worker absenteeism, increased attrition rates, lower asset utilization rates, voluntary or mandatory closure of our facilities, our inability to meet dynamic employee health and safety requirements, our inability to meet
contractual service levels for our clients, our inability to procure essential supplies, travel restrictions on our employees, and other disruptions to our business. In addition, these events could adversely affect global economies, financial
markets and our clients’ levels of business activity. Any of these events, their consequences or the costs related to mitigation or remediation could have a material adverse effect on our business, financial condition, results of operations and
prospects.
We have a limited operating history as an integrated company under the IBEX brand, which makes it difficult to evaluate our future prospects and the
risks and uncertainties we may encounter.
Prior to June 30, 2017, our business was conducted through various wholly- or majority-owned portfolio companies of TRGI, which we refer to as the Continuing Business Entities. On June 30, 2017, TRGI completed a
series of transactions, which we refer to as the Reorganization Transaction, as a result of which the Continuing Business Entities became our subsidiaries. Although our subsidiaries have individually
conducted operations for years, we have a limited history operating the Continuing Business Entities as an integrated business under the IBEX brand, which make it difficult to evaluate our future prospects and the risks and uncertainties we
may encounter in seeking to execute on our strategies. These risks and uncertainties include our ability to:
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cross-sell our full spectrum of CLX solutions;
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educate the market on our full spectrum of CLX solutions;
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reposition and expand our brand to reflect our full spectrum of CLX solutions; and
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manage and execute our full spectrum of CLX solutions as part of an integrated company.
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Our historical performance, or that of our subsidiaries, should not be considered indicative of our future performance. We have encountered and expect to continue to encounter risks and
uncertainties frequently experienced by growing companies in rapidly changing industries, such as the risks and uncertainties described above and elsewhere in this annual report. If we are unable to successfully address these risks and
uncertainties, our business, financial condition, operating results and prospects could be materially adversely affected.
For more information, see “Item 4A. History and development of the company” and “Item 7A. Major Shareholders.”
Portions of our business have long sales cycles and long implementation cycles, which require significant resources and working capital.
Many of our client contracts are entered into after long sales cycles, which require a significant investment of capital, resources and time by both our clients and us. Before committing to use
our solutions, potential clients require us to expend substantial time and resources educating them as to the value of our solutions and assessing the feasibility of integrating our systems and processes with theirs. As a result, our selling
cycle, which may extend up to two years, is subject to many risks and delays over which we have little or no control, including our clients’ decisions to choose alternatives to our solutions (such as other providers or in-house resources) and
the timing of our clients’ budget cycles and approval processes.
In addition, implementing our solutions involves a significant commitment of resources over an extended period of time from both our clients and us. Our clients may also experience delays in
obtaining internal approvals or may face delays associated with technology or system implementations, thereby further delaying the implementation process.
If we fail to close sales with potential clients to whom we have devoted significant time and resources, or if our current and future clients are not willing or able to invest the time and
resources necessary to implement our solutions, our business, financial condition, results of operations and prospects could suffer.
Our business relies heavily on technology, telephone and computer systems as well as third-party telecommunications providers, which subjects us to various
uncertainties.
We rely heavily on sophisticated and specialized communications and computer technology coupled with third-party telecommunications and bandwidth providers to provide high-quality and reliable
real-time solutions on behalf of our clients through our delivery centers. In our Customer Acquisition solution, the majority of our sales are conducted via sales queues in our contact centers. In both our Customer Acquisition solution and our
Customer Engagement solution, we are typically required to record and maintain recordings of telephonic interactions with customers. We rely on telephone, call recording, customer relationship management and other systems and technology in our
contact center operations. Our operations, therefore, depend on the proper functioning of our equipment and systems, including telephone, hardware and software. Third-party suppliers provide most of our systems, hardware and software, while our
development teams build some in-house. We also rely on the telecommunications and data services provided by local communication companies in the countries in which we operate as well as domestic and international long distance service
providers. Despite our efforts for adequate backup and redundancy mechanisms, any disruptions in the delivery of our services due to the failure of our systems, hardware or software, whether provided and maintained by third parties or in-house
teams, or due to interruptions in our telecommunications or data services that adversely affect the quality or reliability (or perceived quality or reliability) of our solutions or render us unable to handle increased volumes of customer
interaction during periods of high demand, may result in reduction in revenue, loss of clients, or unexpected investment in new systems or technology to ensure that we can continue to provide high-quality and reliable solutions to our clients.
The occurrence of any such interruption or unplanned investment could materially adversely affect our business, financial positions, operating results and prospects.
In addition, in some areas of our business, we depend upon the quality and reliability of the services and products of our clients which we help sell to their end customers. If the solutions we
provide to our clients experience technical difficulties or quality issues, we may have a harder time selling services and products to end customers which could have an adverse impact on our business and operating results.
We further anticipate that it will be necessary to continue to invest in our technology and communications infrastructure to ensure reliability and maintain our competitiveness. This is likely to
result in significant ongoing capital expenditures for maintenance as well as growth as we continue to grow our business. There can be no assurance that any of our information systems will be adequate to meet our future needs or that we will be
able to incorporate new technology to enhance and develop our existing solutions. Moreover, investments in technology, including future investments in upgrades and enhancements to hardware or software, may not necessarily maintain our
competitiveness. Our future success will also depend in part on our ability to anticipate and develop information technology solutions that keep pace with evolving industry standards and changing client demands.
Our business is heavily dependent upon our international operations, particularly in Pakistan and the Philippines and increasingly in Jamaica and
Nicaragua, and any disruption to those operations would adversely affect us.
Outside of the United States, a substantial portion of our operations are conducted in Pakistan, the Philippines and increasingly, Jamaica and Nicaragua. Pakistan has experienced, and
continues to experience, political and social unrest and acts of terrorism. The Philippines has experienced political instability and acts of natural disaster, such as typhoons and flooding, and continues to be at risk of similar and other
events that may disrupt our operations. Our operations in Jamaica, which commenced in 2016 and have been growing quickly, are also subject to political instability, natural disasters, crime and similar other risks. We also conduct operations in
Canada, Nicaragua, Senegal and the United Kingdom which are subject to various risks germane to those locations.
Our international operations, particularly in Pakistan, the Philippines, Nicaragua and Jamaica, and our ability to maintain our offshore facilities in those jurisdictions is an essential
component of our business model, as the labor costs in certain of those jurisdictions are substantially lower than the cost of comparable labor in the United States and other developed countries, which allows us to competitively price our
solutions. Our competitive advantage will be greatly diminished and may disappear altogether as a result of a number of factors, including:
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political unrest;
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social unrest;
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terrorism or war;
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health epidemics (including the outbreak of COVID-19);
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failure of power grids in certain of the countries in which we operate, which are subject to frequent outages;
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currency fluctuations;
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changes to the laws of the jurisdictions in which we operate; or
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increases in the cost of labor and supplies in the jurisdictions in which we operate.
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Our international operations may also be affected by trade restrictions, such as tariffs or other trade controls. If we are unable to continue to leverage the skills and experience of our
international workforce, particularly in Pakistan and the Philippines and increasingly so in Jamaica, we may be unable to provide our solutions at an attractive price and our business could be materially and negatively impacted.
The inelasticity of our labor costs relative to short-term movements in client demand could adversely affect our business, financial condition and
results of operations.
Our business depends on maintaining large numbers of agents to service our clients’ business needs, and we tend not to terminate agents on short notice to respond to temporary declines in
demand in excess of agreed levels, as rehiring and retraining agents at a later date would force us to incur additional expenses, and any termination of our employees would also involve the incurrence of significant additional costs in the form
of severance payments to comply with labor regulations in the various jurisdictions in which we operate our business, all of which would have an adverse impact on our operating profit margins. For example, the Pandemic decreased client demand
for our services in certain verticals which resulted in furloughs of employees in the initial months of the Pandemic. Additionally, the hiring and training of our agents in response to increased demand takes time and results in additional
short-term expenses. These factors constrain our ability to adjust our labor costs for short-term movements in demand, which could have a material adverse effect on our business, financial condition and results of operations.
The anticipated strategic and financial benefits of our relationship with Amazon may not be realized.
On November 13, 2017, we issued to Amazon.com NV Investment Holdings LLC, a subsidiary of Amazon.com, Inc. (“Amazon”), a 10-year warrant to acquire approximately 10.0% of our equity on a fully diluted and
as-converted basis as of the date of issuance of the warrant. We issued this warrant to Amazon with the expectation that the warrant would result in various benefits including, among others, growth in
revenues and improved cash flows. Achieving the anticipated benefits from the warrant is subject to a number of challenges and uncertainties. If we are unable to achieve our objectives or if we experience delays, the expected benefits may be
only partially realized or not at all, or may take longer to realize than expected, which could adversely impact our financial condition and results of operations.
For more information, see our audited consolidated financial statements included at the end of this annual report.
The success of our business depends on our senior management and key employees.
Our success depends on the continued service and performance of our senior management and other key personnel. In each of the industries in which we participate, there is competition for
experienced senior management and personnel with industry-specific expertise. We may not be able to retain our key personnel or recruit skilled personnel with appropriate qualifications and experience. The loss of key members of our personnel,
particularly to competitors, could have a material adverse effect on our business, financial condition, results of operations and prospects.
We may fail to attract, hire, train and retain sufficient numbers of agents and other employees in a timely fashion at our facilities to support our
operations, which could have a material adverse effect on our business, financial condition, results of operations and prospects.
Our business relies on large numbers of trained agents and other employees at our facilities, and our success depends to a significant extent on our ability to attract, hire, train and retain
agents and other employees. The outsourcing industry experiences high employee turnover. In addition, we compete for employees not only with other companies in our industry, but also with companies in other industries. Increased competition for
these employees, in our industry or otherwise, particularly in tight labor markets, could have an adverse effect on our business. Additionally, a significant increase in the turnover rate among trained employees could increase our costs and
decrease our operating profit margins.
In addition, our ability to maintain and renew existing client engagements, obtain new business and increase our margins will depend, in large part, on our ability to attract, hire, train and
retain employees with skills that enable us to keep pace with growing demands for outsourcing, evolving industry standards, new technology applications and changing client preferences. Our failure to attract, train and retain personnel with the
experience and skills necessary to fulfill the needs of our existing and future clients or to assimilate new employees successfully into our operations could have a material adverse effect on our business, financial condition, results of
operations and prospects.
If we are not successful in converting visitors to our customer acquisition websites into purchasers or subscribers, our business and operating results
may be harmed.
The growth of our customer acquisition business depends in part upon growth in the number of our customers or subscribers we are able to acquire for our clients. The rate at which we convert
consumers into customers or subscribers using our customer acquisition websites is a significant factor in the growth of our customer acquisition business. A number of factors could influence this conversion rate for any given period, some of
which are outside of our control. These factors include:
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the quality of the consumer experience on our customer acquisition websites and with our delivery center;
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the variety and affordability of the products and services that we offer on behalf of our clients and carrier partners;
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system failures or interruptions in the operation of our customer acquisition websites; and
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changes in the mix of consumers who are referred to us through our direct marketing partners, online advertising subscriber acquisition channels and other marketing channels.
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Even if the rate at which we convert visitors to customers or subscribers declines, the marketing and lead generation costs that have already been incurred are unlikely to decline
correspondingly. Therefore, such a decline in conversion rate of consumers visiting our customer acquisition websites is likely to result in reduced revenue and a further reduced margin, which could have a material adverse effect on our
business, financial condition and operating results.
We depend upon internet search engines to attract a significant portion of the consumers who visit our customer acquisition websites, and if we are
unable to advertise on search engines on a cost-effective basis, our business and operating results would be harmed.
We maintain a number of different customer acquisition websites to market our clients’ offerings to consumers in their target customer segments. Such client service offerings include cable,
internet and paid television services. We derive a significant portion of our customer acquisition website traffic from consumers who search products or services using Internet search engines, such as Google, MSN and Yahoo!. A critical factor
in attracting consumers to our customer acquisition websites is whether our clients’ offerings are prominently displayed in response to an internet search relating to specific products or services that we market. Search engines typically
provide two types of search results, unpaid (natural) listings and paid advertisements. We rely on both unpaid listings and paid advertisements to attract consumers to our customer acquisition websites.
Unpaid search result listings are determined and displayed in accordance with a set of formulas or algorithms developed by the particular internet search engine. The algorithms determine the order
of the listing of results in response to the consumer’s internet search. From time to time, search engines revise these algorithms. In some instances, these modifications have caused our customer acquisition websites to be listed less
prominently in unpaid search results, which has resulted in decreased traffic to these websites. Our customer acquisition websites may also become listed less prominently in unpaid search results for other reasons, such as search engine
technical difficulties, search engine technical changes and changes we decide to make to our websites. In addition, search engines have deemed the practices of some companies to be inconsistent with search engine guidelines and decided not to
list their websites in search result listings at all. If we are listed less prominently in search result listings for any reason, the traffic to our customer acquisition websites would likely decline, which would harm our operating results. If
we decide to attempt to replace this traffic, we may be required to increase our marketing expenditures, which also would harm our operating results and financial condition.
We also purchase paid advertisements on search engines in order to attract users to our customer acquisition websites. We typically pay a search engine for prominent placement of our name and
website when certain specific terms are searched on the search engine, regardless of the unpaid search result listings. In some circumstances, the prominence of the placement of our name and website is determined by a combination of factors,
including the amount we are willing to pay and algorithms designed to determine the relevance of our paid advertisement to a particular search term. We bid against our competitors and others for the display of these paid search engine
advertisements. If there is increased competition for the display of paid advertisements in response to search terms related to our business, our advertising expenses could rise significantly or we could reduce or discontinue our paid search
advertisements, either of which could harm our business, operating results and financial condition.
In addition to marketing through internet search engines, we frequently enter into contractual marketing relationships with other online and offline businesses that promote us to their
customers. These marketing partners include financial and online service companies, affiliate programs and online advertisers and content providers.
Many factors influence the success of our relationship with our marketing partners, including:
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the continued positive market presence, reputation and growth of the marketing partner;
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the effectiveness of the marketing partner in marketing our websites and services;
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the interest of the marketing partner’s customers in the products and services that we offer on our customer acquisition websites;
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the contractual terms we negotiate with the marketing partner, including the marketing fee we agree to pay a marketing partner;
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the percentage of the marketing partner’s customers that purchase products or services through our customer acquisition websites;
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the ability of a marketing partner to maintain efficient and uninterrupted operation of its website; and
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our ability to work with the marketing partner to implement website changes, launch marketing campaigns and pursue other initiatives necessary to maintain positive consumer
experiences and acceptable traffic volumes.
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If we are unable to maintain successful relationships with our existing marketing partners or fail to establish successful relationships with new marketing partners, our business, operating
results and financial condition will be harmed.
Our business depends in part on our capacity to invest in technology as it develops, and substantial increases in the costs of technology and
telecommunications services or our inability to attract and retain the necessary technologists could have a material adverse effect on our business, financial condition, results of operations and prospects.
The use of technology in our industry has and will continue to expand and change rapidly. Our business depends, in part, upon our ability to develop and implement solutions that anticipate
and keep pace with continuing changes in technology, industry standards and client preferences. We may incur significant expenses in an effort to keep pace with customer preferences for technology or to gain a competitive advantage through
technological expertise or new technologies.
If we do not recognize the importance of a particular new technology to our business in a timely manner, are not committed to investing in and developing or adopting such new technology and
applying these technologies to our business, or are unable to attract and retain the technologists necessary to develop and implement such technologies, our current solutions may be less attractive to existing and new clients, and we may lose
market share to competitors who have recognized these trends and invested in such technology. There can be no assurance that we will have sufficient capacity or capital to meet these challenges. Any such failure to recognize the importance of
such technology, a decision not to invest and develop or adopt such technology that keeps pace with evolving industry standards and changing client demands, or an inability to attract and retain the technologists necessary to develop and
implement such technology could have a material adverse effect on our business, financial condition, results of operations and prospects.
Increases in employee expenses as well as changes to labor laws could reduce our profit margin.
For the fiscal years ended June 30, 2020, 2019, and 2018, payroll and related costs and share-based payments accounted for $276.6 million, $258.7 million, and $261.3 million respectively,
representing, 68.3%, 70.2%, and 76.4%, respectively, of our revenue in those periods.
Employee benefits expenses in each of the countries in which we operate are a function of the country’s economic growth, level of employment and overall competition for qualified employees in the
country. In several locations including the United States, the Philippines and Pakistan, we have experienced increased labor cost during the fiscal years ended June 30, 2020, 2019, and 2018 due to increased demand and greater competition for
qualified employees. For further details, see “Item 5A. Operating Results – Results of Operations.”
We may not be successful in our attempt to control costs associated with salaries and benefits as we continue to add capacity in locations where we consider wage levels of skilled personnel to be
satisfactory. We may need to increase employee compensation more than in previous periods to remain competitive in attracting the quantity and quality of employees that our business requires, which may reduce our profit margins and have a
material adverse effect on our cash flows, business, financial condition, results of operations and prospects. In addition, wage increases or other expenses related to the termination of our employees may reduce our profit margins and have a
material adverse effect on our cash flows, business, financial condition, results of operations and prospects. If we expand our operations into new jurisdictions, we may be subject to increased operating costs, including higher employee
compensation expenses in these new jurisdictions relative to our current operating costs, which could have a negative effect on our profit margin.
Furthermore, many of the countries in which we operate have labor protection laws, which may include statutorily mandated minimum annual wage increases, legislation that imposes financial
obligations on employers and laws governing the employment of workers. These labor laws in one or more of the key jurisdictions in which we operate, particularly in the United States, Pakistan, the Philippines, Jamaica or Nicaragua, may be
modified in the future in a way that is detrimental to our business. If these labor laws become more stringent, or if there are increases in statutory minimum wages or higher labor costs in these jurisdictions, it may become more difficult for
us to discharge employees, or cost effectively downsize our operations as our level of activity fluctuates, both of which would likely reduce our profit margins and have a material adverse effect on our business, financial condition, results of
operations and prospects.
We may face difficulties as we expand our operations into countries in which we have no prior operating experience.
We may expand our global operations in order to maintain an appropriate cost structure and meet our clients’ needs. This may involve expanding into countries other than those in which we currently
operate and where we have less familiarity with local procedures. It may involve expanding into less developed countries, which may have less political, social or economic stability and less developed infrastructure and legal systems. As we
expand our business into new countries, we may encounter economic, regulatory, personnel, technological and other difficulties that increase our expenses or delay our ability to start up our operations or become profitable in such countries.
This may affect our relationships with our clients and could have an adverse effect on our business, financial condition, results of operations and prospects.
Our profitability will suffer if we are not able to maintain asset utilization levels, price appropriately and control our costs.
Our profitability is largely a function of the efficiency with which we utilize our assets, particularly our people and facilities, and the pricing that we are able to obtain for our
solutions. Our utilization rates are affected by a number of factors, including our ability to transition employees from completed projects to new assignments, hire and assimilate new employees, forecast demand for our solutions and thereby
maintain an appropriate headcount in each of our locations and geographies, manage attrition, accommodate our clients’ requests to shift the mix of delivery locations during the pendency of a contract, and manage resources for training,
professional development and other typically non-billable activities. The prices we are able to charge for our solutions are affected by a number of factors, including our clients’ perceptions of our ability to add value through our solutions,
competition, introduction of new services or products by us or our competitors, our ability to accurately estimate, attain and sustain revenues from client engagements, margins and cash flows over increasingly longer contract periods and
general economic and political conditions. Therefore, if we are unable to price appropriately or manage our asset utilization levels, there could be a material adverse effect on our business, results of operations and financial condition.
Our profitability is also a function of our ability to control our costs and improve our efficiency. As we increase the number of our employees and grow our business, we may not be able to
manage the significantly larger and more geographically diverse workforce and our profitability may suffer.
The inability or unwillingness of clients that represent a large portion of our accounts receivable balance to pay such balances in a timely fashion
could adversely affect our business.
We often carry significant accounts receivable balances from a limited number of clients that generate a large portion of our revenues. A client may become unable or unwilling to pay its
balance in a timely fashion due to a general economic slowdown, economic weakness in its industry or the financial insolvency of its business. While we closely monitor our accounts receivable balances, a client’s financial inability or
unwillingness, for any reason, to pay a large accounts receivable balance would adversely impact our financial condition and cash flow and could adversely impact our ability to draw upon our receivables-backed lines of credit.
If we are unable to fund our working capital requirements and new investments, our business, financial condition, results of operations and prospects could
be adversely affected.
Our business is characterized by high working capital requirements and the need to make new investments in operating sites and employee resources to meet the requirements of our clients. Similar
to our competitors in this industry, we incur significant start-up costs related to investments in infrastructure to provide our solutions and the hiring and training of employees, such expenses historically being incurred before revenues are
generated.
We are exposed to adverse changes in our clients’ payment policies. If our key clients implement policies which extend the payment terms of our invoices, our working capital levels could be
adversely affected and our financing costs may increase. If we are unable to fund our working capital requirements, access financing at competitive rates or make investments to meet the expanding business of our existing and potential new
clients, our business, financial condition, results of operations and prospects could be adversely affected.
Our operating results may fluctuate from quarter to quarter due to various factors including seasonality.
Our operating results may vary significantly from one quarter to the next and our business may be impacted by factors such as client loss, the timing of new contracts and of new product or service
offerings, termination of existing contracts, variations in the volume of business from clients resulting from changes in our clients’ operations, the business decisions of our clients regarding the use of our solutions, start-up costs, delays
or difficulties in expanding our operating facilities and infrastructure, delays or difficulties in recruiting, changes to our revenue mix or to our pricing structure or that of our competitors, inaccurate estimates of resources and time
required to complete ongoing projects, currency fluctuation and seasonal changes in the operations of our clients. The financial benefit of gaining a new client may not be recognized at the intended time due to delays in the implementation of
our solutions or negatively impacted due to an increase in the start-up costs.
Based on our experience, the BPO industry experiences increased volumes during the fourth calendar quarter of the year. These seasonal effects also cause differences in revenues and income among
the various quarters of any financial year, which means that the individual quarters of a year should not be directly compared with each other or used to predict annual financial results.
The sales cycle for our solutions, which may extend up to two years, and the internal budget and approval processes of our prospective clients, make it difficult to predict the timing of new
client engagements.
Damage or disruptions to our technology systems and facilities either through events beyond or within our control could have a material adverse effect
on our business, financial condition, results of operations and prospects.
Our key technology systems and facilities may be damaged in natural disasters such as earthquakes or fires or subject to damage or compromise from human error, technical disruptions, power
failure, computer glitches, cyberattacks, and viruses, telecommunications failures, adverse weather conditions and other unforeseen events, all of which are beyond our control or through bad service or poor performance which are within our
control. Such events may cause disruptions to information systems, electrical power and telephone service for sustained periods. Any significant failure, damage or destruction of our equipment or systems, or any major disruptions to basic
infrastructure such as power and telecommunications systems in the locations in which we operate, could impede our ability to provide solutions to our clients and thus adversely affect their businesses, have a negative impact on our reputation
and may cause us to incur substantial additional expenses to repair or replace damaged equipment or facilities.
While we maintain property and business interruption insurance, our insurance coverage may not be sufficient to guarantee costs of repairing the damage caused by such disruptive events and
such events may not be covered under our policies. Prolonged disruption of our solutions, even if due to events beyond our control, could also entitle our clients to terminate their contracts with us or result in other brand and reputational
damages, which would have a material adverse effect on our business, financial condition, results of operations and prospects.
We face substantial competition in our business.
The market in which we compete, which is comprised of the customer acquisition, customer engagement and customer experience management market segments, is highly fragmented and continuously
evolving. We face competition from a variety of companies, including some of our own clients, which operate in distinct segments of the customer lifecycle journey. These segments are very competitive, and we expect competition to remain intense
from a number of sources in the future. We believe that the most significant competitive factors in the markets in which we operate are service quality, value-added service offerings, industry experience, advanced technological capabilities,
global coverage, reliability, scalability, security and price. The trend toward near- and offshore outsourcing, international expansion by foreign and domestic competitors and continued technological changes may result in new and different
competitors entering our markets. These competitors may include entrants from the communications, software and data networking industries or entrants in geographical locations with lower costs than those in which we operate.
Some of our existing and future competitors have or will have greater financial, human and other resources, longer operating histories, greater technological expertise and more established
relationships in the industries that we currently serve or may serve in the future. In addition, some of our competitors may enter into strategic or commercial relationships among themselves or with larger, more established companies in order
to increase their ability to address customer needs and reduce operating costs or enter into similar arrangements with potential clients. Further, trends of consolidation in our certain industries and among competitors may result in new
competitors with greater scale, a broader footprint, better technologies and price efficiencies attractive to our clients. Increased competition, our inability to compete successfully, pricing pressures or loss of market share could result in
reduced operating profit margins and diminished financial performance which could have a material adverse effect on our business, financial condition, results of operations and prospects.
Unfavorable economic conditions, especially in the United States and in the telecommunications, technology and cable industries from which we generate
most of our revenue, could adversely affect our business, results of operations, financial condition and prospects.
Our results of operations may vary based on the impact of changes in the global economy on our clients. While it is often difficult to predict the impact of general economic conditions on our
business, unfavorable economic conditions, such as those that occurred during the global financial crisis and economic downturn that began in 2008, could adversely affect the demand for some of our clients’ products and services and, in turn,
could cause a decline in the demand for our solutions. Additionally, several of our clients, particularly in the telecommunications and technology industries, have experienced substantial price competition. As a result, we face increasing price
pressure from such clients, which, if continued, could negatively affect our operating and financial performance.
Our business and future growth depend largely on continued demand for our solutions from clients based in the United States. During the fiscal year ended June 30, 2020, 2019, and
2018, we derived 96.7%, 97.1%, and 96.2%, respectively, of our revenue from customers based in the United States. In addition, a substantial portion of our clients are concentrated in the telecommunications, technology, cable, retail and
e-commerce industries. For the fiscal year ended June 30, 2020, 35.9% of our revenue was derived from clients in the telecommunications industry, 13.8% of our revenue was derived from clients in the technology industry, 7.0% of our revenue
was derived from clients in the cable industry and 16.8% of our revenue was derived from clients in the retail and e-commerce industry. For the fiscal year ended June 30, 2019, 40.5% of our revenue was derived from clients in the
telecommunications industry, 14.7% of our revenue was derived from clients in the technology industry, 9.9% of our revenue was derived from clients in the cable industry and 7.9% of our revenue was derived from clients in the retail and
e-commerce industry. For the fiscal year ended June 30, 2018, 45.4% of our revenue was derived from clients in the telecommunications industry, 17.7% of our revenue was derived from clients in the technology industry, 12.3% of our
revenue was derived from clients in the cable industry and 4.0% of our revenue was derived from clients in the retail and e-commerce industry.
For these reasons, among others, the occurrence of unfavorable economic conditions could adversely affect our business, results of operations, financial condition and prospects.
If our solutions do not comply with the quality standards required by our clients under our agreements, our clients may assert claims for reduced payments to
us or substantial damages against us, which could have a material adverse effect on our business, financial condition, results of operations and prospects.
Many of our client contracts contain service level and performance requirements, including requirements relating to the quality of our solutions. Failure to meet service requirements or real or
perceived errors made by our employees in the course of delivering our solutions could result in a reduction of revenue, which could have a material adverse effect on our business, financial condition, results of operations and prospects.
In addition, in connection with our service contracts, certain representations are made, including representations relating to the quality and experience of our personnel. A failure or inability
to meet these requirements or a breach of such representations could result in a claim for damages against us and seriously damage our reputation and affect our ability to attract new business.
Our business prospects will suffer if we are unable to continue to anticipate our clients’ needs by adapting to market and technology trends.
Our success depends, in part, upon our ability to anticipate our clients’ needs by adapting to market and technology trends. We may need to invest significant resources in research and development
to maintain and improve our solutions and respond to our clients’ changing needs. However, we may not be able to modify our current solutions or develop, introduce and integrate new solutions in a timely manner or on a cost-effective basis. If
we are unable to further refine and enhance our solutions or to anticipate innovation opportunities and keep pace with evolving technologies, our solutions could become uncompetitive or obsolete and as a result our clients may terminate their
relationship with us or choose to divert their business elsewhere, and our revenue may decline as a result. In addition, we may experience technical problems and additional costs as we introduce new solutions, deploy future iterations of our
solutions and integrate new solutions with existing client systems and workflows. If any of these or related problems were to arise, our business, financial condition, results of operations and prospects could be adversely affected.
In addition, we plan to expand across client industries and enter into new industry verticals such as travel and hospitality. If we are unable to successfully adapt our solutions to these industry
verticals, our potential growth opportunities could be compromised.
If we fail to adequately protect our intellectual property and proprietary information in the United States and abroad, our competitive position could be
impaired and we may lose valuable assets, experience reduced revenues and incur costly litigation to protect our rights.
We believe that our success is dependent, in part, upon protecting our intellectual property and proprietary information. We rely on a combination of intellectual property registrations, trade
secrets and contractual restrictions to establish and protect our intellectual property. However, the steps we take to protect our intellectual property may provide only limited protection and may not now or in the future provide us with a
competitive advantage. We may not be able to protect our intellectual property if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property. Any of our intellectual property rights may be
challenged by others or invalidated through administrative process or litigation. Furthermore, legal standards relating to the validity, enforceability and scope of protection of intellectual property rights are uncertain. Despite our
precautions, it may be possible for unauthorized third parties to copy our technology and use information that we regard as proprietary to create products and services that compete with our solutions. In addition, the laws of some countries do
not protect proprietary rights to the same extent as the laws of the United States.
We enter into confidentiality and invention assignment agreements with our employees and consultants and enter into confidentiality agreements with our directors, advisory board members and with
the parties with whom we have strategic relationships and business alliances, as well as our clients. No assurance can be given that these agreements will be effective in controlling access to and the distribution of our proprietary
information. Further, these agreements may not prevent potential competitors from independently developing technologies that are substantially equivalent or superior to ours, in which case we would not be able to assert trade secret rights.
We may be required to spend significant resources to monitor and protect our intellectual property rights. Litigation may be necessary in the future to enforce our intellectual property
rights and to protect our trade secrets. Such litigation could be costly, time consuming and distracting to management and could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our
intellectual property rights may be met with defenses, counterclaims and countersuits attacking the eligibility, validity and enforceability of our intellectual property rights. Our inability to protect our proprietary technology against
unauthorized copying or use, as well as any costly litigation, could make it more expensive for us to do business and adversely affect our operating results by delaying further sales or the implementation of our technologies, impairing the
functionality of our platform and solutions, delaying introductions of new features or applications or injuring our reputation.
Others could claim that we infringe on their intellectual property rights or violate contractual protections, which may result in substantial costs,
diversion of resources and management attention and harm to our reputation.
We or our clients may be subject to claims that our technology infringes upon the intellectual property rights of others. Any such infringement claims may result in substantial costs, divert
management attention and other resources, harm our reputation and prevent us from offering our solutions. A successful infringement claim against us could materially and adversely affect our business, resulting in our substituting inferior or
costlier technologies into our platform and solutions, monetary damages, reasonable royalties or an injunction against providing some or all of our solutions.
In our contracts, we agree to indemnify our clients for expenses and liabilities resulting from claimed infringement by our solutions, in some cases excluding third-party components, of the
intellectual property rights of others. In some instances, the amount of these indemnity obligations may be greater than the revenues we receive from the client under the applicable contract. In addition, we may develop work product in
connection with specific projects for our clients. While our contracts with our clients provide that we retain the ownership rights to our pre-existing proprietary intellectual property, in some cases we assign to clients intellectual property
rights in and to some aspects of documentation or other work product developed specifically for these clients in connection with these projects, which may limit or prevent our ability to resell or reuse this intellectual property.
Our global operations expose us to numerous legal and regulatory requirements.
We provide solutions to our clients’ customers in 41 countries and two continents around the world. We are subject to numerous, and sometimes conflicting, legal regimes on matters as diverse
as anticorruption, content requirements, trade restrictions, tariffs, taxation, sanctions, immigration, internal and disclosure control obligations, securities regulation, anti-competition, data security, privacy and labor relations. For
example, our operations in the United States are subject to U.S. laws on these diverse matters and our operations outside of the United States may also be subject to U.S. laws on these diverse matters. U.S. laws may be different in several
respects from the laws of Pakistan and the Philippines, where we have significant operations, and jurisdictions where we may seek to expand. We also have and may seek to expand operations in emerging market jurisdictions where legal systems may
be less developed or familiar to us. In addition, there can be no assurance that the laws or administrative practices relating to taxation (including the current position as to income and withholding taxes), foreign exchange, export controls,
economic sanctions or otherwise in the jurisdictions where we have operations will not change. Compliance with diverse legal requirements is costly, time-consuming and requires significant resources. Violations of one or more of these
regulations in the conduct of our business could result in significant fines, criminal sanctions against us or our officers, prohibitions on doing business and damage to our reputation. Violations of these regulations in connection with the
performance of our obligations to our clients also could result in liability for significant monetary damages, fines or criminal prosecution, unfavorable publicity and other reputational damage, restrictions on our ability to process
information and allegations by our clients that we have not performed our contractual obligations. Due to the varying degrees of development of the legal systems of the countries in which we operate, local laws might be insufficient to protect
our rights.
We are subject to economic sanctions, export control, anti-corruption, anti-bribery, and similar laws. Non-compliance with such laws can subject us to criminal or civil liability and harm our
business, revenues, financial condition and results of operations.
We are subject to U.S. export controls and economic sanctions laws and regulations, including the U.S. Export Administration Regulations administered by the U.S. Commerce Department’s Bureau
of Industry and Security and the economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls. Exports, re-exports and transfers of our software and services must be made in
compliance with these laws and regulations, which could impair our ability to compete in international markets and subject us to liability if we are not in compliance with applicable laws. Specifically, the provision of our services and our
international activities are subject to various economic and trade sanctions administered by the U.S. Treasury Department’s Office of Foreign Assets Control, which include prohibitions on the sale or supply of certain products and services to
U.S. embargoed or sanctioned countries, governments, persons and entities. The Office of Foreign Assets Control rules also prohibit U.S. persons from facilitating a foreign person’s engagement in or with such countries, governments, persons and
entities.
Although we take precautions to prevent our services from being provided or deployed in violation of such laws, our services could be provided inadvertently in violation of such laws despite
the precautions we take, including usage by our customers in violation of our terms of service. We also cannot assure you that our employees and agents will not take actions in violation of our policies and applicable law, for which we may be
ultimately held responsible. If we fail to comply with these laws, we and our employees could be subject to civil or criminal penalties, including the possible loss of export privileges, monetary penalties, and, in extreme cases, imprisonment
of responsible employees for knowing and willful violations of these laws. We may also be adversely affected through penalties, reputational harm, loss of access to certain markets, or otherwise.
In addition, various countries regulate the import and export of certain encryption and other technology, including import and export permitting and licensing requirements, and have enacted
laws that could limit our ability to distribute our products or could limit our users’ ability to access our products in those countries. Changes in our products, or future changes in export and import regulations may prevent our users with
international operations from utilizing our products globally or, in some cases, prevent the export or import of our products to certain countries, governments, or persons altogether. Any change in export or import regulations, economic
sanctions, or related legislation, or change in the countries, governments, persons, or technologies targeted by such regulations, could result in decreased use of our products by, or in our decreased ability to export or sell products to,
existing or potential users with international operations. Any decreased use of our platform or limitation on our ability to export or sell our products would likely adversely affect our business, results of operations, and financial results.
In many parts of the world, including countries in which we operate or seek to expand, practices in the local business community may not conform to international business standards and could
violate anticorruption laws or regulations, including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act 2010 and the Bermuda Bribery Act of 2016. Our employees, subcontractors, agents and other third parties with which we associate
could take actions that violate our policies or procedures designed to promote legal and regulatory compliance or applicable anticorruption laws or regulations. As we continue our international business, we may also engage with distributors and
third-party intermediaries to market our solutions and to obtain necessary permits, licenses, and other regulatory approvals. In addition, we or our third-party intermediaries may have direct or indirect interactions with officials and
employees of government agencies or state-owned or affiliated entities. We can be held liable for the corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners and agents,
even if we do not explicitly authorize such activities. Violations of these laws or regulations by us, our employees or any of these third parties could subject us to criminal or civil enforcement actions (whether or not we participated or knew
about the actions leading to the violations) including fines or penalties, disgorgement of profits and suspension or disqualification from work, including U.S. federal contracting, any of which could materially adversely affect our business,
including our results of operations and our reputation.
We cannot predict whether any material suits, claims, or investigations may arise in the future. Regardless of the outcome of any future actions, claims, or investigations, we may incur
substantial defense costs and such actions may cause a diversion of management time and attention. Also, it is possible that we may be required to pay substantial damages or settlement costs which could have a material adverse effect on our
business, financial condition, results of operations and prospects.
Our client base includes many entities in highly regulated industries, potentially increasing our legal risk and compliance costs and requiring
implementation of additional security measures.
Many of our clients are engaged in highly regulated industries that have an array of sector-specific regulatory obligations, including privacy and security requirements. Specifically, our
focus on the telecommunications, technology and cable industries means that we may process or come into possession of data that must be treated with special care. In additional to government regulations, our client contracts contain
requirements related to the retention of records.
In the United States, telecommunications providers are subject to rules on the use and sharing of Customer Proprietary Network Information (“CPNI”). The Telecommunications Act of 1996 limits
the uses to which such information may be put, and the parties with whom it may be shared, absent customer permission. It also requires that CPNI be adequately safeguarded. Compliance with these obligations has been a topic of increased
interest for the U.S. Federal Communications Commission, (“FCC”), which has undertaken high-profile CPNI enforcement actions in recent years. The FCC also is in the process of applying such rules to broadband service providers, which could
affect how we may provide our solutions to this sector of the telecommunications industry. We instruct our clients not to provide any CPNI to us, but this information may inadvertently be provided to us by our clients as part of their customer
information.
In the United States, two federal agencies, the Federal Trade Commission (“FTC”) and the FCC, and various states have enacted laws including, at the federal level, the Telephone Consumer
Protection Act of 1991, that restrict the placing of certain telephone calls and texts to residential and wireless telephone subscribers by means of automatic telephone dialing systems, prerecorded or artificial voice messages and fax machines.
Internationally, we are also subject to similar laws imposing limitations on marketing calls to wireline and wireless numbers and compliance with do not call rules. These laws require companies to institute processes and safeguards to comply
with these restrictions. Some of these laws can be enforced by the FTC, FCC, state attorney generals, foreign regulators or private party litigants. In these types of actions, the plaintiff may seek damages, statutory penalties, costs and/or
attorneys’ fees.
These and other sector-specific obligations could increase our legal risk and impose additional compliance costs on our solutions. If we fail to comply with these obligations, we could suffer
a range of consequences, including contract breach claims from our clients, regulatory fines and other penalties, or reputational harm, all of which may have a material adverse impact on our business.
Our business is subject to a variety of U.S. and international laws and regulations, including those regarding privacy, data protection and information
security, and our customers may be subject to regulations related to the handling and transfer of certain types of sensitive and confidential information. Any failure to comply with applicable laws and regulations would harm our business,
results of operations and financial condition.
We and our customers may be subject to privacy- and data protection-related laws and regulations that impose obligations in connection with the collection, use, storage, transfer,
dissemination, security, and/or other processing, (“Processing”), of personally identifiable information (such personally identifiable information collectively with all information defined or described by applicable law as “personal data,”
“personal information,” “PII” or any similar term, is referred to as Personally Identifiable Information), data, financial data, health data or other similar data. Existing U.S. federal and various state and foreign privacy- and data
protection-related laws and regulations are evolving and subject to potentially differing interpretations and conflicting requirements, and various legislative and regulatory bodies may expand current or enact new laws and regulations regarding
privacy- and data protection-related matters. New laws, amendments to or re-interpretations of existing laws and regulations, rules of self-regulatory bodies, industry standards and contractual obligations may impact our business and practices,
and we may be required to expend significant resources to adapt to these changes, or stop offering our products in certain countries. These developments could adversely affect our business, results of operations and financial condition.
The U.S. federal and various state and foreign governments have adopted or proposed limitations on, or requirements regarding, the Processing of Personally Identifiable Information of individuals.
The FTC and numerous state attorneys general are applying federal and state consumer protection laws to impose standards on the Processing of data, and to the security measures applied to such data. Similarly, many foreign countries and
governmental bodies, including the EU member states, have laws and regulations concerning the Processing of Personally Identifiable Information obtained from their residents and individuals located in the EU or by businesses operating within
their jurisdiction, which are often more restrictive than those in the United States. Laws and regulations in these jurisdictions apply broadly to the Processing of Personally Identifiable Information that identifies or may be used to identify
an individual, such as names, email addresses and, in some jurisdictions, IP addresses and other online or device identifiers. In particular, on April 27, 2016 the European Union adopted the General Data Protection Regulation 2016 / 679
(“GDPR”) that took effect on May 25, 2018. The GDPR repeals and replaces the EU Data Protection Directive 95 / 46 / EC and it is directly applicable across EU member states. The GDPR applies to any company established in the EU as well as to
those outside the EU if they process Personally Identifiable Information, as defined under the GDPR, in connection with the provision of goods or services to individuals in the EU or monitor their behavior (for example, through online tracking)
of individuals in the EU. The GDPR enhances data protection obligations for businesses and provides direct legal obligations and potential liabilities for service providers processing personal data on behalf of customers, including with respect
to cooperation with European data protection authorities, implementation of security measures and keeping records of personal data processing activities. Moreover, the GDPR requirements apply not only to third-party transactions, but also to
transfers of EU personal data between us and our subsidiaries, including employee information. Noncompliance with the GDPR can trigger steep fines of up to €20 million or 4% of global annual revenues, whichever is higher.
In addition to the GDPR, the EU also is considering another draft data protection regulation. The proposed regulation, known as the Regulation on Privacy and Electronic Communications,
(“ePrivacy Regulation”), would replace the current ePrivacy Directive. Originally planned to be adopted and implemented at the same time as the GDPR, the ePrivacy Regulation has been delayed but could be enacted sometime in the relatively near
future. While the new regulation contains protections for those using communications services (for example, protections against online tracking technologies), the potential timing of its enactment significantly later than the GDPR means that
additional time and effort may need to be spent addressing differences between the ePrivacy Regulation and the GDPR. New rules related to the ePrivacy Regulation are likely to include enhanced consent requirements in order to use communications
content and communications metadata, as well as obligations and restrictions on the processing of data from an end-user’s terminal equipment, which may negatively impact our product offerings and our relationships with our customers. Preparing
for and complying with the GDPR and the ePrivacy Regulation (if and when it becomes effective) has required and will continue to require us to incur substantial operational costs and may require us to change our business practices. Despite our
efforts to bring practices into compliance with the GDPR and before the effective date of the ePrivacy Regulation, we may not be successful either due to internal or external factors such as resource allocation limitations. Non-compliance could
result in proceedings against us by governmental entities, customers, data subjects, consumer associations or others.
With respect to all of the foregoing, any failure or perceived failure by us to comply with applicable U.S., EU or other foreign privacy or data security laws, policies, industry standards or
legal obligations, or any security incident that results in the unauthorized Processing of Personally Identifiable Information or other customer data may result in governmental investigations, inquiries, enforcement actions and prosecutions,
private litigation, fines and penalties or adverse publicity.
We expect that there will continue to be new proposed laws, regulations and industry standards concerning privacy, data protection and information security in the U.S., the EU and other
jurisdictions, and we cannot yet determine the impact such future laws, regulations and standards may have on our business. Because global laws, regulations, industry standards and other legal obligations concerning privacy and data security
have continued to develop and evolve rapidly, it is possible that we or our business may not be, or may not have been, compliant with each such applicable law, regulation, industry standard or other legal obligation.
Any such new laws, regulations, other legal obligations or industry standards, or any changed interpretation of existing laws, regulations or other standards may require us to incur
additional costs and restrict our business operations. If our privacy or data security measures fail to comply with current or future laws, regulations, policies, legal obligations or industry standards, we may be subject to litigation,
regulatory investigations, fines or other liabilities, as well as negative publicity and a potential loss of business.
On June 28, 2018, California became the first U.S. state with a comprehensive consumer privacy law when it enacted the California Consumer Privacy Act of 2018 (the “CCPA”), which became effective
January 1, 2020, with some exceptions (Cal. Civ. Code §§ 1798.100-1798.199). The CCPA regulates any for-profit entity doing “business” (who are not otherwise exempt) in California that meets one of the following: (a) has a gross revenue greater
than $25 million. (b) annually buys, receives, sells or shares the personal information of more than 50,000 consumers, households or devices for commercial purposes, or (c) derives 50 percent (50%) or more of its annual revenues from “selling”
(as defined by CCPA) consumers’ personal information. The CCPA grants covered California residents new data protection rights regarding their personal information (as defined under the CCPA), including rights to access and delete their Personal
Information, opt out of certain Personal Information sharing and receive detailed information about how their Personal Information is used. Additionally, the CCPA and imposes various data protection duties on certain entities conducting
business in California. Under the CCPA, in the event of a data breach affecting California residents’ Personal Information, failure to maintain reasonable security procedures and practices can trigger a private right of action lawsuit and is
expected to increase data breach class action litigation. Statutory damages available for CCPA data breach private rights of action range from $100 to $750 per violation or actual damages, whichever greater, with injunctive or declaratory
relief also possible. In addition to the data breach private right of action, the California Attorney General may independently bring administrative actions for violations of the CCPA’s non-data breach requirements and seek civil penalties of
$2,500 per violation, or up to $7,500 per violation if intentional. The CCPA may increase our compliance costs and potential liability. Some observers have noted that the CCPA could mark the beginning of a trend toward more stringent privacy
legislation in the U.S., which could impose additional compliance obligations, increase our potential liability and adversely affect our business.
Unauthorized or improper disclosure of Personally Identifiable Information or breach of privacy, whether inadvertent or as the result of a cyber-attack or
improperly by our employees, could result in liability and harm our reputation which could adversely affect our business, financial condition, results of operations and prospects.
Our business depends significantly upon technology infrastructure, telephone systems, data and other equipment and systems. Internal or external attacks on any of those could disrupt the normal
operations of our facilities and impede our ability to provide critical solutions to our clients, thereby subjecting us to liability under our contracts. In addition, our business involves the use, storage and transmission of information about
our employees, our clients and customers of our clients in connection with our solutions such as Personally Identifiable Information of the customers of our clients. While we take measures to protect the security of, and against unauthorized
access to, our systems, as well as the privacy of Personally Identifiable Information and proprietary information, it is possible that our security controls over our systems, as well as other security practices we follow, may not prevent the
improper access to or disclosure of Personally Identifiable Information or proprietary information. Such disclosure could harm our reputation and subject us to significant liability under our contracts and laws that protect Personally
Identifiable Information, resulting in increased costs or loss of revenue. Further, data privacy is subject to frequently changing rules and regulations, which sometimes conflict among the various jurisdictions and countries in which we provide
solutions. Our failure to adhere to or successfully implement processes in response to changing regulatory requirements in this area or any other kind of improper access to private Personally Identifiable Information could result in legal
liability or impairment to our reputation in the marketplace, which could have a material adverse effect on our business, financial condition, results of operations and prospects.
Our existing debt may affect our flexibility in operating and developing our business and our ability to satisfy our obligations.
As of June 30, 2020, we had total indebtedness of $106.0 million, including our lease liabilities. Our level of indebtedness may have significant negative effects on our future operations,
including:
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impairing our ability to obtain additional financing in the future (or to obtain such financing on acceptable terms) for working capital, capital expenditures, acquisitions or other
important needs;
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requiring us to dedicate a substantial portion of our cash flow to the payment of principal and interest on our indebtedness, which could impair our liquidity and reduce the
availability of our cash flow to fund working capital, capital expenditures, acquisitions and other important needs;
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increasing the possibility of an event of default under the financial and operating covenants contained in our debt instruments; and
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limiting our ability to adjust to rapidly changing conditions in the industry, reducing our ability to withstand competitive pressures and making us more vulnerable to a downturn in general economic
conditions or business than our competitors with relatively lower levels of debt.
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If we are unable to generate sufficient cash flow from operations to service our debt, we may be required to refinance all or a portion of our existing debt or obtain additional financing. We
cannot assure you that any such refinancing would be possible or that any additional financing could be obtained. Our inability to obtain such refinancing or financing may have a material adverse effect on our business, financial condition,
results of operations and prospects.
In addition, several of our financing arrangements contain a number of covenants and restrictions including limits on our ability and our subsidiaries’ ability to incur additional debt, pay
dividends and make certain investments. Complying with these covenants may cause us to take actions that make it more difficult to successfully execute our business strategy and we may face competition from companies not subject to such
restrictions. Moreover, our failure to comply with these covenants could result in an event of default or refusal by our creditors to renew certain of our loans which may have a material adverse effect on our business, financial condition,
results of operation and prospects. In the past, we have not been in compliance with certain applicable debt covenants in our financing arrangements.
If we experience challenges with respect to labor relations, our overall operating costs and profitability could be adversely affected, and our reputation
could be harmed.
If we fail to maintain good relations with our employees, we could suffer a strike or other significant work stoppage or other form of industrial action, which could have a material adverse effect
on our business, financial condition, results of operations and prospects and harm our reputation.
Fluctuations against the U.S. dollar in the local currencies in the countries in which we operate could have a material effect on our results of operations.
During the fiscal years ended June 30, 2020, 2019, and 2018, 3.3%, 2.9%, and 3.8%, respectively, of our revenue was generated in currencies other than the U.S. dollar. A portion of our costs
and expenses that were incurred outside of the United States were paid for in foreign currencies, mostly the local currencies of the Philippines, Jamaica and Pakistan. During the year ended June 30, 2020, out of our total payroll and related
costs, 24.7% were incurred in the Philippines Peso, 12.7% were incurred in the Jamaican Dollar and 7.3% were incurred in Pakistani Rupee. Because our financial statements are presented in U.S. dollars and revenues are primarily generated in
U.S. dollars whereas some portion of the cost is incurred in foreign currencies, any significant unhedged fluctuations in the currency exchange rates between the U.S. dollar and the currencies of countries in which we incur costs in local
currencies will affect our results of operations and financial statements. This may also affect the comparability of our financial results from period to period, as we convert our subsidiaries’ statements of financial position into U.S. dollars
from local currencies at the period-end exchange rate, and income and cash flow statements at average exchange rates for the year. See “Item 5A. Operating Results —Factors Affecting Our Operating Profit Margins” for more information.
In addition to our exposure to the Philippine Peso, Jamaican Dollar and Pakistani Rupee, we also have exposures to the Canadian Dollar, CFA Franc (XOF), Emirati Dirham, Euro, and Nicaraguan
Cordoba. Of these, the Nicaraguan Cordoba is the most significant after the Philippine Peso, Jamaican Dollar and Pakistani Rupee.
As we increase our revenues from non-U.S. locations or expand our solution delivery or back office footprint to other international locations, this effect may be magnified. We may, in the
future, engage in hedging strategies in an effort to reduce the adverse impact of fluctuations in foreign currency exchange rates, which may not be successful. See “Item 5A. Operating Results —Factors Affecting Our Operating Profit Margins” for
more information.
The estimates of market opportunity and forecasts of market growth included in this annual report may prove to be inaccurate, and even if the market in
which we compete achieves the forecasted growth, our business could fail to grow at similar rates, if at all.
Market opportunity estimates and growth forecasts are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. The estimates and
forecasts in this annual report relating to the size and expected growth of the market for our portfolio of integrated solutions may prove to be inaccurate. Any expansion in our market depends on a number of factors, including the cost,
performance and perceived value associated with our solutions and those of our competitors. Even if the markets in which we currently compete meet the size estimates and growth forecasted in this annual report, our business could fail to grow
at similar rates, if at all. Our growth is subject to many factors, including our success in implementing our business strategy, which is subject to many risks and uncertainties. Accordingly, the forecasts of market growth included in this
annual report should not be taken as indicative of our future growth.
We have entered into certain related-party transactions and may continue to rely on related parties for certain key development and support activities.
We have entered into, and may continue to enter into, transactions with affiliates of TRGI for corporate and operational services. See “Item 7B. Related Party Transactions.” Such transactions
may not have been entered into on an arm’s-length basis, and we may have achieved more favorable terms because such transactions were entered into with our related parties. We rely on, and will continue to rely on, our related parties to
maintain these services. If the pricing for these services changes, or if our related parties cease to provide these services, including by terminating agreements with us, we may be unable to obtain replacements for these services on the same
terms without disruption to our business. This could have a material effect on our business, results of operations and financial condition.
We may acquire other companies in pursuit of growth, which may divert our management’s attention, result in dilution to our shareholders and consume
resources that are necessary to sustain our business.
We may decide to acquire complementary businesses in the future. Negotiating these transactions can be time-consuming, difficult and expensive, and our ability to complete these transactions
may be subject to conditions or approvals that are beyond our control, including anti-takeover and antitrust laws in various jurisdictions. Consequently, these transactions, even if undertaken and announced, may not close.
An acquisition, investment or new business relationship may result in unforeseen operating difficulties and expenditures. In particular, we may encounter difficulties assimilating or
integrating the businesses, technologies, services, products, personnel or operations of acquired companies, particularly if the key personnel of the acquired company choose not to work for us, the acquired company’s technology is not easily
compatible with ours or we have difficulty retaining the customers of any acquired business due to changes in management or otherwise. Mergers or acquisitions may also disrupt our business, divert our resources and require significant
management attention that would otherwise be available for the development of our business. Moreover, the anticipated benefits of any merger, acquisition, investment or similar partnership may not be realized or we may be exposed to unknown
liabilities, including litigation against the companies we may acquire. For one or more of those transactions, we may:
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issue additional equity securities that would dilute our shareholders;
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use cash that we may need in the future to operate our business;
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incur debt on terms unfavorable to us or that we are unable to repay or that may place burdensome restrictions on our operations or cash flows;
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incur large charges or substantial liabilities; or
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become subject to adverse tax consequences, or substantial depreciation or amortization, deferred compensation or other acquisition related accounting charges.
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Any of these risks could materially and adversely affect our business, results of operations, financial condition and prospects.
Our facilities operate on leasehold property, and our inability to renew our leases on commercially acceptable terms or at all may adversely affect our
results of operations.
Our facilities operate on leasehold property. Our leases are subject to renewal and we may be unable to renew such leases on commercially acceptable terms or at all. Our inability to renew
our leases, or a renewal of our leases with a rental rate higher than the prevailing rate under the applicable lease prior to expiration, may have an adverse impact on our operations, including disrupting our operations or increasing our cost
of operations. In addition, in the event of non-renewal of our leases, we may be unable to locate suitable replacement properties for our facilities or we may experience delays in relocation that could lead to a disruption in our operations.
Any disruption in our operations could have an adverse effect on our business and results of operation.
If our goodwill or amortizable intangible assets become impaired, we could be required to record a significant charge to earnings.
We had goodwill and other intangible assets totaling $14.6 million as of June 30, 2020. We review our goodwill and amortizable intangible assets for impairment when events or changes in
circumstances indicate the carrying value may not be recoverable. We assess whether there has been an impairment in the value of goodwill at least annually. In the year ended June 30, 2020, we recognized an impairment of intellectual property
intangibles of $0.7 million. In the fiscal year ended June 30, 2019, we recognized a $0.2 million impairment of intangibles due to the disposal of DGS EDU LLC. Factors that may be considered a change in circumstances indicating that the
carrying value of our goodwill or amortizable intangible assets may not be recoverable include declines in stock price, market capitalization or cash flows and slower growth rates in our industry. We could be required to record a significant
charge to earnings in our financial statements during the period in which any impairment of our goodwill or amortizable intangible assets were determined, negatively impacting our results of operations. For more information, please refer to our
audited consolidated financial statements included at the end of this annual report.
Our ability to use our U.S. net operating loss carry forwards may be subject to limitation.
As of June 30, 2020, we had estimated U.S. federal net operating loss carry forwards of $20.6 million and U.S. state net operating loss carry forwards of $26.6 million, which will begin to expire
in 2029. As of that same date, our European and UK subsidiaries had net operating loss carry forwards of $3.9 million, which can be carried forward indefinitely with no expiry date. Our Luxembourg subsidiary had net operating loss of $1.2
million which will begin to expire in 2037. Our Canadian subsidiary had net operating loss carry forward of $2.2 million, which expires over the period 2027 through 2037. Our subsidiary in Senegal has net operating loss carry forward of $2.9
million expiring over the period 2021 through 2024. The timing and manner in which we may utilize net operating losses may be limited by tax rules regarding changes in ownership and a lack of future taxable income which could adversely affect
our ability to utilize our net operating losses before they expire. In general, net operating losses in one country cannot be used to offset income in any other country and net operating losses in one state cannot be used to offset income in
any other state. Accordingly, we may be subject to tax in certain jurisdictions even if we have unused net operating losses in other jurisdictions. Furthermore, each jurisdiction in which we operate may have its own limitations on our ability
to utilize net operating losses or tax credit carryovers generated in that jurisdiction. These limitations may increase our U.S. federal, state or foreign income tax liability.
Risks Related to Being Incorporated in Bermuda
Tax matters, new legislation and actions by taxing authorities may have an adverse effect on our operations, effective tax rate and financial condition.
We may not be able to predict our future tax liabilities due to the international nature of our operations, as we are subject to the complex and varying tax laws and rules of several foreign
jurisdictions. Our results of operations and financial condition could be adversely affected if tax contingencies are resolved adversely or if we become subject to increased levels of taxation.
We are also subject to income taxes in the United States and numerous other foreign jurisdictions. Our tax expense and cash tax liability in the future could be adversely affected by numerous
factors, including, but not limited to, changes in tax laws, regulations, accounting principles or interpretations and the potential adverse outcome of tax examinations and pending tax-related litigation. Changes in the valuation of deferred
tax assets and liabilities, which may result from a decline in our profitability or changes in tax rates or legislation, could have a material adverse effect on our tax expense. The governments of foreign jurisdictions from which we deliver
solutions may assert that certain of our clients have a “permanent establishment” in such foreign jurisdictions by reason of the activities we perform on their behalf, particularly those clients that exercise control over or have substantial
dependency on our solutions. Such an assertion could affect the size and scope of the solutions requested by such clients in the future.
Transfer pricing regulations, to which we are subject, require that any transaction among us and our subsidiaries be on arm’s-length terms. If the applicable tax authorities were to determine
that the transactions among us and our subsidiaries do not meet arm’s length criteria, we may incur increased tax liability, including accrued interest and penalties. Such increase on our tax expenses would reduce our profitability and cash
flows.
On December 5, 2017, following an assessment of the tax policies of various countries by the Code of Conduct Group for Business Taxation of the European Union, the Council of the European
Union (the “Council”) approved and published Council conclusions containing a list of “non-cooperative jurisdictions” for tax purposes. In response to the Council’s findings, on December 31, 2018, the Bermuda government enacted the Economic
Substance Act 2018, and related regulations, as subsequently amended (the “Substance Act”), with effect from July 1, 2019 for existing Bermuda entities, requiring certain entities in Bermuda engaged in “relevant activities” to maintain a
substantial economic presence in Bermuda and to satisfy economic substance requirements. The list of “relevant activities” includes holding entities, and the legislation requires Bermuda companies engaging in a “relevant activity” to be locally
managed and directed, to carry on core income generating activities in Bermuda, to maintain adequate physical presence in Bermuda, and to have an adequate level of local full time qualified employees and incur adequate operating expenditure in
Bermuda. Under the Substance Act, any entity that must satisfy economic substance requirements but fails to do so could face automatic disclosure to competent authorities in the European Union of the information filed by the entity with the
Bermuda Registrar of Companies in connection with the economic substance requirements and may also face financial penalties, restriction or regulation of its business activities or may be struck as a registered entity in Bermuda. As a result of
implementing the Substance Act, Bermuda does not currently appear on the Council’s list of “non-cooperative jurisdictions” for tax purposes and is therefore “white listed”. Although we believe we comply with the requirements of the Substance
Act, we are not able to predict how the Bermuda authorities will interpret and enforce the Substance Act or the potential impact of compliance or noncompliance on our results of operations and financial condition.
In addition, the United States enacted the Tax Cuts and Jobs Act of 2017 (the “TCJA”), which has significantly changed the U.S. federal income tax system. Significant changes introduced by
TCJA include reduction in US federal tax rate, limitations on the deductibility of interest expense and executive compensation, a base erosion focused minimum tax (the Base Erosion and Anti-Abuse tax), transitional tax, tangible property
expensing, current tax on global intangible low-taxed income (GILTI) and carry forward of net operating losses (“NOLs”). Although we believe we currently comply with the applicable requirements of TCJA, it is difficult to predict whether and to
what extent legislative changes or administrative guidance could further change or interpret the meaning of the TCJA. See “Item 10E. Taxation.”
Prospective investors should consult their tax advisors regarding the potential impact to them of the TCJA and any subsequent legislative changes and administrative guidance to them.
During the fiscal year ended June 30, 2019, the Luxembourg tax authorities challenged our tax position with respect to a royalties-related tax exemption and, in response, we filed a petition to defend our position. In response to our petition, the Luxembourg tax authorities accepted our tax position and permitted the tax exemption, issuing a revised tax assessment on June 17, 2020.
Furthermore, the Organisation for Economic Cooperation and Development (OECD) is leading an initiative under its base erosion and profit shifting (BEPS) project aimed at imposing a global
minimum tax rate, with the intention of reaching an agreement on its proposals by the end of 2020 or early 2021. We do not know when, or if, the OECD’s proposals will be adopted; however, such proposals may have implications for international
companies based in Bermuda. At this stage it is difficult to predict whether and to what extent any legislative changes that are adopted to implement the OECD’s proposals will impact us.
We may become subject to taxes in Bermuda after 2035, which may have a material adverse effect on our results of operations and shareholders’
investments.
The Bermuda Minister of Finance, under the Exempted Undertakings Tax Protection Act 1966 of Bermuda, as amended, has given us assurances that if any legislation is enacted in Bermuda that
would impose tax computed on profits or income, or computed on any capital asset, gain or appreciation, or any tax in the nature of estate duty or inheritance tax, then the imposition of any such tax will not be applicable to us or any of our
operations, shares, debentures or other obligations until March 31, 2035, except insofar as such tax applies to persons ordinarily residing in Bermuda or to any taxes payable by us in respect of real property owned or leased by us in Bermuda.
See “Item 10E. Taxation.” Given the limited duration of the Bermuda Minister of Finance’s assurance, we cannot assure shareholders that we will not be subject to any Bermuda tax after March 31, 2035.
We are a foreign private issuer and, as a result, we are not subject to U.S. proxy rules and will be subject to Exchange Act reporting obligations that, to
some extent, are more lenient and less frequent than those of a U.S. domestic public company.
We report under the Exchange Act as a non-U.S. company with foreign private issuer status. Because we qualify as a foreign private issuer under the Exchange Act and although we are subject to
Bermuda laws and regulations with regard to such matters and intend to furnish quarterly financial information to the SEC, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies,
including:
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the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;
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the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit from trades made in a short period
of time; and
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the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K,
upon the occurrence of specified significant events.
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In addition, foreign private issuers are not required to file their annual report on Form 20-F until 120 days after the end of each fiscal year, while U.S. domestic issuers that are accelerated
filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year. Foreign private issuers are also exempt from Regulation Fair Disclosure, aimed at preventing issuers from making selective
disclosures of material information. As a result of the above, you may not have the same protections afforded to shareholders of companies that are not foreign private issuers.
As a foreign private issuer and a controlled company, we are not subject to certain Nasdaq corporate governance rules applicable to U.S. listed companies.
As a foreign private issuer, we rely on a provision in the Nasdaq corporate governance listing standards that allows us to follow Bermuda law with regard to certain aspects of corporate
governance. This allows us to follow certain corporate governance practices that differ in significant respects from the corporate governance requirements applicable to U.S. companies listed on the Nasdaq Global Market.
For example, we are exempt from Nasdaq regulations that require a listed U.S. company to:
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have a majority of the board of directors consist of independent directors;
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require non-management directors to meet on a regular basis without management present;
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adopt a code of conduct and promptly disclose any waivers of the code for directors or executive officers that should address certain specified items;
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have an independent compensation committee;
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have an independent nominating committee;
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solicit proxies and provide proxy statements for all shareholder meetings;
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review related-party transactions; and
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seek shareholder approval for the implementation and modification of certain equity compensation plans and issuances of common shares.
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As a foreign private issuer, we are permitted to follow home country practice in lieu of the above requirements. In accordance with our Nasdaq Global Market listing, our audit committee is
required to comply with the provisions of Section 301 of the Sarbanes-Oxley Act, and Rule 10A-3 of the Exchange Act, both of which are also applicable to U.S. companies listed on the Nasdaq Global Market. Because we are a foreign private
issuer, however, our audit committee is not subject to additional Nasdaq corporate governance requirements applicable to listed U.S. companies, including the requirements to have a minimum of three members and to affirmatively determine that
all members are “independent,” using more stringent criteria than those applicable to us as a foreign private issuer. These reduced compliance requirements may make our common shares less attractive to some investors, which could adversely
affect their market price.
In the event we no longer qualify as a foreign private issuer, we intend to rely on the “controlled company” exemption under Nasdaq corporate governance rules. A “controlled company” under Nasdaq
corporate governance rules is a company of which more than 50% of the voting power is held by an individual, group or another company. Our principal shareholder, TRGI, controls a majority of the voting power of our outstanding shares, making us
a “controlled company” within the meaning of Nasdaq corporate governance rules. As a controlled company, we are eligible to, and, in the event we no longer qualify as a foreign private issuer, we intend to, elect not to comply with certain of
corporate governance standards.
We may lose our foreign private issuer status which would then require us to comply with the Exchange Act’s domestic reporting regime and cause us to incur
significant legal, accounting and other expenses.
We are a foreign private issuer and therefore we are not required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act applicable to U.S. domestic
issuers. In order to maintain our current status as a foreign private issuer, either:
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a majority of our common shares must be either directly or indirectly owned of record by non-residents of the United States; or
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a majority of our “executive officers” or directors may not be U.S. citizens or residents, more than 50% of our assets cannot be located in the United States, and our business must be
administered principally outside the United States.
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A majority of our executives, assets and business are located in and managed from the United States. As a result, if a majority of our common shares become either directly or indirectly owned of
record by United States residents, we will lose our foreign private issuer status. If we lost this status, we would be required to comply with the Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more
detailed and extensive than the requirements for foreign private issuers.
We may also be required to make changes in our corporate governance practices in accordance with various SEC and Nasdaq rules. The regulatory and compliance costs to us under U.S. securities laws
if we are required to comply with the reporting requirements applicable to a U.S. domestic issuer may be significantly higher than the cost we would incur as a foreign private issuer. As a result, we expect that a loss of foreign private issuer
status would increase our legal and financial compliance costs and would make some activities more time consuming and costly. We also expect that if we were required to comply with the rules and regulations applicable to U.S. domestic issuers,
it would make it more difficult and expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These rules and regulations could
also make it more difficult for us to attract and retain qualified members of our board of directors.
Bermuda law differs from the laws in effect in the United States and may afford less protection to holders of our common shares.
We are incorporated under the laws of Bermuda. As a result, our corporate affairs are governed by the Companies Act 1981, as amended (the “Companies Act”) which differs in some material respects
from laws typically applicable to U.S. corporations and shareholders, including the provisions relating to interested directors, amalgamations, mergers and acquisitions, takeovers, shareholder lawsuits and indemnification of directors.
Generally, the duties of directors and officers of a Bermuda company are owed to the company only. Shareholders of Bermuda companies typically do not have rights to take action against directors or officers of the company and may only do so in
limited circumstances. Class actions are not available under Bermuda law. The circumstances in which derivative actions may be available under Bermuda law are substantially more prescribed and less clear than they would be to shareholders of
U.S. corporations. The Bermuda courts, however, would ordinarily be expected to permit a shareholder to commence an action in the name of a company to remedy a wrong to the company where the act complained of is alleged to be beyond the
corporate power of the company or illegal, or would result in the violation of the company’s memorandum of association or bye-laws. Furthermore, consideration would be given by a Bermuda court to acts that are alleged to constitute a fraud
against the minority shareholders or, for instance, where an act requires the approval of a greater percentage of the company’s shareholders than that which actually approved it. However, our bye-laws contain a provision by virtue of which
unless we consent in writing to the selection of an alternative forum, the United States District Court for the Southern District of New York will be the exclusive forum for any private action asserting violations by us or any of our directors
or officers of the Securities Act or the Exchange Act, or the rules and regulations promulgated thereunder, and of all suits in equity and actions at law brought to enforce any liability or duty created by those statutes or the rules and
regulations under such statutes. If any action the subject matter of which is within the scope of the preceding sentence is filed in a court other than the United States District Court for the Southern District of New York, the plaintiff or
plaintiffs shall be deemed by this provision of the bye-laws (i) to have consented to removal of the action by us to the United States District Court for the Southern District of New York, in the case of an action filed in a state court, and
(ii) to have consented to transfer of the action pursuant to 28 U.S.C. § 1404 to the United States District Court for the Southern District of New York. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits
brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any
duty or liability created by the Securities Act or the rules and regulations thereunder. Accordingly, there is uncertainty as to whether a court would enforce such provision with respect to claims under the Securities Act, and in any event, our
shareholders cannot waive compliance with federal securities laws and the rules and regulations thereunder. If a court were to find the choice of forum provision to be unenforceable in an action, we may incur additional costs associated with
resolving such action in other jurisdictions, which could have a material adverse effect on our business, financial condition or results of operations.
When the affairs of a company are being conducted in a manner that is oppressive or prejudicial to the interests of some shareholders, one or more shareholders may apply to the Supreme Court of
Bermuda, which may make such order as it sees fit, including an order regulating the conduct of the company’s affairs in the future or ordering the purchase of the shares of any shareholders by other shareholders or by the company. In addition,
under our bye-laws and as permitted by Bermuda law, each shareholder has waived any claim or right of action against our directors or officers for any action taken by directors or officers in the performance of their duties, except for actions
involving fraud or dishonesty. In addition, the rights of holders of our common shares and the fiduciary responsibilities of our directors under Bermuda law are not as clearly established as under statutes or judicial precedent in existence in
jurisdictions in the United States, particularly the State of Delaware. Therefore, holders of our common shares may have more difficulty protecting their interests than would shareholders of a corporation incorporated in a jurisdiction within
the United States.
Any U.S. or other foreign judgments you may obtain against us may be difficult to enforce against us in Bermuda.
We are incorporated in Bermuda and a significant portion of our assets is located outside the United States. In addition, certain of our directors are non-residents of the United States. As a
result, it may be difficult or impossible for U.S. investors to serve process within the United States upon us or our directors and executive officers, or to enforce a judgment against us for civil liabilities in U.S. courts.
In addition, you should not assume that courts in the countries in which we are incorporated or where our assets are located would enforce judgments of U.S. courts obtained in actions against us
based upon the civil liability provisions of applicable U.S. federal and state securities laws or would enforce, in original actions, liabilities against us based on those laws.
Risks Related to Our Common Shares
The market price of our common shares may be volatile.
The stock market in general, and the market for equities of newly public companies in particular, have been highly volatile. As a result, the market price of our common shares is likely to be
similarly volatile, and investors in our common shares may experience a decrease, which could be substantial, in the value of their common shares, including decreases unrelated to our operating performance or prospects, or a complete loss of
their investment. The price of our common shares could be subject to significant fluctuations in response to a number of factors, including those listed elsewhere in this “Risk Factors” section and others such as:
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variations in our operating performance and the performance of our competitors;
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actual or anticipated fluctuations in our quarterly or annual operating results;
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changes in our revenues or earnings estimates or recommendations by securities analysts;
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publication of research reports by securities analysts about us or our competitors in our industry;
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failure of securities analysts to initiate or maintain coverage of us, changes in ratings and financial estimates and the publication of other news by any securities analysts who follow our
company, or our failure to meet these estimates or the expectations of investors;
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our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market;
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additions or departures of key personnel;
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strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy;
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announcement of technological innovations by us or our competitors;
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the passage of legislation, changes in interpretations of laws or other regulatory events or developments affecting us;
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speculation in the press or investment community;
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changes in accounting principles;
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terrorist acts, acts of war or periods of widespread civil unrest;
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health pandemics (including COVID-19);
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changes in general market and economic conditions;
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changes or trends in our industry;
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investors’ perception of our prospects; and
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adverse resolution of any new or pending litigation against us.
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In the past, securities class action litigation has often been initiated against companies following periods of volatility in their stock price. This type of litigation could result in
substantial costs and divert our management’s attention and resources and could also require us to make substantial payments to satisfy judgments or to settle or defend litigation.
If securities or industry analysts do not publish research about our business, or publish inaccurate or unfavorable research, the price and trading
volume of our common shares could decline.
The market for our common shares will likely depend, in part, on the research and reports that securities or industry analysts publish about us or our business. There can be no assurance that
analysts will cover us or provide favorable coverage. In addition, if one or more analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share
price or trading volume to decline. Moreover, if one or more analysts downgrade our common shares or change their opinion of our common shares, our share price would likely decline.
Our future earnings and earnings per share, as reported under IFRS as issued by the IASB, could be adversely impacted by the Amazon Warrant and if
Amazon exercises its right to acquire our common shares pursuant to the Amazon Warrant, it will dilute the ownership interests of our then-existing shareholders and could adversely affect the market price of our common shares.
The Amazon Warrant increases the number of diluted shares reported, which has an effect on our fully diluted earnings per share. Further, the Amazon Warrant will be presented as a liability
in our audited consolidated balance sheet and is subject to fair value measurement adjustments during the periods that it is outstanding. Accordingly, future fluctuations in the fair value of the Amazon Warrant could adversely impact our
results of operations. If Amazon exercises its right to acquire our common shares pursuant to the Amazon Warrant, it will dilute the ownership interests of our then-existing shareholders and reduce our earnings per share. In addition, any sales
in the public market of any common shares issuable upon the exercise of the Amazon Warrant by Amazon could adversely affect the market price of our common shares.
For more information, see our audited consolidated financial statements included at the end of this annual report.
We may not pay any dividends. Accordingly, investors may only realize future gains on their investments if the price of their common shares increases,
which may never occur.
We have never declared or paid any dividends, other than (i) a dividend declared by one of our subsidiaries during the fiscal year ended June 30, 2017, the remaining $1.6 million of which was
paid during the fiscal year ended June 30, 2019 and (ii) on July 21, 2020, our board of directors approved a one-time dividend of $4.0 million to our shareholders reflecting a portion of the cash generation from the business during fiscal year
2020. We currently do not plan to declare dividends on our common shares in the foreseeable future. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. The payment of
dividends, if any, would be at the discretion of our board of directors and would depend on our results of operations, capital requirements, financial condition, prospects, contractual arrangements, any limitations on payment of dividends
present in our current and future debt agreements and other factors that our board of directors may deem relevant. Accordingly, if our board of directors deems it appropriate not to pay any dividends, our investors may only realize future gains
on their investments if the price of their common shares increases, which may never occur.
We are an emerging growth company, and the reduced disclosure requirements applicable to emerging growth companies may make our common shares less
attractive to investors.
We are an emerging growth company (“EGC”), as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”), and we may take advantage of certain exemptions from various reporting
requirements that are applicable to other public companies that are not EGCs including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the
“Sarbanes-Oxley Act”), reduced financial disclosure obligations, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory
vote on executive compensation and any golden parachute payments not previously approved. We may take advantage of these provisions until we are no longer an EGC. We would cease to be an EGC upon the earliest to occur of: the last day of the
fiscal year in which we have more than $1.07 billion in annual revenue; the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates; the issuance, in any three-year period, by us of
more than $1.0 billion in non-convertible debt securities; and the last day of the fiscal year ending after the fifth anniversary of our initial public offering. If we take advantage of any of these reduced reporting requirements in future
filings, the information that we provide our security holders may be different than you might get from other public companies in which you hold equity interests. We cannot predict if investors will find our common shares less attractive because
we may rely on these exemptions. If some investors find our common shares less attractive as a result, there may be a less active trading market for our common shares and our share price may be more volatile.
If we are unable to implement and maintain effective internal control over financial reporting, our results of operations and the price of our common shares could be
adversely affected.
During the fiscal year ended June 30, 2019, we and our independent registered public accounting firm identified one material weakness in our internal control over financial reporting related to
our estimate of renewable revenue and related provision for Etelequote Limited. During the preparation of our interim condensed consolidated financial statements as of March 31, 2020 and for the nine month periods ended March 31, 2020 and
2019, we and our independent registered public accounting firm identified material weaknesses in our internal control over financial reporting related to our estimate of renewable revenue and related provision, and related tax effects, for
Etelequote Limited for the nine month period ended March 31, 2019. We disposed of Etelequote Limited to our parent company, The Resource Group International Limited, on June 26, 2019 and have treated Etelequote Limited as a discontinued
operation in our financial statements for all periods presented in this annual report. For more information about our disposition of Etelequote Limited, refer to Note 30.2 to our audited consolidated financial statements included at the end
of this annual report. As of June 30, 2020, we and our independent registered public accounting firm determined that this material weaknesses were remediated, due to the disposal of Etelequote Limited at the end of June 2019.
During the audit for the fiscal year ended June 30, 2020, we and our independent registered public accounting firm identified a material weakness in our internal control over financial reporting related to the execution and review of complex accounting matters. Due to a failure in procedures with respect to the execution, review, supervision and monitoring of complex accounting matters, a number of adjustments were identified and made to the consolidated financial statements during the course of our audit.
We cannot assure you that the measures we have taken to date, and actions we may take in the future, will prevent potential future material weaknesses. In addition, neither our management nor
an independent registered public accounting firm has performed an evaluation of our internal control over financial reporting in accordance with the provisions of the Sarbanes-Oxley Act because no such evaluation has been required to date. As
an ECG and pursuant to Section 404 of the Sarbanes-Oxley Act, beginning with our annual report on Form 20-F for the fiscal year ending June 30, 2021, our management is required to report on the effectiveness of our internal control over
financial reporting. The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation. We have not yet
made a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Also, once we no longer qualify as an EGC, the independent registered public accounting firm that audits our financial statements
will also be required to audit our internal control over financial reporting. Any delays or difficulty in satisfying these requirements could adversely affect our future results of operations and the price of our shares. Moreover, it may cost
us more than we expect to comply with these control- and procedure-related requirements. Failure to comply with Section 404 or to implement required new or improved controls, or difficulties encountered in their implementation, could harm our
operating results or cause us to fail to meet our reporting obligations could potentially result in a loss in investor confidence in our reported financial information and subject us to sanctions or investigations by regulatory authorities.
If we are unable to successfully remediate any future material weaknesses in our internal control over financial reporting, or identify any additional material weaknesses, the accuracy and
timing of our financial reporting may be adversely affected, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements,
investors may lose confidence in our financial reporting, and our share price may decline as a result.
We will incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies, particularly
after we are no longer an EGC, which could adversely affect our business, operating results and financial condition.
As a public company, and particularly after we cease to be an EGC, we will incur significantly greater legal, accounting and other expenses than we incurred as a private company. We are
subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), and Nasdaq rules and regulations. These requirements have increased and will
continue to increase our legal, accounting and financial compliance costs and have made and will continue to make some activities more time consuming and costly. For example, we expect these rules and regulations to make it more difficult and
more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to maintain the same or similar coverage. As a result, it may be
more difficult for us to attract and retain qualified individuals to serve on our board of directors or as our executive officers.
The Sarbanes-Oxley Act requires, among other things, that we assess the effectiveness of our internal control over financial reporting annually and the effectiveness of our disclosure
controls and procedures quarterly. In particular, Section 404 of the Sarbanes-Oxley Act, (“Section 404”), will require us to perform system and process evaluation and testing of our internal control over financial reporting to allow management
to report on, and our independent registered public accounting firm potentially to attest to, the effectiveness of our internal control over financial reporting. As an EGC, we expect to avail ourselves of the exemption from the requirement that
our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting under Section 404. However, we may no longer avail ourselves of this exemption when we cease to be an EGC. When our
independent registered public accounting firm is required to undertake an assessment of our internal control over financial reporting, the cost of our compliance with Section 404 will correspondingly increase. Our compliance with applicable
provisions of Section 404 will require that we incur substantial accounting expense and expend significant management time on compliance-related issues as we implement additional corporate governance practices and comply with reporting
requirements. Moreover, if we are not able to comply with the requirements of Section 404 applicable to us in a timely manner, or if we or our independent registered public accounting firm identify deficiencies in our internal control over
financial reporting that are deemed to be material weaknesses, the market price of our shares could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional
financial and management resources.
Furthermore, investor perceptions of our company may suffer if deficiencies are found, and this could cause a decline in the market price of our common shares. Irrespective of compliance with
Section 404, any failure of our internal control over financial reporting could have a material adverse effect on our stated operating results and harm our reputation. If we are unable to implement these requirements effectively or efficiently,
it could harm our operations, financial reporting, or financial results and could result in an adverse opinion on our internal controls from our independent registered public accounting firm.
After we are no longer an EGC, or sooner if we choose not to take advantage of certain exemptions set forth in the JOBS Act, we expect to incur significant expenses and devote substantial
management effort toward ensuring compliance with the auditor attestation requirements of Section 404. In that regard, we will need to hire additional accounting and financial staff with appropriate public company experience and technical
accounting knowledge.
Certain U.S. holders of our common shares may suffer adverse U.S. tax consequences if we are characterized as a passive foreign investment company.
Based on our gross income and average value of our gross assets, and our current share price, as well as the nature of our business, we do not expect to be classified as a “passive foreign
investment company,” or PFIC, for U.S. federal income tax for the current tax year or in tax years in the foreseeable future. A corporation organized outside the United States generally will be classified as a PFIC for U.S. federal income tax
purposes in any taxable year in which at least 75% of its gross income is passive income or on average at least 50% of the gross value of its assets is attributable to assets that produce passive income or are held for the production of passive
income. Passive income for this purpose generally includes dividends, interest, royalties, rents and gains from commodities and securities transactions. Our status in any taxable year will depend on our assets and activities in each year, and
because this is a factual determination made annually after the end of each taxable year, there can be no assurance that we will not be considered a PFIC for the current taxable year or any future taxable year. The market value of our assets
may be determined in large part by reference to the market price of our common shares, which is likely to fluctuate. If we were to be treated as a PFIC for any taxable year during which a U.S. holder held our common shares, however, certain
adverse U.S. federal income tax consequences could apply to the U.S. holder.
Our executive officers, directors and principal shareholders have the ability to control all matters submitted to shareholders for approval.
Our executive officers, directors and shareholder who own more than 5% of our outstanding common shares, which we refer to as our principal shareholder, beneficially owns shares representing
approximately 69.7% of our outstanding common shares. As a result, if some or all of these shareholders were to choose to act together, they would be able to control all matters submitted to our shareholders for approval, as well as our
management and affairs. For example, these persons, if they choose to act together, would control the election of directors and approval of any merger, amalgamation, consolidation or sale of all or substantially all of our assets. This
concentration of voting power could delay or prevent an acquisition of our company on terms that other shareholders may desire.
Our largest shareholder, The Resource Group International Limited, and its major shareholder, TRG Pakistan Limited, have substantial control over us and
could limit your ability to influence the outcome of key transactions, including any change of control.
As of September 30, 2020, our largest shareholder, TRGI, beneficially owns, in the aggregate, approximately 61.6% of our outstanding common shares. As of June 30, 2020, TRG Pakistan Limited
(“TRGP”), a publicly traded Pakistan corporation listed on the Pakistan Stock Exchange, beneficially owned 46% of TRGI’s outstanding voting securities (45% if all outstanding non-voting common shares are converted into voting common shares).
The members of the boards of directors of TRGP and TRGI have substantial overlap. Peter Riepenhausen serves as the chairman and director of both TRGP and TRGI. Zia Chishti serves as a director of both TRGP and TRGI and is also TRGP’s largest
shareholder and a significant shareholder in TRGI. In addition, Mohammed Khaishgi serves on the boards of directors of TRGP, TRGI and TRGI’s portfolio management company, TRG Holdings.
Additionally, pursuant to a stockholder’s agreement, dated September 15, 2017, between TRGI and us (the “TRGI Stockholder’s Agreement”), we will not take or commit to take, or cause or permit any
of our subsidiaries to take, certain enumerated actions without TRGI’s consent, to be withheld or given in TRGI’s sole discretion. The TRGI Stockholder’s Agreement will remain in effect until the date that TRGI ceases to hold 10% or more of all
shares issued by us, as measured on an as-converted basis. As a result, we expect that TRGP and TRGI will be able to exert significant influence over our business. TRGP and TRGI may have interests that differ from your interests and may cause
TRGI’s shares in our company to be voted in a way with which you disagree and that may be adverse to your interests. The concentration of ownership of our share capital may have the effect of delaying, preventing or deterring a change of
control of our company and its subsidiaries, as well as certain M&A activity and securities offerings, and could deprive our shareholders of an opportunity to receive a premium for their common shares as part of a sale of our company and
may adversely affect the market price of our common shares. In addition, because of TRGI’s majority ownership of our company, even if we no longer qualify as a foreign private issuer, we may be able to take advantage of many of the same
exemptions from the Nasdaq corporate governance rules for as long as we continue to qualify as a “controlled company” within the meaning of the Nasdaq corporate governance standards. See “As a foreign private issuer, we are not subject to
certain Nasdaq corporate governance rules applicable to U.S. listed companies.” Our bye-laws provide that any shareholder holding 50% or more of the nominal value of our voting shares will have the right to appoint five directors to our board
of directors. If there is no such 50% holder, then any shareholder holding 25% or more of the nominal value of our voting shares (first in time as compared to any other 25% shareholder) will have the right to appoint five directors to our board
of directors.
A significant portion of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near future. This could
cause the market price of our common shares to drop significantly, even if our business is doing well.
Sales of a substantial number of our common shares in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to
sell shares, could reduce the market price of our common shares. As of September 30, 2020, we have 18,388,167 outstanding common shares. Of these common shares, 4,761,905 shares are freely tradable, without restriction, in the public market.
All remaining 13,626,262 shares are currently restricted as a result of securities laws or lock-up arrangements but will be able to be sold in the near future. Moreover, certain of our security holders have rights, subject to some conditions,
to require us to file registration statements covering the 11,416,683 common shares that it holds or to include their shares in registration statements that we may file for ourselves or other shareholders. We also intend to register all of our
common shares that we may issue under our equity compensation plans. Once we register these shares, they can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates and lock-up arrangements.
Anti-takeover provisions in our bye-laws could make an acquisition of us, which may be beneficial to our shareholders, more difficult and may prevent
attempts by our shareholders to replace or remove our current management.
Provisions in our bye-laws may delay or prevent an acquisition of us or a change in our management. In addition, by making it more difficult for shareholders to replace members of our board
of directors, these provisions also may frustrate or prevent any attempts by our shareholders to replace or remove our current management because our board of directors is responsible for appointing the members of our management team. These
provisions include:
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the ability of our board of directors to determine the rights, preferences and privileges of our preferred shares and to issue the preferred shares without shareholder approval; and
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the ability of major shareholders (i.e., shareholders holding 50% or more; in the absence of such a holder, 25% or more) to appoint directors to the Board.
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These provisions could make it more difficult for a third party to acquire us, even if the third party’s offer may be considered beneficial by many shareholders. As a result, shareholders may
be limited in their ability to obtain a premium for their shares.
We have the ability to issue preferred shares without shareholder approval.
Our common shares may be subordinate to classes of preferred shares issued in the future in the payment of dividends and other distributions made with respect to the common shares, including
distributions upon liquidation or dissolution. Our board of directors is authorized to issue preferred shares without first obtaining shareholder approval. If we issue preferred shares, it will create additional securities that may have
dividend or liquidation preferences senior to the common shares. If we issue convertible preferred shares, a subsequent conversion may dilute the current common shareholders’ interest.
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A.
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History and development of the company
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Company History
We were incorporated by TRGI in 2017 for the purpose of delivering solutions to help the world’s preeminent brands more effectively engage with their customers as a leading global customer experience (“CX”)
company. Prior to June 30, 2017, our business was conducted through various wholly- or majority-owned portfolio companies of TRGI, which we refer to as the Continuing Business Entities. The predecessor
companies for our Customer Engagement and Customer Expansion solutions were established in 1996 and acquired by TRGI in 2004. The predecessor company for our Customer Experience solution was established in 1984 and acquired by TRGI in 2004.
The predecessor company for our Customer Acquisition business was founded as a subsidiary of TRGI in 2008.
On June 30, 2017, TRGI completed a series of transactions constituting the Reorganization Transaction, as a result of which TRGI acquired 4,254,221 of our convertible preference shares and
6,140,713 of our common shares (representing 88.5% of our outstanding common shares as of such date) and the Continuing Business Entities became our wholly owned direct and indirect subsidiaries. We consider the Reorganization Transaction to be
a transaction between entities under common control as all of the combining entities or businesses were ultimately controlled by TRGI both before and after the Reorganization Transaction and such control was not transitory.
In addition, in connection with the consummation of the Reorganization Transaction, Mr. Jeffrey Cox, a member of our executive leadership team, and Mr. Anthony Solazzo, the chief executive
officer of our discontinued operation Etelequote Limited, acquired minority interests in our company (322,599 and 478,115 common shares, respectively). The number of common shares of IBEX Limited issued to Messrs. Cox and Solazzo was determined
based on the relative values of their respective minority interests in two of the Continuing Business Entities that were contributed by TRGI to our company. The relative values of those entities were not dependent upon the price at which common
shares were sold but rather was determined on the basis of independent third-party valuations of two Continuing Business Entities and our company.
In connection with the Reorganization Transaction, we provided an indemnity to Mr. Solazzo. Our indemnification obligation is capped at $2.0 million. No claim under the indemnity has been
made, and we believe that any material indemnity exposure for us is remote.
One of the Continuing Business Entities, DGS Limited, entered into a “Profit Share Agreement” dated as of June 30, 2017 with Mr. Cox whereby, in exchange for his services as chief executive officer of that entity, Mr. Cox received 13.9% of any cash dividends paid by DGS Limited to us. Mr. Cox was paid $0.2 million under that agreement, which expired by its terms on June 30, 2018. The parties entered into a new Profit Share Agreement, effective as of June 30, 2019, whereby in exchange for his services as chief executive officer of DGS Limited, Mr. Cox received a fee equal to 16.18% of any cash dividends paid by DGS Limited to us. Mr. Cox was paid $0.1 million under the Profit Share Agreement, which expired by its terms on June 30, 2020.
Spin-off of Etelequote Limited to our Parent Company
On June 26, 2019, we transferred all of our equity interests in Etelequote Limited to our parent company, TRGI. In consideration of the share transfer, TRGI agreed to waive $47.9 million of
the aggregate preference amount to which the Series C preferred shares that were held by it were entitled upon a voluntary or involuntary liquidation, dissolution or winding up after holders of our Series A preferred shares and Series B
preferred shares would receive their respective entitlements. The $47.9 million amount represents the agreed purchase price for the share transfer. As a result of the ETQ Spin-off, Etelequote Limited is no longer a part of our ongoing business
and is treated as a discontinued operation as of June 30, 2019 and for the fiscal years ended June 30, 2019 and 2018. For more information on the ETQ Spin-off, refer to Note 30.2 in our audited consolidated financial statements at the end of
this annual report.
We are an exempted company with limited liability under the laws of Bermuda. We were incorporated on February 28, 2017 under the name Forward March Limited. We changed our name to IBEX Holdings Limited on
September 15, 2017 and then changed our name to IBEX Limited on September 11, 2019. We maintain a registered office located at Crawford House, 50 Cedar Avenue, Hamilton HM11 Bermuda, and the telephone number for this office is (441) 295-6500.
Our website address is http://www.ibex.co.
Emerging Growth Company
The JOBS Act was enacted in April 2012 with the intention of encouraging capital formation in the United States and reducing the regulatory burden on newly public companies that qualify as EGCs. We are an EGC
within the meaning of the JOBS Act. As an EGC, we are not required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley
Act, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Act, (iii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board
regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis), and (iv) disclose certain executive
compensation-related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation. We may take advantage of these exemptions until we
are no longer an EGC.
We will remain an EGC until the earliest to occur of:
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the last day of the fiscal year in which we have more than $1.07 billion in annual revenues;
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the date on which we become a “large accelerated filer” (the fiscal year-end on which at least $700 million of equity securities are held by non-affiliates as of the last day of our then-most recently completed second fiscal
quarter);
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the date on which we have issued, in any three-year period, more than $1.0 billion in non-convertible debt securities; and
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the last day of the fiscal year ending after the fifth anniversary of the completion of our initial public offering.
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For more information see “Item 3D. Risk Factors—Risks Related to Our Common Shares.” The reduced disclosure requirements applicable to EGCs may make our common shares less attractive to investors due to certain
risks related to our status as an EGC.
Controlled Company Status
We qualify as a “controlled company” under Nasdaq rules because more than 50% of the voting power of our shares are held by TRGI. We intend to rely upon the “controlled company” exception relating to the board
of directors and committee independence requirements under the Nasdaq listing rules. Pursuant to this exception, we will be exempt from the rules that would otherwise require that our board of directors consist of a majority of independent
directors and that our compensation committee and nominating and governance committee be composed entirely of independent directors. The “controlled company” exception does not modify the independence requirements for the audit committee, and
we intend to comply with the requirements of the Exchange Act and Nasdaq, which require that our audit committee have a majority of independent directors, and exclusively independent directors within one year following the effective date of our
registration statement. For more information, see “Item 3D. Risk Factors—Risks Related to Being Incorporated in Bermuda—As a foreign private issuer and a controlled company, we are not subject to certain Nasdaq corporate governance rules
applicable to U.S. listed companies.”
Recent Developments
2020 Cybersecurity Incident
On August 17, 2020, we detected a ransomware attack that briefly impacted a portion of our information technology systems. Immediately upon becoming aware of the attack, we implemented containment measures to
prohibit access by the threat actor to our extended network which also prevented its access to our client’s networks and systems. Normal IT operations continued, leveraging our redundant infrastructure and immediately restoring the impacted
systems from online backup systems. At no time did the attack impact our business operations, but the unauthorized access included the exfiltration of certain non-production data files from a file server in our backup data center. In
conjunction with our containment activities, we launched an investigation, notified our insurance broker and carrier, and engaged an incident response team and cybersecurity forensics firm. We have been working with industry-leading
cybersecurity firms who have implemented a series of additional containment and remediation measures to address the incident and reinforce the security of our information technology systems.
Based on the preliminary assessment and on the information currently known, we do not believe the incident will have a material impact on our business, financial condition or results of operations. However, the
investigation of the incident is ongoing, and we may incur losses associated with claims by third parties, as well as fines, penalties and other sanctions imposed by regulators relating to or arising from the incident, which could have a
material adverse impact on our business, financial condition or results of operations in future periods.
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B.
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Business overview
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Overview
We are a leading global CX company delivering solutions to help the world’s preeminent brands more effectively engage with their customers.
Through our integrated customer lifecycle experience (“CLX”) platform, we provide solutions that span the entire customer lifecycle and range from broad-based integrated offerings to more
customized solutions focused on specific client needs. Our top ten clients use an average of more than three services across our CLX platform. The ibex Connect suite of solutions makes up the largest portion of our revenue.
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Our CLX Suite of Solutions
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Connect (Customer Engagement)
“Engage customers.”
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Digital (Digital Marketing)
“Add customers.”
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CX (Feedback Analytics)
“Grow relationships.”
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Customer Service
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Digital Marketing
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Multi-Channel Digital Surveys
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Billing Support
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Lead Generation
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Real-Time Issue Resolution
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Technical Support
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Online Sales
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Analytics & Business Intelligence
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Up-Sell/Cross-Sell
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Optimization
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Text / Sentiment Analytics
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Retention / Renewals
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Win-backs
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Lead Conversion
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We manage over 100 million interactions with consumers on behalf of our clients each year through an omni-channel approach, using voice, web, chat and email. While traditional channels
(voice) still account for a majority of our revenue, our revenue from non-voice channels (web, chat and email) has increased over the last five years, from 2.9% in fiscal year 2015 to 16.5% in fiscal year 2020. The growth of our non-voice
business has a positive impact on our profitability because our non-voice business has a higher workstation capacity utilization. In addition, agent attrition rates are lower for our non-voice business, which saves us significant costs
associated with hiring and training.
Our delivery centers are strategically located in labor markets with relatively low levels of resource competition, which enables us to attract, hire and retain a highly engaged, well trained
and motivated workforce, resulting in high levels of client satisfaction. In recent years, we have opened all of our new delivery centers in lower-cost markets outside the United States, such as the Philippines, Jamaica and Nicaragua, where we
have been successful in offering our clients a lower cost base while maintaining high levels of quality.
Industry Background
The outsourced industry is undergoing a paradigm shift with blue chip companies in traditional industries pivoting toward digitally-enabled marketplaces and increasingly digitally-native
consumers. Companies are reacting to this shifting landscape with a relentless focus on CX and customer lifetime value (“LTV”). They are beginning to view their customer contact center providers as essential partners and extensions of their
brand rather than cost centers that manage customer interaction. We define this new model and vantage point as “BPO 2.0” and believe that our differentiated suite of services and organizational characteristics uniquely position us to lead in
this market, including:
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services that span the full customer lifecycle, ranging from customer acquisition to customer engagement to managing and measuring the customer experience;
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technology tools that enhance agent performance and drive unique client insights;
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multiple channels of engagement, ranging from voice to fast-growing digital channels such as chat and email;
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differentiated global delivery centers, where we have been successful in offering clients lower costs while maintaining high levels of quality; and,
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unique, highly engaged culture that is overseen by a highly experienced management team that is flexible and moves at the speed of the client.
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This marketplace driven shift to BPO 2.0 has been critical in our success, as we are well positioned on the leading edge which is demonstrated by our above-average revenue growth rates and
success with both new economy and traditional blue-chip branded clients. Our “New Economy” business, where we work with the faster-growing, new economy brands, has grown at a compound annual growth rate (“CAGR”) of 176% for the last five years.
We define New Economy clients as those that are experiencing high degrees of top-line growth which, in turn, drives significant increases in such companies’ volume requirements for customer care BPO solutions. Between fiscal years 2015 and
2020, this category grew from 0.2% to 27.4% of our revenue. We have also been able to win blue chip brands that are looking for providers with a more innovative and outcome-oriented focus on customer engagement. Our work with New Economy
clients has resulted in a rapid expansion of our non-voice solutions where we engage our client’s customers through means, such as chat and email. Our revenue from non-voice channels has similarly grown at a rapid CAGR of 52% over the last five
years.
Key Market Trends
A number of trends are driving growth and transformation in the outsourced customer interactions market. Historically, the industry was premised on labor arbitrage and cost. Offshoring of
work to markets like India and the Philippines was driven primarily by the cost advantages those markets provided. However, the outsourced industry is undergoing a paradigm shift with blue chip clients pivoting toward technology-enabled
marketplaces supporting an increasingly digitally-native consumer base. Companies are reacting to this shifting landscape with a relentless focus on CX and customer LTV. They view their customer contact center providers as essential partners
and an extension of their brand rather than a cost center to manage customer interaction. In addition to clients in mature industries, emerging industries in the technology and consumer services sectors are changing the mix of solutions,
channels and delivery locations. We believe that participants that offer a flexible, technology-oriented, and integrated solution will be best positioned to address the following key industry trends:
The Primacy of CX
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A Dramatic Prioritization of CX – As brands recognize that digital feedback mechanisms, such as social media, can rapidly impact brand perception in a positive or
negative manner, the importance of delivering an exceptional customer experience has become a top priority for companies.
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Consumer Centricity & Customer LTV – Customer expectations and behaviors are changing dramatically. Enabled by immediate feedback channels, consumers expect
that enterprises will meet their needs and preferences instantaneously in return for brand loyalty and greater share of customer spend. Accordingly, enterprises and brands are more focused on understanding their consumers’ needs
and developing business models that hinge on maximizing customer lifetime value. In turn, they are demanding outsourced customer engagement partners that can deliver customer-centric solutions in an omni-channel manner that
maximizes customer retention.
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Evolution of Client Needs
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Outsourcing Across the Operational Value Chain – Enterprises are more frequently relying on outsourced providers to address their needs across the entire
customer lifecycle. Many companies, especially in the healthcare, financial services, and utilities space, are beginning to increasingly rely on the expertise of external vendors to deliver cost savings, ensure compliance, drive
performance enhancements, and offer technology suites that serve to improve overall CX while allowing the brand to focus on their core products and competencies.
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Rise of Omni-Channel to Drive Consumer Centricity − Customer expectations and behaviors are changing dramatically with the evolution of technology such as smart
phones, tablets and social media. This has accelerated the speed of consumer interaction with the brands. Consumers expect the brands to meet their needs and preferences instantaneously in return for brand loyalty and a greater
share of customer spend. To address this trend, brands are focused on providing a seamless experience via integration of all contact channels (chat, email, SMS, voice, etc.) to deliver customer-centric solutions in an
omni-channel manner that maximize customer lifetime value.
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Seeking Integrated End-to-End Partners – We believe clients are increasingly looking to utilize outsourcing partners who can provide unified solutions for a
variety of touchpoints along the customer interaction value chain, from digital marketing to customer sales and support to CX and surveys. Vendors with integrated offerings will command a larger share of wallet from their
clients, drive a great degree of insight and performance, and become more ‘sticky’ with their clients for longer-lasting relationships.
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Bestshore Flexible Delivery Model – Clients are increasingly differentiating between providers based on their ability to provide a flexible, turnkey
delivery model that can offer a mix of onshore, nearshore, offshore, and remote working capabilities. In light of recent global events, clients have indicated a heightened importance on the ability of providers to
shift their delivery rapidly between various location models.
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Data Protection & Security − With the rise of the digital economy has come a rise in both the concern toward, and vulnerability of, consumer data.
Both mature and new economy brands are placing a higher degree of focus on the technology that underpins the data security & fraud systems deployed by their partners; having an advanced and secure system
architecture along with data center redundancy and advanced security technologies are becoming increasingly important, understanding that any security breach can result in a devastating impact to a client’s brand and a
consumer’s loyalty.
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Impact of Technology, Automation, & Artificial Intelligence (“AI”)
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Data and Analytics − Enterprises are increasingly demanding that their providers of customer interaction solutions integrate data analysis &
insight into their core service offerings, in order to drive continuous performance and superior outcomes. These business intelligence tools can yield actionable insights across every customer touchpoint enabling
clients to address customer issues in real time. We expect that investments in automation, digitization and machine learning will be key drivers in the industry as clients seek to adopt more technology-rich ways of
servicing their customers.
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Artificial Intelligence to Enhance Service Delivery − With the increasing applicability of AI in enhancing business processes, the customer care
industry is starting to integrate AI into its range of solutions.
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Favorable Emerging Market / Client Trends
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Integrated Technology Solutions for Mature Sectors – Fortune 500 companies that historically utilized traditional live-agent, voice-based services
are now integrating new technology-enabled solutions that include multi-channel delivery, self-serve options and automation. Such solutions allow them to achieve greater operational flexibility and innovate their
service offerings.
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Solutions Catered to High-Growth Sectors – The challenges that new economy “disruptors” face consist largely of managing high growth within their
customer base, while simultaneously maintaining a high-quality customer experience. In contrast to mature business models, new economy companies have generally not focused on developing large-scale insourced customer
operations; therefore, they rely on external partners that can deliver customer service, engagement and support while maintaining the quality of their brands. Most of these companies source their customer interaction
needs from lower-cost locations outside their home markets.
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Market Opportunity
The estimated total current addressable market for our suite of CLX solutions is well over $100 billion, and is comprised of the following areas of opportunity:
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Customer Engagement (ibex Connect) – The largest portion of our addressable market is the customer care segment within the Business Process
Outsourcing (“BPO”) industry, which makes up the largest portion of our revenue. International Data Corporation (“IDC”), a leading information technology research firm, estimates that the worldwide business process
outsourcing services revenue in 2020 was $203.3 billion and expected to grow to $231 billion in 2024. Within this market, the customer care segment is the largest horizontal market, with approximately $77 billion
of revenues in 2020 and expected to grow at a CAGR of 3.6% to $88.6 billion in revenues by 2024. Within the United States, customer care BPO spend accounted for $45 billion in 2020 and is expected to grow to $51.6
billion by 2024.
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Customer Acquisition (ibex Digital) – Our customer acquisition solution is enabled primarily by digital marketing which is one of the fastest
growing segments of the media advertising industry. According to eMarketer, a leading market research company, digital marketing will make up 43% of all advertising spending in 2020. A significant portion of this
fast-growing market consists of outsourced customer acquisition specialists, who have primarily adopted a pay-for-performance business model in which advertisers only compensate marketers once a target consumer has
taken a particular action, such as filling out an information form or completing a purchase of a product or service. eMarketer estimates that $28 billion will be spent in 2020 on paid search in North America, our
primary digital marketing channel, and is expected to grow at a 10% CAGR from 2020 to 2023. The market is projected to continue to grow in the near term and is rapidly evolving due to increased expectations for BPO
vendors to innovate and constantly improve service quality.
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Customer Experience Management and Analytics (ibex CX) – With unprecedented access to technology, data and choices, consumers have elevated
expectations about being heard, as well as how companies take action and respond in real time. As consumers gravitate toward digital channels (websites, mobile and social media), enterprises are seeking more
technologically advanced solutions to collect data in real time and harness insights yielded by advanced analytics performed on those data to provide customized customer experiences.
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Markets and Markets, a leading B2B market research firm, estimates that the global customer experience management market will grow at a 13.3% CAGR, from $7.8 billion in 2019 to $14.5 billion in
2024, with North America representing approximately $2.9 billion of market share in 2019. Similarly, Market Research Future estimates that the global market for customer experience analytics will increase to $12 billion by 2023.
Our Approach
We work closely with our clients to optimize and accelerate every customer interaction. We offer technology-centric solutions through our integrated CLX platform. Our solutions offer a variety of
performance-enhancing and risk-mitigating capabilities, to help our clients protect and enhance their brands, grow and retain their customer bases, and maximize customer lifetime value. Our comprehensive offering of customizable solutions
drives deep customer integration and long-term trusted relationships with our clients. Our solutions can be procured on a stand-alone, point solution basis, or in an integrated manner covering multiple stages across the customer lifecycle
journey.
Our vertical industry expertise in telecommunications, technology, cable / broadband, high-growth technology, healthcare and financial services allows us to adapt our services and solutions for
our clients, further embedding us into their value chain while delivering impactful business results.
Our Strengths
Whether in mature, high-growth or emerging industries, we are able to provide clients with a compelling value proposition that combines our full spectrum of customer lifecycle solutions with a
global delivery model and innovative technology. We believe that the investments we have made have placed us in a strong competitive position with substantial first-mover advantages. Our leadership position is founded on the following key
competitive strengths, including:
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Differentiated as a Nimble, Disruptive Provider – We believe that we have a distinct organizational culture that embraces technological
disruption and is characterized by innovation, speed and structural nimbleness. Our innovative and entrepreneurial culture is a key differentiator and gives us a competitive advantage in delivering high-quality
solutions to clients around the globe. With mature clients, this culture plays to our advantage by showcasing the inflexibility of larger incumbents. With high-growth clients, which we refer to as New Economy
clients, we believe that our entrepreneurial approach is in line with their own culture.
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Technology Solutions & Continuous Innovation – ibex Wave X is the hub of our technology development and innovation effort to drive
value-added technology development that improves agent interactions, client CX, and overall performance benchmarks. Our CLX platform combines our proprietary technology with our service delivery model to
provide our clients with customized solutions at a large scale. We are integrating artificial intelligence into each stage of the customer lifecycle, from customer acquisition, to engagement, to surveys &
analytics. Our proprietary technology allows us to provide innovative, automated and customizable solutions to our clients more efficiently than if delivered through a purely service-based delivery model.
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Provider of Customizable Sets of Customer Lifecycle Experience Solutions – The customer lifecycle, from acquisition to retention has become
more challenging, complex and competitive for enterprises to manage. We designed a differentiated suite of digital and operational solutions that seamlessly manages interactions throughout all phases of the
customer lifecycle, across multiple channels, customized to a client’s specific needs.
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Proven Expertise in Mature Industries – We believe that we have built a deep level of expertise in serving clients in mature industries,
including the telecommunications and cable sectors. We believe that we are able to provide value at all stages of the customer lifecycle for these industries, from lowering the cost of customer acquisition to
increasing customer lifetime value through improved retention and increased up-sell.
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World-Class Global Delivery with Nearshore & Offshore Diversification – Our global delivery model is built on onshore, nearshore and
offshore delivery centers, and includes our ability to also support work-at-home capabilities. We seek to operate state-of-the-art ‘highly-branded’ sites in labor markets that are underpenetrated in order
to maintain our competitive advantage, retain our position in those labor markets as an employer of choice and deliver a highly scalable and cost-effective solution to our clients. Our highly-branded
centers enable us to create a differentiated connection to our clients’ brands and customers. In addition, with a broad network of 27 contact centers spread across multiple geographies, we provide much
needed geographic diversity for our clients. In particular, significant investments made in nearshore sites, such as Jamaica and Nicaragua, enable us to offer untapped talent pools for high quality service,
proximity to home (US) operations and competitive price points, and often an existing brand affinity.
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Innovative and Entrepreneurial Culture – We believe we have established a strong, unique corporate culture that is critical to our
ability to recruit, engage, motivate, manage and retain our talented global workforce of over 22,500 employees. A culture which we actively foster through events including, employee galas, VIP events,
talent shows, community outreach to engage, reward, and support our agents. At ibex, we ensure our employees are extensions of our clients’ brand identities, delivering passionate and industry-leading
results.
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Client Satisfaction and Retention – Our ability to build deep and trusted relationships with our clients is core to who we are. Since the
end of fiscal year 2018, we have successfully retained all of our top 25 clients, which represented over 95% of our revenue in fiscal year 2018. Additionally, we monitor customer satisfaction in the form of
a net promoter score (NPS) which is tracked through our ibex annual Client Satisfaction Survey. Based on ibex’s 2019 Client Satisfaction Survey, we scored a NPS of 68 which indicates strong,
mutually-beneficial relationships with our clients built on the value clients place in our services and solutions and level of service we consistently deliver. We believe that our success with client
retention is driven by our ability to perform at or above our client expectations and our competitors as well as our investment in building deep relationships with our clients at multiple levels within
their businesses.
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Our Strategy
Our goal is to become a key strategic partner to both mature and high-growth companies that require outsourced customer interaction solutions, especially as they seek to address consumers that
are increasingly digitally savvy. We have built a platform that we believe is well-positioned for strong, sustainable, long-term growth. Over the last six years, our revenues have increased at a CAGR of 10.1%, growing from $227.4 million in
the fiscal year ended June 30, 2014 (excluding any impact due to IFRS 15) to $405.1 million in the fiscal year ended June 30, 2020. This growth rate is significantly greater than that of our constituent markets, especially the BPO industry,
which according to IDC, grew at an annualized rate of 4.2% between 2014 and 2020.
Our growth model is designed to deploy a “land and expand” approach by targeting and initiating delivery both with mature, global enterprises as well as relatively younger, high-growth clients,
and subsequently expanding our services with these clients. The breadth of our capabilities, our ability to deliver a superior experience to our clients and our global delivery capabilities have allowed us to successfully land new clients and
then expand our wallet share with them over time. We believe our growth will be bolstered in the future as clients continue to recognize the benefits of partnering with an end-to-end customer interactions provider, and we are able to cross-sell
our broad suite of solutions through our client base. Moreover, the current capacity at our onshore and nearshore delivery centers will be able to support our near-term growth with minimal incremental investment, with future investments in
capacity expected to be success-based and in response to growth demands of our business.
Our growth strategy is based on the following key components:
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Continue Winning Blue Chip Clients – We’ve been able to win marquee blue chip brands that are looking to transform their customer
engagement strategy through a more innovative and outcome-oriented focus. For these customers, our value proposition is primarily focused on acting as a partner to drive digital transformation in their
existing operations. The imperative of engaging digitally with a new type of consumer is all the more urgent as these companies increasingly face-off against emerging new economy players. We have
increasingly gained share in these relationships, often displacing existing incumbent vendor(s).
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Continue Winning New Clients with New Economy – Our New Economy initiative combines our Customer Engagement, Customer Acquisition and
Customer Experience solutions into an integrated solution set that is focused on the needs of high-growth emerging technology markets. Our success in our New Economy vertical can be traced to its inception
in 2014, when we began servicing a new client in the emerging technology space. We launched our New Economy initiative in the summer of 2018 to help similar clients attain and support their high-growth
objectives. We believe we are among the top tier of providers of outsourced customer interaction solutions that can address the unique needs of such clients. In addition, New Economy customers are generally
higher margin as a result of lower customer acquisition costs and a greater portion of non-voice revenue, which is delivered with greater efficiency.
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Grow Strategic Verticals with Specific Domain Strategies – Our ibex Financial, ibex Health, and ibex Utilities sub-brands are structured
to accelerate growth using a highly targeted and performance-driven approach. Within ibex Financial, we intend to build on recent wins we have had with payments companies. Within ibex Health, we see
significant opportunity to provide revenue cycle management as well as medical coding and billing services. Finally, within ibex Utilities, we see the opportunity to acting as the “utility mover” for our
clients’, by facilitating our clients’ customers’ moves in the form of targeted offers and services that could be of interest at the time certain customers are undergoing a physical move or changing utility
provider.
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Expand Service & Lines of Business (LOBs) with Current Clients (“Expand”) – The breadth of our solutions over the full customer
lifecycle creates the ability to cross-sell each solution throughout our client base. Our client base has many large, global brands that have multiple lines of business across multiple geographies. Our
typical model is to provide a launch in one center with one CLX service such as Customer Engagement. Our goal is then to “expand” with additional CLX services or new geographies where we operate for our
clients. We believe that the success of our initial launches has enabled our client teams to broaden our scope of engagement with these clients to include additional solutions within our suite of offerings.
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Pursue strategic acquisitions – Our acquisition strategy targets situations in which it is optimal to acquire versus build. It will
primarily be focused on adding additional omni-channel capabilities, providing access to new geographies and acquiring technologies that further differentiate our solutions.
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By offering technology-enabled customer interactions solutions through our integrated CLX platform, and focusing on our strategies for growth, we believe we are well positioned to compete
effectively in the customer engagement marketplace, continue to take market share and capitalize on market growth.
Our Solutions and Technology
Service Offerings
We provide our services across the following three phases of the customer lifecycle experience:
ibex Connect
Our Customer Engagement solution is the core of our CLX platform and generates the majority of our revenue. This solution is comprised of customer service (assisting customers with
information about our clients and their products or services), technical support (providing specialized teams to provide information, assistance and technical guidance to our clients’ customers on a specific product or service) and other
value-added outsourced back office services (finance and accounting, marketing support, sales operations, and human resources administration). We deliver this solution through our omni-channel platform, which integrates voice, email, chat, SMS,
social media and other communication applications.
Client pricing for our Customer Engagement solution has traditionally been structured on a per agent staffed hour, per-minute of talk and call wrap time or a per call/contact/email basis.
Historically we have had a majority of our contracts on a per-hour or per-minute basis. With the growth of new clients, including New Economy clients and restructuring several key contract with existing clients, our business is increasingly
evolving toward a per agent staffed hour basis for customer service and technical support solutions, and toward pricing structures that include performance-based components based upon achieving agreed upon performance targets. The per agent
staffed hour model framework shifts the risk associated with call volume volatility and arrival pattern away from the service provider and to the client and results in more consistent profitability due to a less volatile agent billable to agent
payroll percentage.
ibex Digital
In our Customer Acquisition solution, we work with consumer-facing businesses to drive online customer demand. We offer Search, Social, & Display advertising capabilities, helping our
clients promote brand awareness and drive high-volume, low-churn new customer conversion. With proprietary algorithms that strategically target high-value customers and seamlessly optimize ad bidding and deployment, ibex Digital is capable of
reducing a client’s customer acquisition costs. Additionally, ibex Digital can also seamlessly transition customers from client-to-call, where the initial interest is driven digitally, and the conversation is closed at an ibex call center with
a trained sales agent. We are typically compensated by our clients on a pay-per-performance basis, where we earn a commission upon the successful addition of a new customer. Most of our Customer Acquisition solutions involve two steps: (a)
generating or purchasing a lead or a prospect, and (b) converting that lead or prospect into a customer, most frequently through a voice-based channel.
In our Customer Acquisition solutions, we employ our proprietary algorithms across our platforms to manage all aspects of the marketing function, ranging from setting the amount of our bid
for advertising in response to a given search term to managing the underlying website and its associated analytics. We apply machine learning to identify high-quality leads, which ultimately improves the conversion of those leads into sales.
We are typically compensated by our clients on a pay-for-performance basis where we earn a commission upon the successful addition of a new customer. Within digital acquisition, to a lesser
extent we also provide sales-based delivery center services to convert leads provided by the client into new customers, for which we are typically compensated on a fixed hourly basis.
ibex CX
In our Customer Experience solution, we offer a comprehensive suite of proprietary software tools to measure, monitor and manage our clients’ customer experience, as well as a set of
analytics capabilities that interpret data generated by our interactions and deliver recommendations to the benefit of their operations and brand. By applying these tools, we enable our clients to improve retention of their customers, identify
and manage service issues in real time, predict future behavior and enhance overall customer satisfaction. Our platform includes management of omni-channel surveys, interactive artificial intelligence, text analytics and sentiment analysis, a
business intelligence suite, and case management capabilities.
We currently offer our Customer Experience solutions under multiple options, including a recurring license fee where we charge the client on a “software as a service” basis that reflects
usage of the product at the client’s location and a per survey model. In addition, we may charge a set-up fee to customize the solution for our client’s specific needs as well as a usage fee (i.e., per survey). Our Analytics solution is offered
as a professional services contract with technology hosting fees or bundled into per contact or per survey fee.
Technology Approach
We have designed and developed our technology solutions to support a range of client engagements, scaling from emerging startups to large global enterprise clients. We operate a range of
multi-tenant platforms as well as dedicated platforms that fully segregate customer data. These platforms and applications can run in our Tier 4 Data Center as well as our AWS cloud platforms to accommodate specific data privacy standards such
as those required under the GDPR or to better locate content closer to the intended audience. This architecture also reduces risk associated with infrastructure outages, improves system scalability and security, and allows for flexibility in
deployment location.
From a development perspective, we leverage the Agile Software development methodology, which is based on iterative development, where requirements and solutions evolve through collaboration
between self-organizing cross-functional teams. Because we are PCI certified and HIPAA compliant, an emphasis is placed on Secure Software Development as part of Agile, throughout the lifecycle to minimize potential threats.
Our current initiatives are focused on enhancing and extending the capabilities of our existing suite of products servicing the full customer lifecycle. Our product roadmap is dynamic, and
our product development cycles can rapidly address client needs, deliver additional value to our clients and maintain our competitive differentiation.
Technology Solutions
Underpinning our CLX solutions is our ability to leverage technology to help clients drive insights and manage interactions across the customer journey. Over the past five years, we have
invested significant resources into building and deploying proprietary technology, focusing on next-generation software deployed across the full customer lifecycle journey, driving revenue growth, productivity improvements, experience
enhancement and competitive differentiation. Our technology efforts are led by ibex Wave X and a 16-year legacy of value creation and outcome-oriented technology development.
We believe that we have built an industry-leading, comprehensive suite of software products and applications, deployed at enterprise scale across multiple industries along the full consumer
lifecycle.
In particular, we have integrated AI functionality into multiple portions of our CLX solution suite. In our core Customer Engagement offering, we deploy third party technologies such as such
as Afiniti, CallMiner, and Cogito that enhance customer interaction. For our Customer Acquisition offering, we have developed a technology called Adcast AI that uses AI to better match our search engine keyword bidding with our available call
center capacity. Our technology innovations ensure that we are at the forefront of our industry in employing digital solutions on behalf of our customers. Across all three of our solutions areas (ibex Digital, ibex Connect and ibex CX), the
portion of our revenue from digital services (i.e., digital support, including omni channel and other digital services) comprises 30%, 29% and 28% of total revenue for the fiscal years ended June 30, 2020, 2019, and 2018, respectively.
Additionally, our business is highly data intensive. We overlay our proprietary datasets with third-party data and other available data to derive insights into customer behaviors and
preferences, which in turn optimizes our solutions and enables enhanced delivery of our services. For example, based on our proprietary databases of the performance characteristics of over 5 million search terms and 26 million unique keyword
and bid type combinations, we are able to refine our algorithms continually to optimize our lead generation and conversion solutions.
ibex Wave X
In order to deliver these innovation solutions, we have assembled a large and talented team of technologists along with a suite of tools, technologies and data driven solutions that span the
entire customer lifecycle with the objective of helping our clients design a customer experience approach that delivers ground-breaking outcomes. This technology arm is known as ibex Wave X.
ibex Wave X leverages our full suite of ibex technology assets across our digital, engage and customer experience solutions, and includes over 650 experts in the technology and marketing
sciences area.
ibex Wave X has established us as a thought leader in the application of artificial intelligence across the customer lifecycle. In our CLX offerings, we leverage the capabilities of
artificial intelligence by integrating solutions from technology partners such as Afiniti (a company majority owned by TRGI), Cogito and CallMiner, in addition to deploying solutions developed internally such as Adcast.
In addition to providing a comprehensive suite of CLX solutions, ibex Wave X also develops purpose-built tools that drive operational efficiencies and insights. Such tools are designed, for
example, to support our agents’ path to skills proficiency, beginning with sophisticated training simulations and gamified learning and moving to a suite of artificial intelligence assisted tools that offer support throughout the interaction.
These proprietary tools enable us to address feature gaps in commercial products. Examples include Inspire, our digital coaching tool, Capture, our call and screen recording solution, and Witness, our security software, each of which has a
robust feature set and was internally developed.
As our clients evolve and refine their customers’ journey, an expanding role for ibex Wave X is providing development support for third party technology platforms deployed by our clients. For
example, we have developed expertise in supporting Zendesk and Salesforce.com cloud solutions where we designed and implemented chatbots and workflows for those platforms. This development support work is a natural extension of our Client
Integration work which is part of our new client deployment, as part of which we carry out application and database integration that tightly link our client and Ibex systems. This development support work and associated hosted services now
constitute an additional revenue stream.
CLX Test Kitchen
As part of ibex Wave X, we have created a “CLX Test Kitchen” that allows our clients to work with our portfolio of technologies to customize a solution that is suitable for their business. The CLX
Test Kitchen enables our clients to encounter firsthand the customer lifecycle, as imagined and developed by our CLX experts, and provides an interactive experience that helps transform their customer lifecycle experiences.
To maximize the value of the CLX Test Kitchen, we leverage an ideation model, which provides a framework around the creative process of generating, developing, and executing new ideas. This
process enables us to co-create and collaborate with our clients to deliver data driven solutions. The model involves a deep dive into understanding our clients’ unique business challenges. We then combine our clients’ vision and imagination
with our industry expertise to achieve the widest possible range of data driven solutions.
The CLX Product Cloud
Our CLX suite and its end-to-end set of solutions (acquire, engage and experience) are powered by the CLX Product Cloud, a flexible and modular toolset of integrated products that can be
configured, connected, and deployed based on diverse client needs and requirements by leveraging the ibex Wave X technical team.
Technology Infrastructure
We believe we have a flexible, scalable, resilient and reliable technology infrastructure that helps us deliver our CLX suite to our clients. We utilize industry-leading hardware and software
components to provide for and enable the rapid growth of our business. We employ virtualization to maximize utilization where appropriate. Maintaining the integrity and security of our technology infrastructure is critical to our business, and
as such we leverage industry-standard security and monitoring tools to ensure performance across our network.
Our technology infrastructure supporting our CLX solutions is designed according to our clients’ needs. Our technology systems can integrate with our clients’ existing infrastructure where
required. This enables us to deliver the optimal infrastructure mix irrespective of whether our delivery platforms are onshore, offshore or nearshore. We have extensive experience in providing the customized integrations that clients require to
deploy our solution within their delivery center operations.
We work with the main telephone carriers at the local and international levels. We have a solid and flexible telecommunications infrastructure, which provides business continuity through
redundant architectures and interconnection schemes in most of our facilities. We work with leading telephonic and multiprotocol label switching circuity providers including Century Link, PLDT and Globe. For the fiscal years ended June 30,
2020, 2019, and 2018, we maintained 99.95%, 99.97%, and 99.92% system uptime, respectively.
We have implemented strong quality standards into our operations with an emphasis on operational excellence, product management and statistical analysis to improve our performance and provide
better results for our clients. A number of our facilities are compliant with multiple standards and frameworks for service availability and information security management including ISO 27001 and PCI. A majority of our data centers are
certified across various standards including ISO 27001, PCI DSS, SOC 1 Type II, and SOC 2 Type II. Our robust physical and logical controls meet the compliance and security requirements across our client base.
We use leading products for network and security monitoring including SolarWinds, Palo Alto Advance Threat Management Systems, Cisco Security Devices, LogRhythm SIEM, SNORT IDS, Tripwire,
NESSUS devices, SentinalOne and Trend Micro Anti-Virus and Intrusion Detection Systems, among others.
Our physical network is maintained by a high-quality infrastructure and networking organization, which is dedicated to seamless, uninterrupted service delivery to our clients.
Our Delivery Model
Bestshore Flexible Delivery Model
Clients are increasingly differentiating between providers based on their ability to provide a flexible, turnkey delivery model that can offer a mix of onshore, nearshore,
offshore and remote working capabilities. In light of recent global events, clients have focused on the ability of providers to shift their delivery rapidly between various location models.
Our global delivery model is built on onshore, nearshore and offshore delivery centers, and includes our ability to also support work-at-home capabilities. We operate
state-of-the-art ‘highly-branded’ sites in labor markets that are underpenetrated in order to maintain our competitive advantage, retain our position in those labor markets as an employer of choice and deliver a highly scalable and
cost-effective solution to our clients. Our highly-branded centers enable us to create a differentiated connection to our clients’ brands and customers. In addition, with a broad network of 25 contact centers spread across multiple geographies,
we provide much needed geographic diversity for our clients. In particular, significant investments made in nearshore sites, such as Jamaica and Nicaragua, enable us to offer untapped talent pools for high quality service, proximity to U.S.
operations and competitive price points, and often an existing brand affinity.
We operate the following delivery models for each of our service offerings:
Customer Engagement
We operate 25 Customer Engagement focused delivery centers located in the United States and the United Kingdom (eight sites), Pakistan (four sites), the
Philippines (seven sites), Nicaragua (two sites), Jamaica (three sites) and Senegal (one site). As of June 30, 2020, 17,891 agents were dedicated to our Customer Engagement solution, with 3,041 agents in the United States and the United
Kingdom, 3,574 in Pakistan, 6,691 in the Philippines, 1,330 in Nicaragua, 3,146 in Jamaica and 109 in Senegal.
Customer Acquisition
We operate three acquisition-focused delivery centers, two in Pakistan and one in Jamaica, which are focused on customer acquisition on behalf of our clients in the cable
and telecommunications industries. The number of agents dedicated to customer acquisition was 565 as of June 30, 2020.
Customer Experience Technology Solutions
We deliver our Customer Experience technology solutions to our clients using a primarily cloud-based delivery model. Our Analytics solution is an add-on
solution, which includes technology such as omni-channel speech analytics utilizing AI along with business analysts who provide various insights.
Our Clients
As of June 30, 2020, we had over 100 clients. Our clients fit primarily within two categories. The first category is made up of mostly Fortune 500 brands, across a broad range of industries,
such as telecommunications, cable, financial services, and healthcare, which have large customer bases and rely on outsourced providers to maximize customer retention and improve customer expansion. We refer to these clients as “blue chip”
companies. Increasingly, clients in this category look to us as a nimble provider offering differentiated services as they face challenges in the wake of digital disruption. We apply our execution expertise and end-to-end CLX technology suite
to enable these clients to adapt in a changing environment that requires a different type of customer experience for digital-native consumers. The second category of clients we serve are digitally-driven “disruptors.” We refer to these clients
as the “New Economy” companies. They tend to be faster-growing brands in high-growth industry verticals, such as (but not limited to) technology, e-commerce and consumer services. Our New Economy business is designed to meet these needs for new
economy verticals and high-growth requirements, with a focus on launch, speed-to-performance and scale. While many of these New Economy clients are smaller, fast growing companies, there are several Fortune 500 companies within that group, such
as Amazon and one of the leading ride-sharing companies in the United States. The success of our New Economy initiative with high-growth technology, e-commerce and consumer services clients is a key driver in the increase of our revenue from
non-voice channels, and, as a result, has a positive effect on our profitability. While most other client verticals operate under economics typical of the outsourced customer care industry, the success of our New Economy business vertical is a
result of differentiating factors such as its growth trajectory, its contribution to profitability and the greater propensity for these clients to leverage digital forms of service delivery. During the fiscal years ended June 30, 2020, 2019,
and 2018, we derived 27.4%, 22.0%, and 13.4% of our consolidated revenue, respectively, from our New Economy clients.
Our contracts with clients generally take the form of a master services agreement, which is a framework agreement that is then supplemented by one or more statements of work. Our master
services agreements specify the general terms applicable to the services we provide. Our statements of work specify the specific services to be provided and associated performance metrics and pricing.
During the fiscal years ended June 30, 2020, 2019 and 2018, our top three clients represented 43.7%, 50.6% and 56.9%, of our consolidated revenue, respectively. During the fiscal years ended
June 30, 2020, 2019 and 2018, our largest client, Frontier Communications Corporation, represented 18.2%, 18.2% and 18.5%, of our consolidated revenue, respectively. We are focused on building deep client relationships at multiple levels within
their businesses. Coupled with our ability to consistently perform at or above expectations, this has enabled us to expand the number of high value CLX solutions we provide for our clients. This approach, over time, has led to higher client
retention rates.
Client Contracts
On January 1, 2017, Ibex Global Solutions, Inc. f/k/a TRG Customer Solutions, Inc. (“TRGCS”) entered into a services agreement with our top client measured by revenue as of June 30, 2020, to
provide certain call center services pursuant to statements of work issued under such services agreement. There are two statements of work existing under the services agreement. The first statement of work, dated as of January 1, 2017, has
TRGCS provide to the client a number of services, including, but not limited to, customer technical support. The first statement of work was extended on May 1, 2019 and will continue until April 30, 2021 unless earlier terminated in accordance
with its terms. The second statement of work, dated as of January 1, 2017, has TRGCS provide to the client a number of services, including, but not limited to, general customer support and sales. This second statement of work was extended on
October 1, 2018 and will continue until December 31, 2020 unless earlier terminated in accordance with its terms. The services agreement and any statements of work issued under the service agreement may be terminated, in whole or in part, with
or without cause, by the client with at least 90 days prior written notice to TRGCS. Either party may terminate the services agreement and/or any statements of work issued under the service agreement upon an event of default. Both parties have
agreed to indemnify the other party for certain losses or liabilities incurred in connection with the performance of services by TRGCS.
On December 10, 2013, Telsat Online, Inc. (“TSO”) entered into a marketing agent agreement with this client, pursuant to which we provide marketing and sales services, including, but not
limited to, computer, security and technical support services. The term of this agreement automatically renews for successive one-year terms unless terminated by either party. The marketing agent agreement may be terminated by either party
without cause upon 30 days written notice. In addition, the client may terminate the marketing agent agreement upon a breach or default by TSO after 30 days’ prior written notice or immediately upon the occurrence of certain events set forth in
the marketing agent agreement. The marketing agent agreement contains mutual indemnification provisions.
On August 12, 2014, TRGCS entered into a master service agreement with our second largest client measured by revenue as of June 30, 2020, to provide services pursuant to work orders issued
under such master service agreement. On April 24, 2020, TRGCS executed a supplemental order with our second largest client, which is designed to provide consistency amongst multiple work orders and lines of business. The term of the
supplemental order was made effective as of January 1, 2020 and will continue through December 31, 2022.There are two work orders existing under the master service agreements, and each are expressly subject to the new supplemental order. The
first work order, originally dated as of April 1, 2016, was renewed and replaced with a new work order, effective as of January 1, 2020 and will continue through December 31, 2022, unless cancelled or terminated earlier pursuant to its terms.
Under this work order, TRGCS provides our second largest client a number of services, including, but not limited to, inbound customer care, customer sales and retention, customer support, and third-party verification. The second work order,
originally dated as of February 1, 2017, was renewed and replaced with a new work order, effective as of July 1, 2020 and will continue through June 30, 2023, unless cancelled or terminated earlier pursuant to its terms. Under this second work
order, TRGCS provides our second largest client a number of services, including, but not limited to, customer technical support and sales. Our second largest client may terminate either or both of the work orders at any time, for convenience
and without cause, upon 70 days and 60 days written notice, to TRGCS for the first and second work order. Either or both work orders may also be terminated by either party upon a breach of the provisions of the master service agreements or any
work orders issued under the master service agreements if such breach is not cured during a 10-day period, or if such breach is not curable or is a violation of certain laws, immediately upon notice of such breach. TRGCS has also agreed to
indemnify our second largest client for certain losses or liabilities incurred in connection with the performance of the services by TRGCS. This agreement replaced a prior agreement that was executed between the parties on December 4, 2009, as
amended from time-to-time.
On December 14, 2016, TSO entered into a service agreement with our second largest client to provide online sales and marketing services. This agreement continued through December 13, 2018
and the parties are currently continuing to operate under it notwithstanding its expiration, as confirmed by the client in writing. Either party may terminate this agreement at any time, without cause upon 30 days prior written notice, our
second largest client may terminate the agreement immediately with respect to a particular market upon written notice if the client is no longer authorized to provide services in such particular market. Either party may terminate the agreement
immediately (or after the failure to cure within 30-days to the extent a cure period is applicable) upon the occurrence of certain events specified in the agreement. TSO has also agreed to indemnify the client for certain losses or liabilities
incurred by in connection with the performance of services by TSO. Pursuant to this agreement, TSO is paid on a commission basis per each sale. The amount of the commission for a sale depends on the product sold, and in some cases, the speed of
the sale.
On May 22, 2017, TSO entered into a customer fulfillment referral agreement with a subsidiary of our second largest client, pursuant to which we serve as a commissioned customer referral
contractor to market, advertise and promote the client’s systems, services and programming. This agreement automatically renews for an unlimited number of successive one-year terms unless earlier terminated by either party. Either party may
terminate the agreement, immediately upon the occurrence of certain events. Automatic termination is also provided for with respect to bankruptcy or cessation of either party’s business. The parties have agreed to indemnify each other for
certain losses or liabilities incurred in connection with the agreement. We are paid a commission for each qualifying subscriber referred the client. If a subscriber disconnects, cancels, terminates or fails to pay the client at any time within
the first year after their initial subscription, the client is entitled to a discounted chargeback of that subscriber’s commission depending on the timing of such termination of service. Additionally, the client pays us continuing service fees
for our ongoing marketing, promotion and advertising of the client’s services, as well as continuing service to referred customers. The amount of such continuing service fees depend on the level of our performance in a calendar quarter.
On July 1, 2017, Ibex Digital entered into a customer referral agreement with a third-party organization, pursuant to which such organization will act as a commissioned customer referral
contractor of TSO to market, advertise and promote our second largest client’s systems, services and programming for an initial 3-year term, and on August 1, 2019, the parties amended the agreement, to extend the initial term through July 31,
2022. Pursuant to this agreement, the organization will refer potential customers to us which we will then refer to our client. We will pay a commission for the referral of each qualifying subscriber, and we are in turn paid a commission for
the referral of each qualifying subscriber by our second largest client in accordance with the agreement. After the expiration of the initial term, this agreement automatically renews for an unlimited number of successive one-year terms unless
earlier terminated by either party. Either party may elect to cancel the agreement for any reason, effective upon the expiration of the then-current term, by delivering written notice to the other party at least 60 days prior to such
expiration. Either party may terminate the agreement with written notice and opportunity to cure and/or immediately upon the occurrence of certain events. Ibex Digital and the third-party organization have agreed to indemnify each other for
certain losses or liabilities incurred in connection with the agreement.
Sales and Marketing
Our sales and marketing teams work closely together to drive awareness and adoption of our CLX platform, accelerate customer acquisition and expand the relationship with our existing
customers. We focus on developing long-term relationships with large strategic clients that have needs across the entire CLX lifecycle and employ a “land and expand” strategy to grow these relationships. Under this strategy, we seek to build
the client’s trust through flawless execution on the initial assignment (which is typically for a single solution or geography) and then expand the scope of our engagement with the client into multiple geographies and business lines, which
allows us to offer additional CLX solutions. In this manner, the “land and expand” strategy provides opportunities for us to substantially increase our revenues within our existing client base over time.
Our sales and marketing activities are focused on our key market verticals: telecommunications and cable, technology, retail, emerging and high-growth technology, healthcare, financial
services and utilities. We have market heads of our key verticals, including a market head over our New Economy business vertical. We believe our vertical market focus allows us to provide deep domain expertise and positions us as the best
partner to help solve our clients’ unique needs. An essential part of our sales strategy is to focus on ways we can innovate on behalf of our clients, which includes digitization strategies and usage of data, technology, analytics and insights.
We are well positioned with the top brands in each of the industry verticals in which we operate and can leverage domain knowledge and strong client references to generate business with other companies in the same industry vertical.
New Logos
Our new logo organization is made up of teams focused on our key market verticals. Each team is focused solely on penetrating and closing business with the top 40 clients in each vertical. In
addition, they will often partner with our client services executives who have an intimate understanding of the client’s business and needs, to actively identify and target additional cross-sell opportunities across the entire CLX lifecycle.
New Economy
The New Economy team is focused on penetrating a broader reach of unicorn and potential unicorn clients in the emerging technology and consumer services sector. Through our New Economy
offering, we combine Customer Engagement, Customer Acquisition and Customer Experience into an integrated solution set that is focused on the high-growth technology, e-commerce and consumer services markets for new economy clients.
The sales process for a new client can be short or lengthy depending on the client. Generally, the sales process for our New Economy target clients is 30-60 days, while selling to larger blue-chip
clients can range as long as 18 months.
Client Services Organization
Our client services organization is dedicated to maintaining and expanding our relationships with our existing clients and is made up of teams that are organized either around a single large
client or around groups of clients that collectively provide scale to warrant the investment of client services overhead. A majority of the senior leadership of the client services organization is located in the United States and is supported
by local team members located closer to the actual service delivery, sometimes in other countries / regions. The members of our client services organization typically have deep operational experience as well as strong relationship-building and
selling skills. Often our client services team for an account has a team member located close to the client’s premises in the United States as well as a member that is located close to where the delivery takes place, which is now increasingly
in offshore and nearshore locations. Most of the new opportunities created within the embedded base of existing clients are led by the senior leadership of the client services organization and follow the same general sales process as the new
logo organization.
As part of our highly engaged, or “leaned in” corporate culture, our client relationships are set up at multiple levels and layers, all the way from our chief executive officer through the
business heads of our organization. The multi-layered nature of these relationships allows us to develop even stronger client engagements.
Marketing Efforts
Our marketing efforts are focused on generating awareness of our offerings, establishing and promoting our brand, reaching and serving the CLX needs of key decision makers in our target
verticals, and cultivating a community of successful and vocal customers. We focus our marketing effort on demonstrating to our prospects our thought leadership in the CLX market, addressing the challenges facing enterprises across the full CLX
lifecycle, and engaging business leaders who are seeking to leverage data, technology, analytics, and insights to drive competitive differentiation. We take a targeted approach and work with enterprises across our target verticals:
telecommunications, technology, cable / broadband, high-growth technology, healthcare and financial services. We engage with key decision makers outside of RFP cycles in the following key offices: Chief Digital Officer, Chief Information
Officer, Chief Experience Officer, Chief Customer Officer and the Chief Marketing Officer.
We also use various social media platforms such as LinkedIn and Facebook to promote our brand externally to target clients and internally to our employees and prospective employees, with the
latter being a key component of our success in achieving award winning agent engagement.
Competition
The BPO markets in which we compete are highly fragmented with the largest 10 providers for call center and BPO services representing approximately 30% of the total market. We believe this
creates significant opportunity for a broad and differentiated provider like us. Although we do not believe any single competitor currently offers a directly comparable end-to-end CLX solution, we believe our integrated platform faces
competition from a variety of companies which operate in distinct segments of the customer lifecycle journey. Based on our industry knowledge, traditional BPO companies are seeking to respond to these dynamics by taking steps to evolve into
fully-fledged end-to-end customer lifecycle experience platforms, including through acquisitions. However, such initiatives have been limited due to the scarcity of actionable at-scale assets.
We also face competition from in-house customer service departments, which seek to develop, deploy and service applications that offer functionality similar to our solutions. These in-house
customer service departments continue to constitute the largest segment of customer lifecycle management expenditures.
We believe that the most significant competitive factor in the sale of outsourced customer engagement services is the ability of providers to act as partners to and extensions of clients’
brands, in an effort to deliver improved customers experience and increased overall customer LTV. Other important factors include maintaining high and consistent levels of service quality, tailored value-added service offerings, supported by
advanced technological capabilities, industry and domain expertise, an understanding of the digital marketplace and modern consumer, sufficient diversified global delivery coverage, reliability, scalability, security and competitive pricing.
Intellectual Property
The success of our business depends, in part, on our proprietary technology and intellectual property. We rely on a combination of intellectual property laws and contractual arrangements to
protect our intellectual property.
We have registered or are registering various trademarks and service marks in the U.S. and/or other countries, including: Clearview (U.S. Reg. No. 5230123), IBEX Global (U.S. Reg. Nos.
4596647, 4424863, and 4588731), IBEX (U.S. Reg. No. 6062663), DGS Deliberate by Design (U.S. Reg. No. 4399136). The duration of trademark and service mark registrations varies from country to country but may generally be renewed indefinitely as
long as the marks are in use and their registrations are properly maintained. We also have common law rights to certain trademarks and service marks.
We also have and maintain certain trade secrets arising out of the authorship or creation of proprietary computer programs, systems and business practices. Confidentiality is maintained
primarily through contractual clauses, and in the case of computer programs, system access controls, tracking and authorization processes.
Regulation
We are subject to a number of U.S. federal and state and foreign laws and regulations that involve matters central to our business. These laws and regulations may involve privacy, data
protection, intellectual property, competition, consumer protection, export taxation and other subjects. Many of the laws and regulations to which we are subject are still evolving and being tested in courts and could be interpreted in ways
that could harm our business. In addition, the terms of our service contracts typically require that we comply with applicable laws and regulations. In some of our service contracts, we are contractually required to comply even if such laws and
regulations apply to our clients, but not to us, and sometimes our clients require us to take specific steps intended to make it easier for our clients to comply with requirements that are applicable to them. If we fail to comply with any
applicable laws and regulations, we may be restricted in our ability to provide services and may also be the subject of civil or criminal actions involving penalties, any of which could have a material adverse effect on our operations. Our
clients generally have the right to terminate our contracts for cause in the event of regulatory failures, subject to notice periods. See Item 3D. “Risk Factors” for more information.
Certain Bermuda Law Considerations
As a Bermuda company, we are also subject to regulation in Bermuda. Among other things, we must comply with the provisions of the Companies Act regulating the declaration and payment of
dividends and the making of distributions from contributed surplus.
We are classified as a non-resident of Bermuda for exchange control purposes by the Bermuda Monetary Authority, (“BMA”). Pursuant to our non-resident status, we may engage in transactions in
currencies other than Bermuda dollars. There are no restrictions on our ability to transfer funds in and out of Bermuda or to pay dividends to United States residents that are holders of our common shares.
Under Bermuda law, “exempted” companies are companies formed for the purpose of conducting business outside Bermuda. As an exempted company, we may not, without a license granted by the
Minister of Economic Development, participate in certain business transactions, including transactions involving Bermuda landholding rights and the carrying on of business of any kind, for which we are not licensed in Bermuda.
On December 31, 2018, the Bermuda government enacted the Substance Act, with effect from July 1, 2019 for existing Bermuda entities, requiring certain entities in Bermuda engaged in “relevant
activities” to maintain a substantial economic presence in Bermuda and to satisfy economic substance requirements. The list of “relevant activities” includes holding entities, and the legislation requires Bermuda companies engaging in a
“relevant activity” to be locally managed and directed, to carry on core income generating activities in Bermuda, to maintain adequate physical presence in Bermuda, and to have an adequate level of local full time qualified employees and incur
adequate operating expenditure in Bermuda. Under the Substance Act, any entity that must satisfy economic substance requirements but fails to do so could face automatic disclosure to competent authorities in the European Union of the
information filed by the entity with the Bermuda Registrar of Companies in connection with the economic substance requirements and may also face financial penalties, restriction or regulation of its business activities or may be struck as a
registered entity in Bermuda. The guidance as to how Bermuda authorities will interpret and enforce the Substance Act is pending, and we therefore cannot predict the potential impact of compliance or noncompliance on our results of operations
and financial condition.
See Item 3D. “Risk Factors - Risks Related to Being Incorporated in Bermuda” for more information.
|
C.
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Organization Structure
|
Please refer to Exhibit 8.1 for a complete list of our subsidiaries and their ownership.
|
D.
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Property, plant and equipment
|
Facilities and Delivery
As of June 30, 2020, we operated 25 delivery centers in the following countries:
|
Country
|
Number of
Centers
|
Number of
workstations
|
||||||
|
United States
|
7
|
2,513
|
||||||
|
Philippines
|
7
|
6,170
|
||||||
|
Pakistan
|
4
|
2,211
|
||||||
|
Jamaica
|
3
|
2,799
|
||||||
|
Nicaragua
|
2
|
944
|
||||||
|
Senegal
|
1
|
204
|
||||||
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United Kingdom
|
1
|
15
|
||||||
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Total
|
25
|
14,856
|
||||||
Leases for our delivery centers have a range of expiration dates from May 31, 2020 to December 31, 2026, and typically include a renewal option for an additional term.
Our executive management offices are located in Washington, D.C., which consist of approximately 2,000 square feet of office space subleased from TRGI, the term of which is set to expire on June
30, 2025. This facility currently serves as the headquarters for senior management and the financial, information technology and administrative departments.
We also utilize three data center locations in the United States. Our primary data center is co-located in a Tier 4 Equinix Data Center Facility, with a back-up data center located in Hampton,
Virginia. The Master Country Agreement for the primary data center expires on September 30, 2022, and our Hampton, Virginia lease expires on December 31, 2022. In addition, we have a third data center facility in the Rackspace San Antonio
facility which expires in November 2020. We also make extensive use of Amazon and Azure facilities in a true hybrid data center configuration.
We lease all of our facilities and do not own any real property. We intend to procure additional space in the future as we continue to add employees and expand geographically.
As of the date of filing of this annual report, we have no unresolved comments from the SEC.
You should read the following discussion and analysis of our financial condition and results of operations together with “Selected Financial Data” and our audited consolidated
financial statements and the related notes and other financial information included elsewhere in this annual report. The audited consolidated financial statements have been prepared in accordance with IFRS as issued by the IASB, which may
differ in material respects from generally accepted accounting principles in other jurisdictions, including the United States. This discussion contains forward-looking statements that involve risks and uncertainties. You should review the “Risk
Factors” and “Cautionary Statement Regarding Forward-Looking Statements” sections of this annual report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the
forward-looking statements contained in the following discussion and analysis.
| A. |
Operating Results
|
Overview
We are a leading global CX company delivering solutions to help the world’s preeminent brands more effectively engage with their customers.
Key Factors Affecting Our Performance
We believe that the following factors have affected our results of operations for the year ended June 30, 2020.
COVID-19
The adverse impact of the Pandemic was primarily operational in nature related to the complexities of ensuring staffing in those of our sites where the local authorities had imposed
lockdowns. Client demand for our services remained robust despite the Pandemic, and our revenues during the fourth quarter of the fiscal year ended June 30, 2020 were $100.9 million which represents an increase of approximately 14.8% over our
revenues for the same period in fiscal year 2019. The high level of client demand reflects the nature of our client base, where the Pandemic increased demand for customer support, and as a result, our client pricing remained stable, and in some
cases, we were able to win client bonuses related to operational execution.
From a financial perspective, the impact of the Pandemic manifested itself primarily in the form of hotel accommodation expenses in the Philippines, where we housed over 1,600 of our
employees in hotels in close proximity to our sites during the period of enhanced quarantine that corresponded to a public transportation lockdown. By the end of June 2020, the period of enhanced quarantine ended and we incurred total one-time
expenses of approximately $6.1 million (net of client reimbursements) for the fiscal year ended June 30, 2020, primarily in additional hotel- and per-diem-related expenses. Other than the one-time expenses discussed above, the Pandemic did not
have a material adverse impact on our net loss for the year ended June 30, 2020. In light of the above considerations, the impact of the Pandemic on our liquidity and cash flows was manageable, given that we continued to access working capital
financing through our various pre-existing lines of credit.
We believe that the Pandemic presents both medium term risks and opportunities for our business. In terms of risks, any weakening of the economy could have an overall impact on the level of
consumer demand for goods and services, with knock-on effect on the demand from consumer-facing businesses for customer support. On the other hand, our client base has a heavy preponderance of companies that either provide online services or
are enablers of the online economy, and a prolongation of consumer online activity due to the Pandemic is likely to result in continued demand for services from our clients.
For additional details on the effect of COVID-19 on our performance, see “Item 3D. Risk Factors—Risks Related to Our Business—The COVID-19 pandemic has adversely impacted our business and
results of operations. The ultimate impact of COVID-19 on our business, financial condition and results of operations will depend on future developments which are highly uncertain and cannot be predicted at this time, including the scope and
duration of the pandemic and actions taken by federal, state and local governmental authorities in the United States, governmental authorities in our international sites and our clients in response to the pandemic.”
Client Concentration
Our revenues are heavily dependent upon our key client relationships. Our top three clients accounted for 43.7%, 50.6%, and 56.9% of our revenue for the fiscal years ended June 30, 2020,
2019, and 2018, respectively. We have actively pursued the diversification of our client base as demonstrated by the decrease in revenues from these top three clients as a percentage of our revenue.
Frontier Chapter 11 Petition
On April 14, 2020, Frontier, our largest client as of June 30, 2020, representing 18.2% of revenue for the fiscal year then ended, filed a petition under Chapter 11 of the Bankruptcy Code,
in the Bankruptcy Court, along with certain of its subsidiaries. Frontier announced that this Chapter 11 filing was intended to effectuate a pre-arranged financial restructuring in accordance with a Restructuring Support Agreement, entered into
by Frontier with certain of its creditors.
Frontier has paid us all obligations owing by Frontier to us for periods prior to the Frontier Chapter 11 filing. In addition, Frontier has continued to pay us for services
rendered in the ordinary course of business for periods after the Frontier Chapter 11 filing and is currently up to date in paying all amounts presently due and owing to us. Moreover, Frontier’s Chapter 11 plan of reorganization (‘‘Chapter 11
Plan’’), which Frontier first filed with the Bankruptcy Court on May 15, 2020, and which was confirmed by the Court on August 27, 2020, provides that
trade creditor claims are unimpaired and will either be paid in full, reinstated, or otherwise unimpaired, that the pending contract between Frontier and us will be assumed (reaffirmed) by Frontier, and that any potential preferential
transfer claims against its trade creditors in respect of payments made by Frontier to such trade creditors, including us, in the ninety days prior to Frontier’s Chapter 11 filing. Frontier has stated that it expects the Chapter 11 Plan to
become effective, resulting in Frontier’s emergence from Chapter 11, in early 2021, following the completion of the regulatory approval process. Upon emergence, Frontier will have reduced its total
outstanding indebtedness by more than $10 billion and have achieved significant financial flexibility to support continued investment in its long-term growth.
During its Chapter 11 case, on May 1, 2020, Frontier completed the sale of its Northwest operations to Ziply Fiber in a transaction, first announced in May 2019, valued at $1.352 billion.
With the sale, Ziply Fiber will be taking over approximately 500,000 of Frontier’s residential and business services customers. Prior to the sale, Frontier had approximately 4.1 million customers. Ziply Fiber has continued to retain our
services to provide customer support to its newly acquired customers as a result of the transaction. The combined revenues for both Frontier and Ziply Fiber in the quarter ended June 30, 2020 were $19.9 million, which represents an increase of
29% compared to the same period in fiscal year 2019, and an increase of 2% compared to the quarter ended March 31, 2020. There have been no changes in our pricing terms with Frontier during the fiscal year ended June 30, 2020.
In conjunction with its Chapter 11 filing, Frontier announced that it had received commitments for $460 million in DIP Financing and that, following Bankruptcy Court approval, its
liquidity will total over $1.1 billion, comprising the DIP Financing and more than $700 million cash on hand. Frontier’s Chapter 11 Plan indicates that, following approval of the DIP Financing and upon the consummation of Frontier’s Chapter 11
Plan, the DIP Financing would be converted into an exit financing facility, (“Exit Financing”), rather than repaid, preserving Frontier’s liquidity in the period following its emergence from Chapter 11. Frontier’s DIP Financing was approved by
the Bankruptcy Court on September 16, 2020.
We are continuing to perform services for Frontier during the pendency of its Chapter 11 proceedings. We believe that we will continue to collect amounts billed for services we render to
Frontier in the ordinary course of business during Frontier’s Chapter 11 proceedings. Assuming that the DIP Financing provides adequate liquidity for Frontier or Frontier otherwise has or obtains adequate liquidity, Frontier assumes the
Company’s contracts, and Frontier emerges from Chapter 11 consistent with its Chapter 11 Plan, we also anticipate that we will continue to render services to Frontier, and to be paid by Frontier for such services, following such emergence.
Assuming Frontier emerges from Chapter 11 on its proposed timeline and consistent with the Chapter 11 Plan, we do not anticipate any material reduction in the volume of the business we undertake with Frontier as a result of Frontier’s Chapter
11 proceedings, except as noted above as a result of the Northwest operations sold to Ziply Fiber.
Frontier’s ability to successfully complete a reorganization process in its Chapter 11 proceedings is subject to a number of risks and uncertainties. A Chapter 11 bankruptcy
proceeding is an unpredictable process that can involve contested matters, evidentiary hearings, and trials over issues that can be raised by creditors or other parties in interest at any time during the course of the Chapter 11 case. These
risks and uncertainties could delay, impair, or frustrate Frontier’s efforts to: (i) have or obtain adequate liquidity to operate its business and pay its restructuring expenses; (ii) meet the deadlines and milestones set forth in the
Restructuring Support Agreement; (iii) obtain timely Bankruptcy Court approval of other relief sought by it in the Chapter 11 proceeding that is integral to the Restructuring Support Agreement;(iv) avoid any adverse effect on liquidity,
creditor support or business operations as a result of its Chapter 11 proceedings; (v) obtain the requisite regulatory approvals for consummation of the Chapter 11 Plan; (vi) comply with the terms and conditions of the DIP Financing and any
other financing arrangements; and (vii) consummate the Chapter 11 Plan and emerge from bankruptcy in a timely fashion. All of these direct and indirect uncertainties regarding Frontier may affect, among other things, our ability to be paid by
Frontier for services rendered to Frontier by us in a timely and compete manner, our ability to sustain or increase the volume of our business with Frontier, and the possibility of potential preferential transfer claims by or on behalf of
Frontier against us with regard to payments made to us by Frontier in the 90 days prior to its Chapter 11 filing. In each case, the actions of Frontier and other parties in interest in Frontier’s Chapter 11 proceedings and the decisions of
the Bankruptcy Court may affect these and other aspects of the Frontier Chapter 11 proceedings and the resulting implications for us. Because of the significant volume of business that we currently undertake with Frontier, any detrimental
impact on Frontier’s Chapter 11 proceedings, the timing or availability of financing, or its ability to timely obtain requested relief in the Chapter 11 proceedings could significantly and adversely affect the collectability our existing or
future receivables, result in a decline in our revenues and profits, and have a material adverse impact on our business and financial conditions, results of operations, and cash flows. For further
details, see “Item 3D. Risk Factors—Risks Related to Our Business—Frontier, our largest client as of June 30, 2020, has filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code, which could have a material
adverse effect on our business, financial condition, results of operations and cash flows.”
A number of factors related to client activity that have impacted our revenues during the three years ended June 30, 2020 are discussed below:
New Client Wins
As a result of our growth strategy, we have been successful in winning an increasing number of new client engagements. The revenue impact of these wins is expected to take place on a multi-year
basis, given the time frame associated with the hiring and training activity for a new client ramp, as well as client roll-out calendars. Historically, our in-year new client wins have generated 2.5x to 4.5x revenue over the second and third
year of the engagement. As the new clients wins in fiscal year 2020 ramp and bill for a full year, we expect the revenues to follow a similar pattern.
Outsourcing Strategy
Large enterprises generally have sophisticated outsourcing strategies that seek to identify the strongest vendors in targeted markets rather than seeking one global provider for all markets. The
client selection process typically considers scale, quality of the facilities, and strength of leadership and brand of the provider in the selected market. Clients will usually reward higher-performing vendors with a greater share of their
spend on customer interaction solutions. Changes in geographic strategy, where a client is looking to move business from onshore to offshore or nearshore, or balance their workload between nearshore and offshore, often create opportunities for
outsourced customer interaction providers. Our geographic growth with clients is a key part of our overall growth.
Provider Performance
Generally, our clients will re-allocate spend and market share in favor of outsourcing providers who consistently perform better and add more value than their competitors. Such re-allocation
of spend can either take place on a short-term basis as higher performing providers are shielded by the client against demand volatility, or on a longer term basis as the client shifts more and more of its overall outsourcing spend and volume
to higher performing providers. In addition to our growth due to new client wins, our revenues have increased with our existing clients as a result of performance-based market share gains.
Client’s Underlying Business Performance
Demand for customer interaction services reflects a client’s underlying business performance and priorities. Growth in a client’s business often results in increased demand for our customer
engagement solutions. Conversely, a decline in a client’s business generally results in a decrease in demand for our customer engagement solutions, coupled with an increase in demand for our customer acquisition and expansion solutions. The
correlation between business performance and demand for outsourced customer interaction solutions can therefore be complex, and depends upon several factors such as vendor consolidation, growth investment focus and overall business environment,
which can result in short term revenue volatility for providers.
Product Cycles
Many of our clients regularly upgrade their product or service mix, which impacts their demand for CLX service. For example, one of our largest clients has, in recent years, followed a
product release cycle which results in demand spikes that can vary in volume depending on product complexity and customer demand.
Pricing
Our revenues are dependent upon both volumes and unit pricing for our various CLX services. Client pricing is often expressed in terms of a base price as well as, in limited cases, with
bonuses and occasionally penalties depending upon our achievement of certain client objectives. While base pricing during the three fiscal years ended June 30, 2020 was largely stable, we did experience periodic fluctuations based upon
achievement of bonuses or incurrence of penalties.
Within our customer engagement solution, pricing for services delivered from onshore locations is higher than pricing for services delivered from offshore locations. This difference in
pricing is due to the higher wage levels in onshore locations. Accordingly, a shift in service delivery location from onshore to offshore locations results in a decline in absolute revenues; however, margins tend to increase, in percentage and
often in absolute terms, as compared to onshore service delivery.
Factors Affecting our Operating Profit Margins
A number of factors have affected our operating profit margins during the three fiscal years ended June 30, 2020, 2019, and 2018 as follows:
Capacity Utilization
As a significant portion of our customer interaction services are performed by customer-facing agents located in delivery facilities, our margins are impacted by the level of capacity utilization
in those facilities. We incur substantial fixed expenses in operating such facilities, such as rent expenses and site management overhead expenses. The greater the volume of interactions handled, the higher the utilization level of workstations
within those facilities and the revenues generated to cover those fixed costs, thus the greater the percentage operating margin.
As our geographic delivery location mix has continued to shift toward offshore and nearshore locations, we have invested in additional facilities in Jamaica, Nicaragua and the Philippines, with
that additional capacity being gradually absorbed during the last three fiscal years. As a result, while we experienced margin pressure in fiscal year 2018 due to the temporary effect of the lower capacity utilization in our newer offshore and
near-shore facilities, our results in the fiscal years ended June 30, 2020 and 2019 reflected the positive margin impact of the increase in capacity utilization of those facilities.
Labor Costs
When compensation levels of our employees increase, we may not be able to pass on all or a portion of such increased costs to our clients or do so on a timely basis, which tends to depress
our operating profit margins if we cannot generate sufficient offsetting productivity gains. During the current economic up-cycle in the United States, competition for contact center agents has been increasing from other sectors of the economy
and has resulted in upwards wage pressure. Towards the end of fiscal year 2017, we increased base compensation for our agents in many of our U.S.-based facilities, which resulted in pressure on operating margins from our activities requiring
U.S. service delivery. In fiscal year 2019 and during the second half of fiscal year 2018, we offset these wage increases with higher agent quality and increased productivity, leading to financial improvements. Furthermore, our overall labor
cost as a percentage of revenue has decreased due to the aforementioned shift in mix of delivery location from onshore delivery centers to nearshore and offshore centers. Our payroll and related costs have steadily decreased, representing
68.3%, 69.1%, and 73.9% as a percentage of revenue, for the fiscal years ended June 30, 2020, 2019, and 2018, respectively.
Attrition Among Customer Facing Agents
The delivery center industry is generally characterized by high employee turnover. Such turnover has a significant impact upon profitability as recruiting and training expenses are incurred
to replace departing agents. The improving economy in the United States has increased our U.S. agent turnover, as agents are able to access other opportunities. Conversely, our Customer Acquisition solution and our offshore and nearshore
operations have historically experienced low levels of turnover. Other considerations such as company culture, work conditions and general employee morale are key factors that impact employee turnover.
Delivery Location
We generate significantly greater profit margins from our work carried out by agents located in offshore and nearshore geographies compared to our work carried out from locations in the
United States. As a result, our operating margins are significantly influenced by the proportion of our work delivered from these higher margin locations. Over time we have expanded and further diversified our delivery network by adding
facilities in these locations offering a significant relative cost advantage. Our percentage of workstations in nearshore and offshore centers increased to 66.7% from 56.9% as of June 30, 2020 and 2019, respectively.
Inelasticity of Labor Costs Relative to Short-Term Variations in Client Demand
As our business depends on maintaining large numbers of agents to service our clients’ business needs, we tend not to terminate agents on short notice in response to temporary declines in
demand in excess of agreed levels, as rehiring and retraining agents at a later date would force us to incur additional expenses. Furthermore, any termination of our employees also generally involves the incurrence of significant additional
costs in the form of severance payments or early notice periods to comply with labor regulations in the various jurisdictions in which we operate our business, all of which would have an adverse impact on our operating profit margins.
Similarly, we do tend to delay increases in overall headcount upon increases in short-term demand, preferring to increase agent utilization and compensating agents for the increased workload. Accordingly, these factors constrain our ability to
adjust our labor costs for short-term declines in demand, but also allow us to realize significant margin accretion upon short term increases in demand that can be handled by our existing workforce. These factors are especially relevant in
situations where we are paid by clients based upon actual work performed, rather than upon the number of agents made available to perform client work.
Increases in Expenses Related to Sourcing or Generating Leads
A key element of our customer acquisition solution is the generation or purchase of leads or projects. We either generate our leads ourselves, often through digital means, or purchase our
leads from external sources. Any increase in the cost of sourcing or generating leads or changes in the rate of conversion of those leads could impact our profit margins. We occasionally experience some volatility in our internal lead
generation costs, either due to competitive keyword bidding by other digital marketing agencies, or due to bidding restrictions imposed by our clients.
Increased Up-Front Costs Driven by Increased Demand
Aside from short-term increases in demand for which we tend to delay increases in headcount, an increase in demand for customer interaction services typically results in an up-front increase
in employee compensation expenses, due to the in-advance need to hire and train additional employees, predominantly delivery center agents, to service client campaigns. As these expenses for hiring and training our employees are typically
incurred in a period before the revenues associated with the increase in demand are recognized, it has the effect of causing an initial decrease in our operating profit margins prior to the full impact of the profitability from the additional
demand.
Net Effect of Currency Exchange Rate Fluctuations
While substantially all of our revenues are generated in U.S. dollars, a significant portion of our operating expenses are incurred outside of the United States and paid for in respective
foreign currencies, principally the local currencies of the Philippines, Jamaica, Pakistan and Nicaragua. During the three fiscal years ended June 30, 2020, out of our total employee benefits expenses, 24.7%, 20.3%, and 18.1%, respectively,
were incurred in the Philippine Pesos, 12.7%, 10.0%, and 6.7%, respectively, were incurred in the Jamaican Dollar and 7.3%, 7.0%, and 7.6%, respectively, were incurred in Pakistani Rupee. As a result, our operations are subject to the effects
of changes in exchange rates against the U.S. dollar. See “Item 3D. Risk Factors” and Note 22.1.2 to our audited consolidated financial statements included at the end of this annual report.
Seasonality
Our business performance is subject to seasonal fluctuations. Within our customer engagement solution, some of our retail-facing clients undergo an increase in activity during the calendar year-end holiday
period. These seasonal effects cause differences in revenues and expenses among the various quarters of any financial year, which means that the individual quarters should not be directly compared with each other or be used to predict annual
financial results. This intra-year seasonal fluctuation is common in the BPO industry, with increased volumes during the fourth calendar quarter of the year.
Within our customer acquisition solution, our revenues may increase during the summer period when households tend to move and activate telecommunications services in their new homes, as well as during the final
quarter of the calendar year when the year-end holiday season begins.
Key Operational Metrics
We regularly prepare and review the following key operating indicators to evaluate our business, measure our performance, identify trends in our business, prepare financial projections,
allocate resources and make strategic decisions:
Workstations
The number of workstations at all of our delivery centers is a key volume metric for our business. It is defined as the number of physical workstations at a delivery center location used for
production (excluding, for example, workstations in training rooms or those used by supervisors). A single workstation will typically be used for multiple shifts, and therefore there will typically be more delivery center agents than utilized
workstations.
Capacity Utilization
Capacity Utilization is an efficiency metric used within our business. We define Capacity Utilization as the number of on-site workstations in use plus the number of work at home seats
divided by the number of on-site workstations, for the period under consideration, across all facilities in the region. In fiscal year 2020, we saw capacity utilization over 100% in the nearshore region due to a higher work at home employee
population and / or higher on-site workstation seat turns.
The following table displays our capacity utilization by region for the fiscal years ended June 30, 2020, 2019, and 2018, respectively.
|
As of June 30, 2020
|
||||||||||||
|
Total Production
Workstations
|
In Use
|
Utilization %
|
||||||||||
|
Offshore
|
6,170
|
4,453
|
72%
|
|
||||||||
|
Nearshore
|
3,743
|
3,878
|
104%
|
|
||||||||
|
US
|
2,513
|
2,226
|
89%
|
|
||||||||
|
Rest of world(1)
|
2,430
|
1,894
|
78%
|
|
||||||||
|
Total
|
14,856
|
12,450
|
84%
|
|
||||||||
|
As of June 30, 2019
|
||||||||||||
|
Total Production
Workstations
|
In Use
|
Utilization %
|
||||||||||
|
Offshore
|
4,440
|
3,890
|
88%
|
|
||||||||
|
Nearshore
|
2,900
|
2,600
|
90%
|
|
||||||||
|
US
|
3,129
|
2,179
|
70%
|
|
||||||||
|
Rest of world(1)
|
2,430
|
2,180
|
90%
|
|
||||||||
|
Total
|
12,899
|
10,849
|
84%
|
|
||||||||
|
As of June 30, 2018
|
||||||||||||
|
Total Production
Workstations
|
In Use
|
Utilization %
|
||||||||||
|
Offshore
|
3,975
|
2,975
|
75%
|
|
||||||||
|
Nearshore
|
2,340
|
1,890
|
81%
|
|
||||||||
|
US
|
3,547
|
2,147
|
61%
|
|
||||||||
|
Rest of world(1)
|
2,430
|
1,980
|
81%
|
|
||||||||
|
Total
|
12,292
|
8,992
|
73%
|
|
||||||||
|
(1)
|
Rest of world includes workstations in Pakistan, Senegal and the United Kingdom.
|
Workstation Seat Turns
A single workstation has the potential to be used for multiple shifts. We define Workstation Seat Turn as the average number of shifts that a workstation is used. On average, our voice
business operates at approximately 1.3 Workstation Seat Turns while our non-voice business attains approximately 1.8 Workstation Seat Turns, resulting in a higher profitability from the non-voice workstation. As our non-voice business increased
to 17% of our revenue in fiscal year 2020 from 13% in fiscal year 2019, our overall Workstation Seat Turns have increased. The growth of our non-voice business is a result of an increase in our high-growth clients.
In the fourth quarter of fiscal year 2020, our Workstation Seat Turns were negatively impacted by the safety protocols that were necessary as a result of the Pandemic. For more
information, please see “Risk Factors—The COVID-19 pandemic has adversely impacted our business and results of operations. The ultimate impact of COVID-19 on our business, financial condition and
results of operations will depend on future developments which are highly uncertain and cannot be predicted at this time, including the scope and duration of the pandemic and actions taken by federal, state and local governmental authorities
in the United States, governmental authorities in our international sites and our clients in response to the pandemic.”
Components of Results of Operations
Revenue
A substantial majority of revenues in our contact center solution are based upon a price per unit of time or customer interaction. In such case, we either charge (1) a base rate per unit of
time (i.e., per hour worked or per minute interacting with customers) that an agent is engaged in servicing the client’s customers or (2) an overall rate per customer interaction (i.e., price per call handled). Base rates could be adjusted up
or down depending upon our performance against metrics agreed upon with each client.
A substantial majority of digital services revenues is generated under a fee-per-customer arrangement in which clients pay a fixed commission for each customer that we successfully acquire on
their behalf. In some cases, we also receive a commission payment upon the annual renewal of that acquired customer. We also receive incentive payments upon the achievement of certain volume thresholds.
Operating Expenses
Payroll and Related Costs
Payroll and related costs consist of salaries, incentive compensation and employee benefits for all employees. The majority of this category relates to personnel engaged in client-facing
service delivery, including delivery center agents, supervisors and other operations personnel of a client-facing nature. These costs will generally increase in proportion to our revenue and are therefore known as variable costs. The remaining
expenses in this category relate to salaries, incentive compensation and employee benefits for full-time employees in our accounting, finance, human resources, legal, strategy, sales, marketing, client services, administrative and executive
management functions. While these costs also generally increase in relation to our revenue, they do so at a lower rate and are semi-fixed in nature.
Share-based Payments
The fair value of our share-based awards are based on valuations performed by a third-party valuation firm. For further details, see “Critical Accounting Estimates and Judgments.”
Reseller Commission and Lead Expenses
Reseller commission and lead expenses consist of the costs of generating or purchasing leads, which are expenses directly associated with acquiring new customers. These costs will generally
increase in proportion to revenues from our digital solution and are therefore variable costs. Within this solution, we either generate our own leads or purchase leads from third parties, and then use our telephone-based sales agents to convert
these leads into actual sales for our clients. We are then paid by our clients upon validation and confirmation of that sale. When we generate our own leads, we often do so pursuant to an online search that results in an interested visitor on
our web properties, in which case we pay the search engine provider. When we purchase leads from outside providers, we do so from companies that originate leads for a variety of marketing purposes and sell them to companies such as us. All our
expenses associated either with the internal generation of leads or the purchase of leads from third party providers are classified as lead expenses.
Depreciation and Amortization
Depreciation and amortization relates to the depreciation of property, plant and equipment, right-of-use assets, and amortization of our software licenses and other definite lived intangibles.
Other Operating Costs
Other operating costs include rent and utilities, telecommunication, repairs and maintenance, travel, legal and professional, as well as other miscellaneous expenses. These costs will generally
increase in relation to our revenue, although at a lower rate than variable expenses. This category also includes certain other expenses such as goodwill and intangibles impairment, foreign exchange gain or loss and bad debt write-downs.
Income / (Loss) from Operations
Income (loss) from operations is our earnings before interest and taxes and is a measure of our income (loss) from ordinary operations. Income (loss) from operations is calculated as revenues
minus total operating expenses.
Finance Expenses
Finance costs consist principally of interest and other expenses paid on leases, short- and long-term loans and borrowings, interest accrued on the redeemable preferred shares and convertible
preferred shares, interest and expenses on current account overdrafts, and losses on adjustment for fair value of financial instruments.
Income Tax (Expense) / Benefit
Income tax (expense) / benefit consists of the corporate income tax to be paid on our corporate profit, including deferred tax.
Net income / (loss) for the year, continuing operations
Net income / (loss) for the year, continuing operations, for the period consists of total loss for the period from continuing operations.
Net income on discontinued operation, net of tax
Net income on discontinued operation, net of tax, for the period consists of total income for the period from discontinuing operations, net of tax.
Net income / (loss) for the year
Net income / (loss) for the year consists of total income/(loss) for the period from continuing operations and from discontinued operations.
Results of Operations
Consolidated Statement of Profit or Loss
The following summarizes the results of our operations for the fiscal years ended June 30, 2020, 2019, and 2018:
|
Fiscal Year ended June 30,
|
||||||||||||
|
US$ in thousands
|
2020
|
2019
|
2018
|
|||||||||
|
Revenue
|
$
|
405,135
|
$
|
368,380
|
$
|
342,200
|
||||||
|
Payroll and related costs
|
276,255
|
254,592
|
252,925
|
|||||||||
|
Share-based payments
|
359
|
4,087
|
8,386
|
|||||||||
|
Reseller commission and lead expenses
|
17,328
|
27,877
|
28,059
|
|||||||||
|
Depreciation and amortization
|
24,472
|
20,895
|
12,182
|
|||||||||
|
Other operating costs
|
67,208
|
54,124
|
58,425
|
|||||||||
|
Income / (loss) from operations
|
$
|
19,513
|
$
|
6,805
|
$
|
(17,777
|
)
|
|||||
|
Finance expenses
|
(9,428
|
)
|
(7,709
|
)
|
(3,093
|
)
|
||||||
|
Income / (loss) before taxation, continuing operations
|
$
|
10,085
|
$
|
(904
|
)
|
$
|
(20,870
|
)
|
||||
|
Income tax (expense) / benefit
|
(2,315
|
)
|
(3,615
|
)
|
108
|
|||||||
|
Net income / (loss) for the year, continuing operations
|
$
|
7,770
|
$
|
(4,519
|
)
|
$
|
(20,762
|
)
|
||||
|
Net income on discontinued operation, net of tax
|
-
|
15,484
|
4,881
|
|||||||||
|
Net income / (loss) for the year
|
$
|
7,770
|
$
|
10,965
|
$
|
(15,881
|
)
|
|||||
Fiscal Years Ended June 30, 2020 and 2019
Revenue
Our revenue was $405.1 million for the fiscal year ended June 30, 2020, an increase of $36.8 million, or 10.0%, compared to the fiscal year ended June 30, 2019. The increase in revenue was due to
a strong performance of our contact center services. $12.3 million of this increase was attributable to revenue from twenty-four new clients onboarded during fiscal year 2020 (versus twenty-two new clients onboarded during fiscal year 2019) and
another $37.3 million resulted from continuing ramps from clients onboarded in fiscal year 2019. The growth in our revenue was offset by a decline in revenue of $13.7 million from a client in one of the mature industry sectors that we serve
where a strategic decision was made by management to wind down our activity on this lower-margin line of business mid-year in fiscal year 2019, which we have replaced with higher margin business (albeit at a lower revenue level).
Operating Expenses
Total operating expenses were $385.6 million in the fiscal year ended June 30, 2020, an increase of $24.0 million, or 6.7%, compared to the same period in 2019. The increase in operating expenses was primarily due
to an increase in payroll and related cost by $21.7 million or 8.5%, other operating costs (including COVID-19 related costs of $7.1 million) by $13.1 million or 24.2%, and depreciation and amortization by $3.6 million, or 17.1%, compared to
the same period in 2019, and partially offset by a decrease in share-based payments by $3.7 million, or 91.2%, and reseller commission and lead expenses by $10.5 million, or 37.8%, compared to the same period in 2019.
Payroll and related costs were $276.3 million in the fiscal year ended June 30, 2020, an increase of $21.7 million, or 8.5%, compared to the same period in 2019. As a result of improved
operational efficiency, payroll costs decreased as a percentage of revenue from fiscal year 2019 to fiscal year 2020.
Share-based payments were $0.4 million in the fiscal year ended June 30, 2020, a decrease of $3.7 million, or 91.2%, compared to the same period in 2019. The decrease in share-based payments was
due primarily to share-based expense related to the 2017 IBEX Plan of $4.2 million recorded in 2019 (including the accelerated expense of $3.3 million recorded upon cancellation of such plan in 2019) offset by the share based payment expense of
new Long Term Incentive Plan (LTIP) of $0.3 million.
Reseller commissions and lead expenses were $17.3 million in the fiscal year ended June 30, 2020, a decrease of $10.5 million, or 37.8%, compared to the same period in 2019, primarily as a result of an improvement in operational efficiencies resulting from an increase in sales conversion rates ($3.7 million) and our choice to exit an unprofitable contract towards the end of fiscal year 2019 ($6.8 million).
Depreciation and amortization expense was $24.5 million in the fiscal year ended June 30, 2020, an increase of $3.6 million, or 17.1%, compared to the same period in 2019. The increase in depreciation and amortization was due to an increase in depreciation expense of right-of-use assets by $2.0 million and $1.6 million increase in depreciation of other asses primarily due to facilities expansion.
Other operating costs were $67.2 million in the fiscal year ended June 30, 2020, an increase of $13.1 million, or 24% compared to the same period in 2019. The increase in other operating costs
was attributable to the $3.5 million increase in fair value adjustment associated with the Amazon Warrant, an increase in facilities maintenance repairs and improvements of $6.2 million (including COVID related costs of $0.9 million), an
increase in rent and utilities of $1.5 million, COVID related temporary housing and local transportation costs of $5.3 million, COVID related IT expenses of $0.9 million, a decrease in travel and entertainment costs of $3.9 million, and
impairment of intellectual property assets of $0.7 million.
Income / (loss) from operations
As a result of the above, income from operations was $19.5 million in the fiscal year ended June 30, 2020, an increase of $12.7 million, compared to $6.8 million income from operations
recognized during same period in 2019. Our operating profit margin increased from 1.8% in fiscal year 2019 to 4.8% in fiscal year 2020.
The significant improvements in income from operations and operating profit margin in fiscal year 2020 were driven by several factors. First, our nearshore geographies attained scale during
fiscal year 2019 and resulted in significant operating leverage in those geographies that had not been fully achieved in prior years. Second, our overall increase in revenue in fiscal year 2020 took place without the need to add significant
additional capacity, which had a positive impact upon profitability levels. We also invested significantly in our operational management capabilities towards the end of fiscal year 2019 and upgraded our global operations leadership. The
sharpened focus on operational efficiencies in fiscal year 2020 resulted in increased operating margins. We have continued to exercise significant control over our fixed costs across all geographies as well as shared fixed costs, which has
resulted in increased operating leverage with increasing revenues. During fiscal year 2020, we also benefited from higher margins associated with our growth from nearshore and offshore delivery centers, as compared to our onshore delivery
centers.
Finance Expenses
Finance expenses were $9.4 million in the fiscal year ended June 30, 2020, an increase of $1.7 million compared to the same period in 2019. The increase in finance expenses was due primarily due
to additional finance expenses on right-of-use leases added during the year.
Income Tax (Expense) / Benefit
Income tax expense was $2.3 million in fiscal year ended June 30, 2020, a decrease of $1.3 million compared to the $3.6 million income tax expense during the same period in 2019. The decrease in
tax expense was primarily attributable to a non-recurring deferred tax expense of $3.1 million related to the cancellation of the 2017 IBEX Plan recognized in fiscal year ended June 30, 2019.
Net income / (loss) for the year, continuing operations
As a result of the factors described above, net income for the year, continuing operations, was $7.8 million in the fiscal year ended June 30, 2020, an increase of $12.3 million, compared to a
$4.5 million net loss for the year, continuing operations, during the same period in 2019.
Net income on discontinued operation, net of tax
As a result of the operations of Etelequote Limited, a discontinued operation, net income on discontinued operation, net of tax, was nil in the fiscal year ended June 30, 2020, and $15.5 million,
during the same period in 2019. For more information about our disposition of Etelequote Limited, refer to Note 30.2 to our audited consolidated financial statements included at the end of this annual report.
Net income / (loss) for the year
As a result of the factors described above, net income for the year was $7.8 million in the fiscal year ended June 30, 2020, compared to $11.0 million net income for the year during the same
period in 2019. Notwithstanding net income on discontinued operations, net of tax, net income rose by $12.3 million compared to prior year.
Fiscal Years Ended June 30, 2019 and 2018
Revenue
Our revenue was $368.4 million in the fiscal year ended June 30, 2019, an increase of $26.2 million, or 7.7%, compared to the same period in 2018. The increase in revenue was due to a strong performance of our
contact center services. $15.9 million of this increase was attributable to revenue from new clients onboarded during fiscal year 2019, which represented an increase of $9.3 million from revenue billed from new clients in fiscal year 2018. We
were able to win twenty-two new clients in fiscal year 2019 as compared to twelve in fiscal year 2018. We added four blue chip Fortune 1000 clients that have approximately 3,000 to 20,000 seats in their enterprise as well as seven New Economy
clients. Additionally, we benefited from approximately $20.9 million of additional revenue related to increased volume from, and additional services provided to existing customers. The growth in our revenue was offset by a decline in revenue of
$4.2 million from a client in one of the mature industry sectors that we serve where a strategic decision was made by management to wind down our activity on this lower-margin line of business mid-year in fiscal year 2019, which we have
replaced with higher margin business (albeit at a lower revenue level). Revenue contribution from this client for the years ended June 30, 2019 and 2018 was $13.7 million and $22.4 million, respectively.
Operating Expenses
Total operating expenses were $361.6 million in the fiscal year ended June 30, 2019, an increase of $1.6 million, or 0.4%, compared to the same period in 2018. The increase in operating expenses was primarily due
to an increase in depreciation and amortization by $8.7 million, or 71.5%, and payroll and related cost by $1.7 million or 0.6% compared to the same period in 2018, and partially offset by a decrease in share-based payments by $4.3 million, or
51.3%, and other operating expenses by $4.3 million, or 7.4%, compared to the same period in 2018.
Payroll and related costs were $254.6 million in the fiscal year ended June 30, 2019, an increase of $1.7 million, or 0.7%, compared to the same period in 2018. As a result of improved operational efficiency,
payroll costs decreased as a percentage of revenue from fiscal year 2018 to fiscal year 2019.
Share-based payments were $4.1 million in the fiscal year ended June 30, 2019, a decrease of $4.3 million, or 51.3%, compared to the same period in 2018. The decrease in share-based payments was due primarily to
share-based expense related to the 2017 IBEX Plan of $7.7 million recorded in 2018 as compared to $4.4 million recorded in 2019 (including the accelerated expense of $3.3 million recorded upon cancellation of such plan in 2019) and the reversal
of a $0.9 million expense related to the cancellation of phantom stock plans during fiscal year 2019.
Reseller commissions and lead expenses were $27.9 million in the fiscal year ended June 30, 2019, a decrease of $ 0.2 million, or 0.6%, compared to the same period in 2018, primarily as a result of the decrease
in revenue and improved operational efficiency.
Depreciation and amortization expense was $20.9 million in the fiscal year ended June 30, 2019, an increase of $8.7 million, or 71.5%, compared to the same period in 2018. The increase in depreciation and
amortization was due to the early adoption of IFRS 16, which resulted in additional depreciation expense of $10.3 million in fiscal year 2019, partially offset by a decrease in depreciation of $1.6 million (excluding the impact of the early
adoption of IFRS 16) relating to certain of our older capital expenditures reaching the end of their accounting depreciation cycles. The decrease in other operating costs was attributable to the $10.5 million decrease in rent and utilities,
primarily due to early adoption of IFRS 16 in fiscal year 2019, an increase in maintenance repairs and improvements of $2.4 million, severance expenses of $1.1 million related to IBEX Global Solutions Limited and a fair value adjustment of $3.0
million associated with the Amazon Warrant.
Income / (loss) from operations
As a result of the above, income from operations was $6.8 million in the fiscal year ended June 30, 2019, an increase of $24.6 million, compared to a $17.8 million loss from operations recognized during same
period in 2018. Our operating profit margin increased from (5.2%) in fiscal year 2018 to 1.8% in fiscal year 2019.
The significant improvements in income from operations and operating profit margin in fiscal year 2019 were driven by several factors. First, our scope of operations in our nearshore geographies attained scale
during fiscal year 2019 and resulted in significant operating leverage in those geographies that had not been present in prior years when those operations were sub-scale with a high fixed costs. Second, our overall increase in revenue in fiscal
year 2019 took place without the need to add significant additional capacity, and the resulting increase in capacity utilization to 84% at the end of fiscal year 2019 from 73% at the end of fiscal year 2018, which had a positive impact upon
profitability levels. We also invested significantly in our operational management capabilities towards the end of fiscal year 2018, and upgraded our global operations leadership. The sharpened focus on operational efficiencies yielded results
in fiscal year 2019 with the increased operating margins. We have continued to exercise significant control over our fixed costs across all geographies as well as shared fixed costs, which has resulted in increased operating leverage with
increasing revenues. During fiscal year 2019, we also benefited from higher margins associated with our growth from nearshore and offshore delivery centers, as compared to our onshore delivery centers.
Finance Expenses
Finance expenses were $7.7 million in the fiscal year ended June 30, 2019, an increase of $4.6 million compared to the same period in 2018. The increase in finance expenses was due primarily to the early adoption
of IFRS 16 resulting in an additional expense of $4.0 million in fiscal year 2019.
Income Tax (Expense) / Benefit
Income tax expense was $3.6 million in fiscal year ended June 30, 2019, an increase of $3.7 million compared to the $0.1 million income tax benefit during the same period in 2018. The increase in tax expense was
attributable to a non-recurring deferred tax expense of $3.1 million related to the cancellation of the 2017 IBEX Plan.
Net income / (loss) for the year, continuing operations
As a result of the factors described above, net loss for the year, continuing operations, was $4.5 million in the fiscal year ended June 30, 2019, a decrease of $16.2 million, compared to a $20.8 million net loss
for the year, continuing operations, during the same period in 2018.
Net income on discontinued operation, net of tax
As a result of the operations of Etelequote Limited, a discontinued operation, net income on discontinued operation, net of tax, was $15.5 million in the fiscal year ended June 30, 2019, an increase of $10.6
million, compared to a $4.9 million net income on discontinued operation, net of tax, during the same period in 2018. This increase is primarily attributable to an increase in the scale of the Etelequote Limited business due to a production
headcount increase of over 75% in fiscal year 2019 as compared to fiscal year 2018, a net sales increase of over 85% in fiscal year 2019 as compared to fiscal year 2018 and an increase in booked revenues per policy as a result of growth
trajectory of the positive historical retention experience. This increase in scale yielded higher operating leverage resulting in an increase in net income. For more information about our disposition of Etelequote Limited, refer to Note 30.2 to
our audited consolidated financial statements included elsewhere.
Net income / (loss) for the year
As a result of the factors described above, net income for the year was $11.0 million in the fiscal year ended June 30, 2019, compared to a $15.9 million net loss for the year during the same period in 2018.
NON-GAAP FINANCIAL MEASURES
This annual report contains financial measures and ratios, including Adjusted net income / (loss) from continuing operations, Adjusted EBITDA from continuing operations, Adjusted EBITDA from continuing operations margin, financial results
excluding IFRS 16, and Net Debt that are not required by, or presented in accordance with IFRS as issued by the IASB. We refer to these measures as “non-GAAP financial measures.”
We present non-GAAP financial measures because we believe that they and other similar measures are widely used by certain investors, securities analysts and other interested parties as supplemental measures of performance and liquidity. We
also use these measures internally to establish forecasts, budgets and operational goals to manage and monitor our business, as well as evaluate our underlying historical performance, as we believe that these non-GAAP financial measures
depict the true performance of the business by encompassing only relevant and controllable events, enabling us to evaluate and plan more effectively for the future. The non-GAAP financial measures may not be comparable to other similarly
titled measures of other companies and have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our operating results as reported under IFRS as issued by the IASB. Non-GAAP financial
measures and ratios are not measurements of our performance, financial condition or liquidity under IFRS as issued by the IASB and should not be considered as alternatives to operating profit or net income / (loss) or as alternatives to cash
flow from operating, investing or financing activities for the period, or any other performance measures, derived in accordance with IFRS as issued by the IASB or any other generally accepted accounting principles.
Adjusted net income / (loss) from continuing operations
We define “adjusted net income / (loss) from continuing operations” as net income / (loss) for the year, less discontinued operation, net of tax, before the effect of the following items: non-recurring expenses (including litigation and settlement expenses, costs related to COVID-19, and expenses related to our initial public offering), impairment, other income, fair value adjustment related to the Amazon warrant, share-based payments, and foreign exchange gains or losses, net of the tax effect of such adjustments. We believe these items are not reflective of our long-term performance. We use adjusted net income / (loss) from continuing operations internally to understand what we believe to be the recurring nature of our net income / (loss) from continuing operations. We also believe that adjusted net income / (loss) from continuing operations is widely used by investors, securities analysts and other interested parties as a supplemental measure of profitability.
The following table provides a reconciliation of Adjusted net income / (loss) from continuing operations to net income / (loss) for the years presented:
|
Year ended June 30,
|
||||||||||||
|
US$ in thousands
|
2020
|
2019
|
2018
|
|||||||||
|
Net income / (loss) for the year
|
$
|
7,770
|
$
|
10,965
|
$
|
(15,881
|
)
|
|||||
|
Net income on discontinued operation, net of tax
|
-
|
15,484
|
4,881
|
|||||||||
|
Net income / (loss) from continuing operations
|
$
|
7,770
|
$
|
(4,519
|
)
|
$
|
(20,762
|
)
|
||||
|
Non-recurring expenses
|
6,482
|
4,239
|
4,112
|
|||||||||
|
Impairment
|
777
|
163
|
-
|
|||||||||
|
Other income
|
(745
|
)
|
(804
|
)
|
(547
|
)
|
||||||
|
Fair value adjustment
|
3,138
|
(364
|
)
|
(3,326
|
)
|
|||||||
|
Share-based payments
|
359
|
4,087
|
8,386
|
|||||||||
|
Foreign exchange (gain) / loss
|
151
|
1,274
|
1,266
|
|||||||||
|
Total adjustments
|
$ |
10,162
|
$ |
8,595
|
|
$ |
9,891
|
|||||
|
Normalized tax rate (see below)
|
22.9
|
% |
26.5 | % |
0.3 | % |
||||||
|
Tax impact of adjustments
|
(2,327
|
) |
(2,278
|
) |
(30
|
) |
||||||
|
Adjusted net income / (loss) from continuing operations
|
$ |
15,605
|
$ |
1,798
|
$ |
(10,901
|
) |
|||||
| Calculation of normalized tax rate: |
||||||||||||
|
Consolidated effective tax rate
|
22.9
|
% |
41.7
|
% |
0.3
|
% |
||||||
| Cancellation of legacy ESOP plan |
- |
(15.2
|
%) |
- | ||||||||
| Normalized tax rate |
22.9 | % |
26.5 |
% |
0.3 |
% |
||||||
Adjusted EBITDA from Continuing Operations
We define “EBITDA” as net income / (loss) for the year, less discontinued operation, net of tax, before finance expenses (including finance costs related to lease liabilities), depreciation and amortization (including depreciation of right-of-use assets), and income tax expense / (benefit). We define “Adjusted EBITDA from continuing operations” as EBITDA before the effect of the following items: litigation and settlement expenses, foreign exchange losses, goodwill impairment, other income, phantom expense and share-based payments. We use Adjusted EBITDA from continuing operations internally to establish forecasts, budgets and operational goals to manage and monitor our business, as well as evaluate our underlying historical performance. We believe that Adjusted EBITDA from continuing operations is a meaningful indicator of the health of our business as it reflects our ability to generate cash that can be used to fund recurring capital expenditures and growth. Adjusted EBITDA from continuing operations also disregards non-cash or non-recurring charges that we believe are not reflective of our long-term performance. We also believe that Adjusted EBITDA from continuing operations is widely used by investors, securities analysts and other interested parties as a supplemental measure of performance and liquidity.
Adjusted EBITDA from continuing operations may not be comparable to other similarly titled measures of other companies and has limitations as an analytical tool and should not be considered in
isolation or as a substitute for analysis of our operating results as reported under IFRS as issued by the IASB. Some of these limitations are as follows:
| • |
although depreciation and amortization expense is a non-cash charge, the assets being depreciated and amortized may have to be replaced in the future. Adjusted EBITDA from continuing operations does not
reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
|
| • |
Adjusted EBITDA from continuing operations is not intended to be a measure of free cash flow for our discretionary use, as it does not reflect: (i) changes in, or cash requirements for, our working
capital needs; (ii) debt service requirements; (iii) tax payments that may represent a reduction in cash available to us; and (iv) other cash costs that may recur in the future;
|
| • |
other companies, including companies in our industry, may calculate Adjusted EBITDA from continuing operations or similarly titled measures differently, which reduces its usefulness as a comparative
measure.
|
Because of these and other limitations, you should consider Adjusted EBITDA from continuing operations in conjunction with other IFRS-based financial performance measures, including cash flows
from operating activities, investing activities and financing activities, net (loss)/income and our other IFRS financial results.
The following table provides a reconciliation of Adjusted EBITDA from continuing operations to net income / (loss) for the year for the periods presented:
|
Year ended June 30,
|
||||||||||||
|
US$ in thousands
|
2020
|
2019
|
2018
|
|||||||||
|
Net income / (loss) for the year
|
$
|
7,770
|
$
|
10,965
|
$
|
(15,881
|
)
|
|||||
|
Net income on discontinued operation, net of tax
|
-
|
15,484
|
4,881
|
|||||||||
|
Net income / (loss) from continuing operations
|
$
|
7,770
|
$
|
(4,519
|
)
|
$
|
(20,762
|
)
|
||||
|
Finance expense
|
9,428
|
7,709
|
3,093
|
|||||||||
|
Income tax expense / (benefit)
|
2,315
|
3,615
|
(108
|
)
|
||||||||
|
Depreciation and amortization
|
24,472
|
20,895
|
12,182
|
|||||||||
|
EBITDA from continuing operations
|
$
|
43,985
|
$
|
27,700
|
$
|
(5,595
|
)
|
|||||
|
Non-recurring expenses
|
6,482
|
4,239
|
4,112
|
|||||||||
|
Impairment
|
777
|
163
|
-
|
|||||||||
|
Other income
|
(745
|
)
|
(804
|
)
|
(547
|
)
|
||||||
|
Fair value adjustment
|
3,138
|
(364
|
)
|
(3,326
|
)
|
|||||||
|
Share-based payments
|
359
|
4,087
|
8,386
|
|||||||||
|
Foreign exchange loss
|
151
|
1,274
|
1,266
|
|||||||||
|
Adjusted EBITDA from continuing operations
|
$
|
54,147
|
$
|
36,295
|
$
|
4,296
|
||||||
|
Adjusted EBITDA from continuing operations margin
|
13.4
|
%
|
9.9
|
%
|
1.3
|
%
|
||||||
Impact of IFRS 16 on Adjusted EBITDA from continuing operations and Adjusted EBITDA from continuing operations margin
As a result of our adoption of IFRS 16 on July 1, 2018, our statement of financial position as of June 30, 2019 reflected an increase of $64.5 million in property and equipment and an
increase of $66.9 million in lease liabilities, and our statement of profit or loss and other comprehensive income for the fiscal year then ended reflected a decrease of $11.7 million in other operating costs, an increase of $10.3 million in
depreciation, an increase of $4.0 million in finance charges, and an increase of $2.6 million in net loss, continuing operations. As a result of the foregoing, Adjusted EBITDA from continuing operations increased by $11.7 million.
Adjusted EBITDA from Continuing Operations Margin
We calculate “Adjusted EBITDA from continuing operations margin” as Adjusted EBITDA from continuing operations divided by revenue. Our Adjusted EBITDA from continuing operations margin for the fiscal years ended June 30, 2020, 2019, and 2018 was 13.4%, 9.9%, and 1.3%, respectively. The increase in Adjusted EBITDA from continuing operations margin was primarily driven by improving performance in net income / (loss) from continuing operations during the three-year period ended June 30, 2020. The key drivers of this improvement were the following: (a) geographic mix improved where our more profitable nearshore and offshore operations continued to grow as a percentage of the overall business, (b) scale was achieved in our nearshore operations where we began to see target flow-through margins materialize as the business hit critical mass, (c) capacity utilization increased as we grew our revenue and agents in our nearshore and offshore operations while reducing our U.S. footprint, (d) disciplined operational execution, (e) the increase of our more profitable non-voice business, and (f) margin improvement in our digital business.
Critical Accounting Estimates and Judgements
The preparation of financial statements in accordance with IFRS as issued by the IASB requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the periods then-ended. Accounting estimates require the use of significant assumptions and judgments as to future events, and the effect of those
events cannot be predicted with certainty. The accounting estimates will change as new events occur, more experience is acquired and more information is obtained. We evaluate and update our assumptions and estimates on an ongoing basis and use
outside experts to assist in that evaluation when we deem necessary. Our significant accounting policies, which may be affected by our estimates and assumptions, are discussed further in Note 2.5 to our audited consolidated financial statements
(critical accounting estimates and judgments) included at the end of this annual report.
In the process of applying our accounting policies, we have made the following estimates and judgments which are significant to the audited consolidated financial statements:
Critical Accounting Estimates
Impairment of intangibles
Goodwill: The calculation for considering the impairment of the carrying amount of goodwill requires a comparison of the recoverable amount of the cash-generating units to which
goodwill has been allocated, to the value of goodwill and the associated assets in the consolidated statement of financial position. The calculation of recoverable amount requires an estimate of the future cash flows expected to arise from
the cash generating unit. Judgement is applied in selection of a suitable discount rate and terminal value. The key assumptions made in relation to the impairment of goodwill are set out in Note 4 to our audited consolidated financial
statements included at the end of this annual report.
Indefinite Lived Intangibles (patent and trademarks): The indefinite lived intangibles are tested for impairment by comparing their carrying amount to the estimates of their fair value based on estimates of
discounted cash flow method. In those instances where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is written
down accordingly. For more information see Note 5 to our audited consolidated financial statements included at the end of this annual report.
Impairment of financial assets
We apply the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade receivables and contract assets. To measure expected credit losses on a
collective basis, trade receivables and contract assets are grouped based on similar credit risk and aging. The contract assets have similar risk characteristics to the trade receivables for similar types of contracts. For more information see
Note 22 to our audited consolidated financial statements included at the end of this annual report.
Depreciation and amortization
Estimation of useful lives of property and equipment and intangible assets: We estimate the useful lives of property and equipment and intangible assets based on the period over
which the assets are expected to be available for use. The estimated useful lives of property and equipment and intangible assets are reviewed periodically and are updated if expectations differ from previous estimates due to physical wear
and tear, technical or commercial obsolescence and legal or other limits on the use of the assets. For more information see Note 5 and 6 to our audited consolidated financial statements included at
the end of this annual report.
Market value of common shares / fair market value of warrants
As we were not listed on a public marketplace as of June 30, 2020, the calculation of the market value of our common shares was subject to a greater degree of estimation in determining the basis
for any share awards that we may issue.
For purposes of determining the historical share-based compensation expense, we used the Monte Carlo simulation to calculate the fair value of the restricted stock awards (the “RSAs”) on the grant
date. The determination of the grant date fair value of the RSAs using a pricing model is affected by estimates and assumptions regarding a number of complex and subjective variables. These variables include the estimated fair value of the
common shares, the expected price volatility of the common shares over the expected term of the RSAs and exercise and cancellation behaviors, each of which are estimated as follows:
| • |
Fair value of our common shares. As our common shares were not publicly traded as of June 30, 2020, we estimated the fair value of the common shares, as discussed in “Valuations of Common Shares”
below.
|
| • |
Volatility. Since there was no trading history for our common shares as of June 30, 2020, the expected price volatility for the common shares was estimated using the average historical volatility of
the shares of our industry peers as of the grant date of our RSAs over a period of history commensurate with the expected life of the awards. To the extent that volatility of the share price increases in the future, the estimates of
the fair value of the awards to be granted in the future could increase, thereby increasing share-based payment expense in future periods. When making the selection of the industry peers to be used in measuring implied volatility of
the RSAs, we considered the similarity of their products and business lines, as well as their stage of development, size and financial leverage. We intend to continue to consistently apply this process using the same or similar
public companies until a sufficient amount of historical information regarding the volatility of our own share price becomes available, or unless circumstances change such that the identified companies are no longer similar to us,
in which case, more suitable companies whose share prices are publicly available would be utilized in the calculation.
|
| • |
Expected life of the RSAs. We calculated the weighted-average expected life of the RSAs to be four years based on management’s best estimates regarding the effect of vesting schedules. RSAs granted
may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent or distribution.
|
Valuations of Common Shares
Given the absence of an active market for our common shares as of June 30, 2020, we were required to estimate the fair value of our common shares at the time of each grant. We considered objective
and subjective factors in determining the estimated fair value of our common shares on each RSA grant date. Factors considered by us included the following:
| • |
third-party valuations of our common shares;
|
| • |
the lack of marketability of our common shares;
|
| • |
our historical and projected operating and financial performance;
|
| • |
our introduction of new services;
|
| • |
our stage of development;
|
| • |
the global economic outlook and its expected impact on the business;
|
| • |
the likelihood of achieving a liquidity event for the common shares underlying the awards, such as our initial public offering or sale, given prevailing market conditions.
|
We determined valuations of our common shares for purposes of granting awards through a two-step valuation process described below. We first estimated the value of our equity. We utilized the
income and market approaches to estimate our equity value. Then, our equity value was allocated across our various equity securities to arrive at a value for the common shares. The income approach, which relies on a discounted cash flow (“DCF”)
analysis, measures the value of a company as the present value of its future economic benefits by applying an appropriate risk-adjusted discount rate to expected cash flows, based on forecasts of revenue and costs.
We used two forms of the market approach to determine a fair market value for its equity: (i) the guideline public company method (the “GPCM”), and (ii) the merger and acquisition method (the
“MAM”).
The GPCM involves the review of pricing and performance information for public companies deemed generally similar to a subject company and subject to similar industry dynamics. The MAM
consists of a review of transactions involving similar companies over the last five years. The valuation conclusion was based on the income approach (using DCF analysis), GPCM, and MAM. We assigned more weight to the DCF as it better reflected
our operations and placed less weight to the GPCM and MAM. More specifically, less weight was assigned to the MAM as compared to the GPCM given the limited number of transactions involving comparable companies, which made the MAM less
meaningful relative to the GPCM.
For each valuation report, we first prepared a financial forecast to be used in the computation of the enterprise value using the income approach. The financial forecasts took into account
our past experience and future expectations. Second, the risks associated with achieving these forecasts were assessed in selecting the appropriate discount rate. There is inherent uncertainty in these estimates. Third, we allocated the
resulting equity value among the securities that comprise our capital structure. The aggregate value of the common shares was then divided by the number of common shares outstanding to arrive at the per share value.
Since the fair value of our common shares has been determined partially by using the DCF analysis, the valuations have been heavily dependent on our estimates of revenue, costs and related
cash flows. These estimates are highly subjective and may change frequently based on both new operating data as well as various macroeconomic conditions that impact our business. Each of the valuations was prepared using data that was
consistent with our then-current operating plans that we were using to manage our business.
In addition, the DCF calculations are sensitive to highly subjective assumptions that we were required to make relating to its financial forecasts and the selection of an appropriate discount
rate, which was based on our estimated cost of equity.
Our discount rate was determined based on the stage of development at each valuation date and was quantified based on a risk-free discount rate for government debt, capital markets risk, our
sector and size.
We granted 2,373,374 restricted share awards at a fair value of $0.61 per restricted common share in December 2018. The fair value of the restricted common shares was based on a Monte Carlo
simulation, which can be considered a form of the probability weighted expected return method (“PWERM”), using an equity value as determined via the income approach (present value of discounted cash flows) and the market approaches (guideline
public company method and mergers and acquisition method).
On December 22, 2018, the preference shares were entitled to an aggregate of $149.2 million in participating and non-participating preference. This amount was significantly higher than our
fair value as determined by the Board of Directors as of November 30, 2018 on the basis of the independent valuation referred to in the previous paragraph. Because the common shares are not entitled to any distribution until the applicable
preferences are satisfied, the fair value of the common shares was significantly lower than the fair value of the preference shares on November 30, 2018.
Fair market value of warrants
The Company accounts for the warrants to purchase its common shares in accordance with the provisions of IAS 32 − Financial Instruments: Presentation and IFRS 9 – Financial Instruments. The Company classifies as
assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net-cash settle the contract if an event occurs and if that event is outside the control of the Company) or (ii) gives the counterparty a
choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement).
The Company assessed the classification of warrant as of the date it was issued and determined that such instruments met the criteria for liability classification. The warrant is reported on the consolidated
statement of financial position as a liability at fair value using the Black-Scholes valuation method. The initial value was recorded as a long term liability on the consolidated statements of financial position with the common shares
underlying the warrant which have vested recorded as contra revenue and the remainder recorded to long term assets.
The total fair value of the warrant liability is determined at the end of each reporting period by multiplying the fair value of a warrant by the total number of warrants that are expected to vest under the
arrangement based on the satisfaction of the specified revenue milestones provided in the warrant. The total number of warrants that are expected to vest is based upon the cumulative revenues that are expected, as determined at the end of
each reporting period, to be earned from Amazon during a period of 7.5 years ending on June 30, 2024.
In December 2017, the Group elected to utilize the Black Scholes valuation model to calculate the fair value of the Amazon warrants as the imminent IPO was anticipated to be $14.0 to $15.0, which would have no
impact on the warrant’s strike price. As the IPO did not consummate in March 2018 as anticipated, the Monte Carlo simulation was used to value the warrants in June 2018 to capture the anti-dilution feature if a qualified IPO were to occur
within the next year for calculating the value of the warrants.
| • |
The share price.
|
| • |
The strike price.
|
| • |
Volatility determined based on historical prices of our shares.
|
| • |
The duration, which has been estimated as the difference between the valuation date of the warrant plans and final exercise date.
|
| • |
The risk free interest rate.
|
At the end of each reporting period, the Company has fair valued the warrant liability with changes in fair value through profit and loss. For the year ended June 30, 2020 and June 30, 2019, the Company used the
Monte Carlo simulation, which requires the input of subjective assumptions, including the expected volatility and the expected term.
Given the absence of an active market for the common shares as of June 30, 2020, the Company is required to estimate the fair value of its common shares at the time of each grant.
The Company considers a variety of factors in estimating the fair value of its common shares on each measurement date, including:
| • |
the Company’s historical and projected operating and financial performance;
|
| • |
the Company’s introduction of new products and services;
|
| • |
the Company’s completion of strategic acquisitions;
|
| • |
the Company’s stage of development;
|
| • |
the global economic outlook and its expected impact on the Company’s business; and
|
| • |
the market performance of comparable companies.
|
The long-term asset will be amortized on a systematic basis over the life of the arrangement as revenue is recognized for the transfer of the related goods or services. The Company will review the asset on a
reporting period basis to determine whether an impairment is required. In the event that an impairment is needed, the company will reduce the asset and offset to revenues.
Legal provisions
We review outstanding legal cases following developments in the legal proceedings and at each reporting date, in order to assess the need for provisions and disclosures in its audited
consolidated financial statements. Among the factors considered in making decisions on provisions are the nature of litigation, claim or assessment, the legal process and potential level of damages in the jurisdiction in which the litigation,
claim or assessment has been brought, the progress of the case (including the progress after the date of the audited consolidated financial statements but before those statements are issued), the opinions or views of legal advisers, experience
on similar cases and any decision of our management as to how it will respond to the litigation, claim or assessment. Refer to Note 16 to our audited consolidated financial statements included at the end of this annual report.
Judgements
Leases
In some cases, judgement may be required in determining whether a contract contains a lease. This assessment involves the exercise of judgement about whether it depends on specific lease,
whether we obtain substantially all the economic benefits from the use of that asset and whether we have the right to direct the use of that asset. In addition, determining the lease term, we consider all facts and circumstances that create an
economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain (in accordance with lease
contracts) to be extended (or not terminated).
Staff retirement plans
The net defined benefit pension scheme assets or liabilities are recognized in our consolidated statement of financial position. The determination of the position requires assumptions to be
made regarding future salary increases, mortality, discount rates and inflation. The key assumptions made in relation to the pension plans are set out in Note 14.1 to our audited consolidated financial statements included at the end of this
annual report.
Share-based payments
The share-based payments expense is recognized in our consolidated statement of profit or loss and comprehensive income. The key assumptions made in relation to the share-based payments are
set out in Note 19 to our audited consolidated financial statements included at the end of this annual report.
Provision for taxation
We are subject to income tax in several jurisdictions and significant judgement is required in determining the provision for income taxes. During the ordinary course of business, there are
transactions and calculations for which the ultimate tax determination is uncertain. As a result, we recognize tax liabilities based on estimates of whether additional taxes and interest will be due. These tax liabilities are recognized when,
despite our belief that our tax return positions are supportable, we believe that certain positions are likely to be challenged and may not be fully sustained upon review by tax authorities. We believe that our accruals for tax liabilities are
adequate for all open audit years based on our assessment of many factors, including past experience and interpretations of tax law. This assessment relies on estimates and assumptions and may involve a series of complex judgments about future
events. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact income tax expense in the period in which such determination is made.
The key assumptions made in relation to tax provisioning are set out in Note 18 to our audited consolidated financial statements included at the end of this annual report.
Adoption of IFRS 15 and IFRS 16
Our results of operations for the fiscal year ended June 30, 2020 and 2019 reflect the impact of our adoption, effective July 1, 2018, of IFRS 15, Revenue from Contracts with Customers, and IFRS 16, Leases. Our results of operations for
the fiscal years ended June 30, 2020 and 2019 reflect the impact of our adoption, effective July 1, 2018, of IFRS 15, Revenue from Contracts with Customers, and IFRS 16, Leases. IFRS 15 has been implemented using the cumulative effect method, and IFRS 16 using the modified retrospective approach.
New accounting standards
We adopted IFRIC 23 effective from July 1, 2019 and reassessed its judgements and estimates related to income tax treatments in various jurisdictions. There are no material uncertain tax
treatments that would require adjustment to income tax expense as a result of the implementation.
Discontinued Operations
On June 26, 2019, we transferred our equity interests in Etelequote Limited to our parent company, TRGI, in exchange for TRGI waiving its right to receive $47.9 million of the preference amount related to our
Series C preferred shares (the “ETQ Spin-off”). As a result of the ETQ Spin-off, Etelequote Limited is no longer a part of our ongoing business. For financial statement purposes, Etelequote Limited is treated as a discontinued operation for
the fiscal years ended June 30, 2019 and 2018. As of June 30, 2018, our consolidated statement of financial position reflected the following amounts attributable to Etelequote Limited: property and equipment of $0.6 million, borrowings
included a related party loan of $15.9 million and accumulated deficit of $7.4 million.
For more information, refer to Note 30.2 to our audited consolidated financial statements included at the end of this annual report.
| B. |
Liquidity and Capital Resources
|
Our principal liquidity needs are to fund our working capital requirements and to finance capital expenditures (consisting of additions to PPE and intangible assets).
We had negative working capital of $19.6 million and $29.6 million as of June 30, 2020 and 2019, respectively, which, in each case, was due primarily to capital expenditures related to the opening
of new delivery centers, and the upgrade and expansion of existing delivery centers. During the fiscal years ended June 30, 2020, 2019, and 2018, we invested $5.3 million, $6.2 million, and $5.8 million, respectively, on capital expenditures.
Historically, we have met our liquidity needs through cash generated from our operating activities and from cash generated by financing activities, including borrowings under credit facilities and
leases, as described in more detail below under “Financing Arrangements.” As of June 30, 2020, the total amount of credit available to us under our revolving credit facilities and lines of credit was $22.0 million. We also have financing
arrangements in place with financial institutions to accelerate collection of receivables. As of June 30, 2020, we had cash and cash equivalents of $21.9 million. Of this amount, $11.3 million is located outside of the United States, and $6.9
million of this is subject to restrictions on our ability to repatriate such funds.
As of June 30, 2020, our outstanding debt under our credit facilities and capital leases amounted to $106.0 million. Of this amount, $40.0 million represented the current portion of such
borrowings and $65.8 million represented the long-term portion of such borrowings.
Our future liquidity requirements will depend on many factors, including our growth rate, the timing and extent of spending to open new delivery centers and support development efforts, our
expansion of sales and marketing activities and the introduction of new and enhanced technology offerings. We may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies and intellectual
property rights.
Management believes that our existing cash balance together with cash generated from our operations, availability under our existing revolving credit facilities and the net proceeds from our
initial public offering will be sufficient to meet our liquidity requirements for at least the next twelve months.
Cash Flows
|
Year ended June 30,
|
||||||||||||
|
US$ in thousands
|
2020
|
2019
|
2018
|
|||||||||
|
Net cash inflow / (outflow) from
|
||||||||||||
|
Operating activities
|
$
|
51,719
|
$
|
2,202
|
$
|
(5,747
|
)
|
|||||
|
Investing activities
|
(4,835
|
)
|
(9,084
|
)
|
(5,439
|
)
|
||||||
|
Financing activities
|
(33,867
|
)
|
2,552
|
3,187
|
||||||||
|
Effects of exchange rate difference on cash and cash equivalents
|
(20
|
)
|
(316
|
)
|
197
|
|||||||
|
Net increase / (decrease) in cash and cash equivalents
|
$
|
12,997
|
$
|
(4,646
|
)
|
$
|
(7,802
|
)
|
||||
|
Cash and cash equivalents at beginning of the period
|
$
|
8,873
|
$
|
13,519
|
$
|
21,321
|
||||||
|
Cash and cash equivalents at end of the period
|
$
|
21,870
|
$
|
8,873
|
$
|
13,519
|
||||||
Cash Flows from Operating Activities
Net cash inflow from operating activities during the fiscal year ended June 30, 2020 was $51.7 million compared with net cash inflow of $2.2 million during the fiscal year ended June 30, 2019. The increase in net cash inflow from operating activities was primarily attributable to the increase in net income before taxation of $10.1 million for the year ended June 30, 2020 and to the accelerated collection of receivables towards the end of the quarter ended December 31, 2019.
Net cash inflow from operating activities during the fiscal year ended June 30, 2019 was $2.2 million compared with net cash outflow of $5.7 million during the fiscal year ended June 30, 2018. The net cash inflow from operating activities was primarily attributable to the increase in our revenue and collection thereof.Cash Flows from Investing Activities
Net cash used in investing activities was $4.8 million during the fiscal year ended June 30, 2020 compared with cash used in investing activities of $9.1 million during the fiscal year ended
June 30, 2019.
During the fiscal year ended June 30, 2020, we expended $4.8 million on investing activities, primarily related to the purchase of property and equipment of $4.3 million and purchase of
intangible assets of $1.0 million. A significant portion of our investing activities was related to the opening of one new delivery center located in the Nicaragua and two new delivery centers located in the Philippines during the fiscal year
ended June 30, 2020.
During the fiscal year ended June 30, 2019, we expended $9.1 million on investing activities, primarily related to the purchase of property and equipment of $5.6 million and purchase of intangible
assets of $0.6 million. A significant portion of our investing activities was related to the opening of one new delivery center located in the Nicaragua and one new delivery center located in the Philippines during the fiscal year ended June
30, 2019. In addition, $3.6 million represents the cash adjustment related to our disposition of Etelequote Limited.
During the fiscal year ended June 30, 2018, we expended $5.4 million on investing activities, primarily related to the purchase of property and equipment of $5.2 million and purchase of
intangible assets of $0.6 million. A significant portion of our investing activities was related to the upgrade and expansion of our existing delivery centers in Jamaica in the quarters ending December 31, 2017 and June 30, 2018.
Cash Flows from Financing Activities
Net cash outflow from financing activities was $33.9 million during the fiscal year ended June 30, 2020 and net cash inflow of $2.6 million during the fiscal year ended June 30, 2019.
Net cash outflow from financing activities of $33.9 million cash during the fiscal year ended June 30, 2020 primarily reflected proceeds from line of credit of $127.6 million, repayments of
line of credit $142.1 million, proceeds from borrowings of $1.0 million, repayment of borrowings of $8.0 million, and the payment of $12.2 million on lease obligations. This was also partially offset by the dividend distribution of $0.1
million.
Net cash inflow from financing activities of $2.6 million cash during the fiscal year ended June 30, 2019 primarily reflected proceeds from line of credit of $168.7 million, repayments of
line of credit $162.9 million, proceeds from borrowings of $36.6 million, repayment of borrowings of $6.1 million, repayment of related party loans of $1.2 million and the payment of $10.5 million on lease obligations. This was also partially
offset by the repayment of $14.5 million on private placement notes, the redemption of $6.0 million of senior preferred shares and dividend distribution of $1.6 million.
Net cash inflow from financing activities of $3.2 million cash during the fiscal year ended June 30, 2018 primarily reflected proceeds from a line of credit of $222.8 million, repayments of
line of credit $216.3 million, proceeds from borrowings of $1.4 million, the issuance of $5.9 million of private placement notes, a $6.2 million repayment of borrowings and $3.2 million of payments on lease obligations.
Net Debt
We calculate “Net Debt” as total borrowings less cash and cash equivalents.
|
Year ended June 30,
|
||||||||
|
US$ in thousands
|
2020
|
2019
|
||||||
|
Borrowings
|
||||||||
|
Non-Current
|
$
|
3,782
|
$
|
7,184
|
||||
|
Current
|
27,476
|
41,835
|
||||||
|
$
|
31,258
|
$
|
49,019
|
|||||
|
Leases
|
||||||||
|
Non-Current
|
$
|
62,044
|
$
|
58,602
|
||||
|
Current
|
12,668
|
10,632
|
||||||
|
$
|
74,712
|
$
|
69,234
|
|||||
|
Convertible loan note - related party
|
$
|
-
|
$
|
-
|
||||
|
Total Debt
|
$
|
105,970
|
$
|
118,253
|
||||
|
Cash
|
21,870
|
8,873
|
||||||
|
Net Debt
|
$
|
84,100
|
$
|
109,380
|
||||
Net debt decreased to $84.1 million as of June 30, 2020 from $109.4 million as of June 30, 2019 primarily due to the strong operating cash flow we experienced in fiscal year 2020.
Net debt increased to $109.4 million as of June 30, 2019 from $49.4 million as of June 30, 2018, due primarily to the early adoption of IFRS 16, which resulted in the recognition of lease
liabilities of $66.9 million as of June 30, 2019.
Financing Arrangements
Through our subsidiaries we are party to a number of financing arrangements with banks, financial institutions and private investors that serve to meet our liquidity requirements. These
arrangements include credit facilities, lines of credit, receivables financing arrangements, term loans, capital leases and equipment leases, as well as private placements of debt securities and preferred shares. The following is a summary of
our principal financing arrangements. For more information, refer to Note 13 to our audited consolidated financial statements included at the end of this annual report.
PNC Credit Facility
In November 2013, our subsidiary Ibex Global Solutions, Inc. (formerly known as TRG Customer Solutions, Inc.) entered into a three-year $35.0 million revolving credit facility (as amended,
the “PNC Credit Facility”) with PNC Bank, N.A. (“PNC”). In June 2015, the maximum revolving advance amount under the PNC Credit Facility was increased to $40.0 million, with an additional $10.0 million of incremental availability (subject to
PNC’s approval and satisfaction of conditions precedent) and the maturity date was extended to May 2020. In December 2018, the PNC Credit Facility maximum revolving advance amount was increased to $45.0 million. In May 2019, the PNC Credit
Facility was amended to include the following: the maximum revolving advance amount was increased to $50.0 million, with an additional $10.0 million of availability (in $5.0 million increments) subject to satisfaction of conditions precedent,
and the maturity date was extended to May 2023. Borrowings under the PNC Credit Facility bear interest at LIBOR plus a margin of 1.75% and/or negative 0.5% of the PNC Commercial Lending Rate for domestic loans. In this agreement, Ibex Global
Solutions, Inc. derives value from the choice of interest rates, depending on the rate selected. This value changes in response to the changes in the various interest rates alternatives. Thus, a derivative is embedded within the loan
commitment. The part of the value associated with the loan commitment derivative (the embedded derivative part) is derived from the potential interest rate differential between the alternative rates. The PNC Credit Facility is guaranteed by
IBEX Global Limited and secured by substantially all the assets of Ibex Global Solutions, Inc. The PNC Credit Facility balance as of June 30, 2020 was $19.8 million (June 30, 2019: $33.5 million), as presented in Note 13.2 to our audited
consolidated financial statements included at the end of this annual report.
In June 2016, the PNC Credit Facility was amended to add a Term Loan A of $6.0 million, which was drawn down in full, and a Term Loan B of $4.0 million (subject to satisfaction of conditions
precedent), which was never drawn down and cancelled. In November 2016, the PNC Credit Facility was amended by adding a Term Loan C of $16.0 million which was drawn down in full with $6.0 million applied to repay in full Term Loan A. Term Loan
C bears interest at LIBOR plus a margin of 4.00% and is required to be repaid in 54 equal monthly instalments (commencing January 1, 2017). Term Loan C balance as of June 30, 2020 was $2.3 million (June 30, 2019: $7.1 million).
In addition, the PNC Credit Facility was amended in June 2016 to include a $3.0 million non-revolving line of credit for purchases of equipment, which was drawn down in full, bearing interest
at LIBOR plus a margin of 3.25%. The balance of this line as of June 30, 2020 was nil (June 30, 2019: $0.2 million), as presented in Note 13.1 to our audited consolidated financial statements included at the end of this annual report.
Receivables Financing Agreement with Citibank, N.A.
In June 2015, our subsidiary, Ibex Global Solutions, Inc., entered into a supplier agreement with Citibank, N.A. (the “Citibank Receivables Financing Agreement”). Pursuant to the Citibank Receivables Financing
Agreement, Citibank provides payment to Ibex Global Solutions, Inc. for accounts receivable owed to Ibex Global Solutions, Inc. from one of our largest clients and its various subsidiaries and affiliates located in the United States. All
payments from Citibank to Ibex Global Solutions, Inc. are subject to a discount charge. The discount rate used to calculate the discount charge is the product of (i) the LIBOR rate for the period most closely corresponding to the number of days
in the period starting from and including the date the proceeds are remitted by Citibank to Ibex Global Solutions, Inc. (the “Discount Acceptance Period”) plus 0.80% per annum and (ii) the Discount Acceptance Period divided by 360. The discount
charge during the fiscal year ended June 30, 2020 and 2019 averaged approximately 0.33% and 0.32% of net sales, respectively.
Receivables Financing Agreement with Seacoast National Bank
In July 2011, our subsidiary, iSky, Inc. entered into a purchasing agreement (the “Seacoast Receivables Financing Agreement”) with the predecessor to Seacoast National Bank (“Seacoast”).
Pursuant to the Seacoast Receivables Financing Agreement, Seacoast provides payment to iSky, Inc. for up to $1.5 million of accounts receivable owed to iSky, Inc. All payments from Seacoast to iSky, Inc. are subject to a discount of 1.0% for
receivables outstanding 30 days or less and an additional 0.5% for each additional 15 days that such receivable is outstanding. The average discount during the fiscal year ended June 30, 2020 was approximately 1.2% (June 30, 2019: 1.2%) of net
sales. Under the Seacoast Receivables Financing Agreement, Seacoast may also advance an amount up to 85% of iSky, Inc.’s receivables to iSky, Inc. at a rate of LIBOR plus 7.0%.
The Seacoast Receivables Financing Agreement requires iSky, Inc. to sell $0.2 million of receivables per month to Seacoast, subject to a penalty based on the discount fee if such minimum is
not met. The Seacoast Receivables Financing Agreement is automatically renewed for successive 12-month periods unless terminated in accordance with its terms.
Loan Facility with First Global Bank Limited
In January 2018, our subsidiary IBEX Global Jamaica Limited entered into a $1.4 million non-revolving demand loan with First Global Bank Limited. The loan bears interest at a fixed rate of 7.0% per annum
for the term of the loan, has a maturity date of January 2023, and is required to be repaid in 54 equal monthly installments (commencing six months after the drawdown date). The loan is guaranteed by IBEX Global Limited and secured by
substantially all the assets of IBEX Global Jamaica Limited. The debenture under which IBEX Global Jamaica Limited granted security over its assets contains limitations on liens, the incurrence of debt and the sale of assets. As of June 30,
2020, the balance of the loan was $0.8 million (June 30, 2019: $1.1 million).
In November 2018, our subsidiary IBEX Global Jamaica Limited entered into a $1.2 million non-revolving demand loan with First Global Bank Limited. The loan bears a variable
interest at 6-month LIBOR plus a margin of 5.26%, subject to a floor of 7.0% per annum, for the term of the loan. The loan is to be paid in 60 equal monthly installments, triggering a bullet payment after 36 months, with an option to renew
for an additional 24 months, with an overall maturity in January 2023. The loan is guaranteed by IBEX Global Limited and secured by substantially all the assets of IBEX Global Jamaica Limited. The debenture under which IBEX Global Jamaica
Limited granted security over its assets contains limitations on liens, the incurrence of debt and the sale of assets. At June 30, 2020, the balance of the loan was $0.9 million (June 30, 2019: $1.04
million).
In October 2019, our subsidiary, IBEX Global Jamaica Limited, entered into a $0.8 million non- revolving demand loan with First Global Bank Limited. The loan bears a fixed interest rate of 7%. The loan is to be
paid in 36 equal monthly instalments. The loan is guaranteed by IBEX Global Limited and secured by substantially all the assets of IBEX Global Jamaica Limited. The debenture under which IBEX Global Jamaica Limited granted security over its
assets contains limitations on liens, the incurrence of debt and the sale of assets plus the assignment of peril insurance for the replacement value over the charged assets. As of June 30, 2020, the balance of the loan was $0.6 million.
In March 2020, our subsidiary, IBEX Global Jamaica Limited, entered into a $0.6 million non-revolving demand loan and a $2 million non-revolving demand loan with First Global Bank Limited. Each loan bears
interest at a fixed rate of 7.0% per annum for the term of the loan. Each loan is to be paid in 36 equal monthly instalments, commencing 30 days after the first disbursement of loan funds. The loan is guaranteed by IBEX Global Limited and
secured by substantially all of the assets of IBEX Global Jamaica Limited. The debenture under which IBEX Global Jamaica Limited granted security over its assets contains limitations on liens, the incurrence of debt and the sale of assets. As
of June 30, 2020, the balance of the loan was $0.6 million.
Heritage Bank of Commerce Credit Facility
In March 2015, our subsidiaries, Digital Globe Services, Inc., TelSatOnline, Inc. and DGS EDU, LLC entered into a one-year $3.0 million loan and security agreement (the “HBC Loan Agreement”)
with Heritage Bank of Commerce (“HBC”). In March 2016, the HBC Loan Agreement was amended to increase the credit line capacity to $5.0 million and extend its maturity date until March 31, 2018, subject to collateral review. In June 2017, the
HBC Loan Agreement was amended to add an additional subsidiary, 7 Degrees LLC, as a borrower, along with extending the maturity date until March 31, 2019. In August 2018, the HBC Loan Agreement was amended to increase the accrued account
advance rate and certain other terms along with extending the maturity date until March 31, 2021. In January 2019, HBC Loan Agreement was amended to exclude DGS EDU, LLC therefrom pursuant to its sale. Refer to Note 30.2. Borrowings under the
HBC Loan Agreement bear interest at the Prime Rate plus a margin of 2.50%. The credit line is secured by substantially all the assets of Digital Globe Services, Inc., TelSatOnline, Inc., and 7 Degrees LLC. The line of credit balance as of June
30, 2020 was $1.4 million (June 30, 2019: $2.4 million), as presented in Note 13.2 to our audited consolidated financial statements included at the end of this annual report.
In March 2019, HBC Loan Agreement was amended to add a term loan of up to $2.0 million that bears interest at the Prime Rate plus a margin of 2.5%. The term loan is required to be repaid in
36 equal monthly installments (commencing April 2020) and will mature on March 1, 2023. On the term loan maturity date, all amounts owing shall be immediately due and payable. The term loan balance as of June 30, 2020 was $1.8 million (June
30, 2019: $1.0 million).
Other Financing Arrangements
We have financed the purchase of various property and equipment and software during the fiscal years 2020 and 2019 with IBM, PNC and FGB. As of June 30, 2020 and 2019, we had
financed $4.5 million and $3.6 million, respectively, of assets at interest rates ranging from 6% to 9% per annum.
Dividend to TRGI
On July 21, 2020, our board of directors approved a one-time dividend of $4.0 million to our shareholders reflecting a portion of the cash generation from the business during fiscal year
2020. The dividend was paid on July 24, 2020 to TRGI, the holder of our Series A preferred share (outstanding prior to its automatic conversion into common shares in connection with our initial public offering), which was entitled to a
dividend preference that expired upon conversion of the Series A preferred share to common shares upon the completion of our initial public offering.
|
C.
|
Research and development activities
|
Not applicable.
| D. |
Trend information
|
For a discussion of trends, see “Item 4.B. Business Overview” and “Item 5.A. Operating Results.”
| E. |
Off-Balance Sheet Arrangements
|
We were not during the periods presented, and are not currently, a party to any off-balance sheet arrangements.
| F. |
Contractual obligations
|
The following table presents our future contractual obligations as of June 30, 2020:
|
US$ in thousands
|
Total
|
Less than one year
|
1 to 3 years
|
4 to 5 years
|
Over 5 years
|
|||||||||||||||
|
Lease obligations
|
$
|
103,309
|
$
|
18,717
|
$
|
29,762
|
$
|
19,150
|
$
|
35,680
|
||||||||||
|
Long term borrowings
|
10,980
|
6,986
|
3,994
|
-
|
-
|
|||||||||||||||
|
Lines of credit
|
21,475
|
21,475 |
-
|
-
|
-
|
|||||||||||||||
|
Purchase obligations
|
1,680
|
-
|
1,680
|
-
|
-
|
|||||||||||||||
|
Defined benefit obligations
|
677
|
-
|
-
|
-
|
677
|
|||||||||||||||
|
Total obligations
|
$
|
138,121
|
$
|
47,178
|
$
|
35,436
|
$
|
19,150
|
$
|
36,357 |
||||||||||
The lease obligations have interest rates ranging from 6.0% to 17.0% for the fiscal year ended June 30, 2020.
Long term borrowings represents indebtedness under the following: (i) Term Loan C under the PNC Credit Facility, which will be amortized in 54 consecutive equal monthly installments which commenced on 1
January 1, 2017 with an interest rate of LIBOR plus a margin of 4%, (ii) current interest rate swap arrangements, and (iii) other financing arrangements having interest rates from 6% to 10%.
Lines of credit represents indebtedness under the following: (i) the PNC Credit Facility ($19.8 million), which bears interest at an interest rate of LIBOR plus a margin of 1.75% and/or the
sum of a margin of -0.5% plus the highest of (a) the PNC commercial lending rate, (b) the sum of the federal prime rate plus 0.5% and (c) daily LIBOR rate plus 1.0%; (ii) the HBC Credit Facility ($1.4 million), which bears interest at a
rate equal to the greater of The Wall Street Journal (WSJ) Prime Rate or 5.7%; and (iii) the Seacoast Receivables Financing Agreement ($0.2 million), which bears interest at a rate of LIBOR plus a margin of 7% per annum.
Purchase obligations represents obligations under annual telecommunication service agreements with two carriers.
Defined benefit obligations represent liabilities against unfunded defined benefit plans whereby employees are entitled to one half month’s salary for every year of service upon attainment
of retirement age of 60 years with at least five years of completed service.
| G. |
Safe Harbor
|
This annual report contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act and as defined in the PSLRA. See “Cautionary Statement Regarding Forward-Looking
Statements.”
| A. |
Directors and Senior Management
|
The following table sets forth the name, age as of September 30, 2020 and position of each of our executive officers and directors. Unless otherwise stated, the business address for all of
our executive officers and members of our board of directors is c/o IBEX Limited, 1700 Pennsylvania Avenue NW, Suite 560, Washington, DC 20006, USA.
|
Name
|
Age
|
Position
|
|
Executive Officers
|
||
|
Robert Dechant
|
58
|
Chief Executive Officer
|
|
Karl Gabel
|
57
|
Chief Financial Officer
|
|
Christy O’Connor
|
51
|
General Counsel and Assistant Corporate Secretary
|
|
David Afdahl
|
46
|
Chief Operating Officer
|
|
Jeffrey Cox
|
51
|
President, IBEX Digital
|
|
Bruce Dawson
|
56
|
Chief Sales and Client Services Officer
|
|
Julie Casteel
|
59
|
Chief Strategic Accounts Officer
|
|
Non-Employee Directors
|
|
|
|
Mohammed Khaishgi
|
53
|
Chairman
|
|
Daniella Ballou-Aares
|
45
|
Director
|
|
John Jones
|
65
|
Director
|
|
Shuja Keen
|
44
|
Director
|
|
John Leone
|
47
|
Director
|
|
Fiona Beck
|
55
|
Director
|
Our Executive Officers
Robert Dechant has served as our chief executive officer since July 2019. From September 2017 to July 2019, Mr. Dechant served as
chief executive officer of IBEX Interactive (which corresponds to IBEX’s current operations). From 2015 until 2017, Mr. Dechant served as chief executive officer of IBEX Global Solutions. From 2012 until 2015, Mr. Dechant served as the
chief sales, marketing and client services officer at Qualfon, Inc., a global provider of call center, back office, and business process outsourcing services. Prior to that, Mr. Dechant was the chief marketing and operations officer at
Stream Global Services, a large multinational business process outsourcing provider which merged with Convergys in 2014. Mr. Dechant holds a B.S. degree from Fairfield University.
Karl Gabel has served as our chief financial officer since November 2017. From 2004 until 2017, Mr. Gabel served in multiple
finance leadership functions, including as the chief financial officer of IBEX Global Solutions, one of the Continuing Business Entities. Mr. Gabel holds a B.S. degree in accounting from Pennsylvania State University and an Executive
M.B.A. degree from St. Joseph’s University.
Christy O’Connor has served as our general counsel and assistant corporate secretary since March 2018. From 2015 to 2018, Ms.
O’Connor worked for Alorica, a provider of customer management outsourcing solutions, as the chief legal and compliance officer from 2015 through 2017 and as a legal advisor thereafter. From 2014 to 2015, Ms. O’Connor was the general
counsel and chief legal officer at SourceHOV. From 2011 to 2014, Ms. O’Connor was the deputy general counsel for Stream Global Services. Ms. O’Connor holds a B.A./M.A. from the University of Chicago and a J.D. from St. Mary’s University
School of Law and a degree in International Law from the University of Innsbruck.
David Afdahl has served as our Chief Operating Officer since 2018, where he is responsible for global operations, performance
management and financial results. He joined IBEX in 2017 as the Vice President of Operations, responsible for US Operations. Mr. Afdahl has more than 23 years of operational leadership experience within the BPO industry. For seven years
he served as the Managing Director for Xerox Services, where he was responsible for global operations, client management and the overall financial performance. Mr. Afdahl holds a B.A. degree in Anthropology from the University of
Maryland.
Jeffrey Cox has served as president of IBEX Digital since 2008, when he founded Digital Globe Services Limited. Mr. Cox has over
twenty years of wireless and cable sales and operations experience and has held executive position in sales channel development and execution, on and off-line marketing programs and call center sales and operations for some of the world’s
most recognized brands. Mr. Cox holds a B.A. degree from San Diego State University.
Bruce Dawson has served as our chief sales and client services officer since 2017. From 2016 until 2017, he held the same role for
IBEX Global Solutions, one of the Continuing Business Entities. From 2014 until 2016, Mr. Dawson served as U.S. nearshore regional director for Atento S.A. Prior to joining Atento S.A., Mr. Dawson served at SITEL Corporation from October
2012 to March 2014 and Stream Global Services from October 2008 to August 2012. Mr. Dawson has held management positions at various companies in the BPO industry bringing as well experience from the software and telecommunications sector.
He holds a B.A. degree in psychology from Denison University.
Julie Casteel has served as our Chief Sales & Marketing Officer since 2012 and is responsible for expanding new and existing
clients. She currently leads the strategy for growth and profitability for ibex’s largest global clients and is also responsible for the strategic development of the financial services and healthcare vertical markets. Ms. Casteel brings
more than 25 years of successful sales and leadership experience within the BPO industry. For 10 years, she served as the Executive Vice-President of Global Sales & Marketing at SITEL, where she was responsible for global revenue,
client relationship management and the overall company marketing strategy. Ms. Casteel has served on a number of industry boards and has been published in the Economist, The Wall Street Journal and various industry publications. She holds
a B.S. degree in Biology from Texas A&M University.
Our Directors
Mohammed Khaishgi served as our chief executive officer from September 2017 through June 2019 and chairman of our board of
directors since September 2017. Mr. Khaishgi was a founding partner and served as the chief operating officer of TRGI, a position he held since TRGI’s inception in 2002 until December 2017, responsible for overseeing TRGI’s day-to-day
operations, including management and oversight of its portfolio of direct holdings. Mr. Khaishgi continues to serve as a director of TRGI. Prior to joining TRGI, Mr. Khaishgi was a senior director at Align Technology, where he managed
Align’s offshore delivery center and back office services operations. Mr. Khaishgi was previously a senior investment officer at the World Bank’s International Finance Corporation (the “IFC”) where he was responsible for the IFC’s
portfolio of investments in the Asian telecommunications and technology sectors. Mr. Khaishgi received his undergraduate degree in electrical engineering from the University of Engineering and Technology in Lahore, Pakistan, an additional
B.A. degree in philosophy, politics and economics from the University of Oxford where he was a Rhodes Scholar, and a M.B.A. degree from Harvard Business School.
Daniella Ballou-Aares has served as a member of our board since March 2018. Ms. Ballou-Aares is chief executive officer of the
Leadership Now Project, a membership organization of business and thought leaders committed to renewing democracy. Daniella spent more than a decade as a partner at Dalberg Advisors, a global strategic advisory firm with that combines the
best of private sector strategy skills, rigorous analytical capabilities and networks in emerging and frontier markets to fuel inclusive growth. She joined Dalberg’s founding team in 2004 served in a variety of capacities within the firm,
including as the first Regional Director for the Americas. Ms. Ballou-Aares returned to Dalberg after serving in the Obama administration for five years as the senior advisor for development to the U.S. Secretary of State, leading efforts
to boost private investment in newly emerging markets. Before Dalberg, she was a management consultant at Bain & Company in the U.S., U.K. and South Africa. Ms. Ballou-Aares holds an M.B.A. from Harvard Business School, an M.P.A. from
Harvard’s Kennedy School of Government and a B.S. in operations research and industrial engineering from Cornell University.
John Jones has served as a member of our board since March 2018. Mr. Jones previously served Expert Global Solutions, Inc. as
chief client officer from 2015 until 2016 and chief operating officer from 2011 until 2015. Prior to joining Expert Global Solutions, Inc. in 2011, Mr. Jones served in various leadership roles at JPMorgan Chase & Co. for more than 25
years. He holds a B.S. degree in business management from the University of Phoenix.
Shuja Keen has served as a member of our board since March 2018. Mr. Keen joined TRGI in 2002 and currently serves as a managing
director. His primary responsibility is to help the firm drive value by improving the operational effectiveness of TRGI’s portfolio companies, and leading fundraising, growth, and liquidity initiatives. Mr. Keen graduated with a S.B.
degree from the Sloan School of Management at the Massachusetts Institute of Technology with concentrations in finance, information technology, and operations research and a minor in economics.
John Leone has served as a member of our board since March 2018 and is a member of the board of directors of TRG Pakistan Ltd. Mr.
Leone founded ForeVest Capital Partners in 2016 and currently serves as a Managing Partner. Prior to founding ForeVest Capital Partners, Mr. Leone served at PineBridge Investments and its predecessor, AIG Investments, from 2004 to
September 2016. Mr. Leone holds a J.D. from The George Washington University School of Law and a B.A. from Binghamton University.
Fiona Beck has served as a member of our board since July 2020. Ms. Beck has held senior executive and director positions in large
infrastructure companies focused on the telecommunications and technology sectors, including as the President and CEO of Southern Cross Cable Limited, a submarine fiberoptic cable company, for 13 years. Ms. Beck currently serves as a
director of Twilio IP Holding Ltd (a subsidiary of Twilio Inc., NYSE: TWLO), a cloud-based communications platform, a director of Ocean Wilsons Holding Ltd (LON: OCN) and a director of Atlas Arteria International Ltd (ASX:ALX). She also
serves as a director of the Bermuda Business Development Agency, focusing on the technology and financial technology sectors. Ms. Beck holds a Bachelor of Management (Hons.) degree in finance and accounting from University of Waikato, New
Zealand and is a chartered accountant.
Our executive officers are elected by, and serve at the discretion of, our board of directors. There are no familial relationships among our directors and executive officers.
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Compensation
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We paid our directors and executive officers an aggregate amount of approximately $5.7 million for services provided in fiscal year 2020, including approximately $2.6 million of salary, $0.2
million of share-based payments, $2.9 million of commissions and bonuses and $0.01 million of pension, retirement and similar benefit plans. For more information regarding a description of applicable stock-based and cash-based plans, see
Note 19 to our audited consolidated financial statements included at the end of this annual report.
The equity ownership of our executive officers and directors is described below under the heading “Item 7A. Major Shareholders.”
In addition, our board of directors adopted a new equity benefit plan as described under “IBEX Limited 2020 Long Term Incentive Plan” pursuant to which a total of 1,287,326.13 common shares
are authorized for issuance (as further described below). On August 7, 2020, under the 2020 LTIP Plan, we granted certain non-employee directors, officers and other employees options to purchase common shares based on a dollar value.
Options to purchase a total of 341,843 common shares at an exercise price of $19.00 per share were granted under the 2020 LTIP Plan, including option grants to Mohammed Khaishgi 50,068 shares, Shuja Keen 2,778 shares, John Jones 3,259
shares, Daniella Ballou-Aares 2,066 shares, Robert Dechant of 45,027 shares, Karl Gabel of 19,627 shares, Bruce Dawson of 8,114 shares, David Afdahl of 10,819 shares, Christy O’Connor of 9,025 shares, and Julie Casteel of 6,574 shares.
2017 IBEX Plan
On June 20, 2017, our board of directors and shareholders approved and adopted the 2017 IBEX Plan. From December 22, 2017 through and including December 31, 2017, we issued an aggregate of
1,778,569 new stock options under the 2017 IBEX Plan. On December 22, 2017, all of the legacy stock option plans that the Continuing Business Entities had maintained and the equity awards granted thereunder were cancelled. For more
information on the legacy stock option plans, refer to Note 19.1 to our audited consolidated financial statements included at the end of this annual report.
The following description summarizes the principal terms of the 2017 IBEX Plan.
Purpose
The purpose of the 2017 IBEX Plan was to enable us to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to our
employees, consultants and directors, and to promote the success of our business.
Types of Awards
The 2017 IBEX Plan provided for grants of stock options and restricted stock awards.
Eligibility
Selected employees, consultants or directors of our company or our affiliates were eligible to receive nonstatutory stock options and restricted stock awards under the 2017 IBEX Plan,
but only employees of our company were eligible to receive incentive stock options.
Administration
The 2017 IBEX Plan was administered by our board of directors, a committee (or subcommittee) appointed by our board of directors, or any combination, as determined by our board of
directors. Subject to the provisions of the 2017 IBEX Plan and, in the case of a committee (or subcommittee), the specific duties delegated by our board of directors to such committee (or subcommittee), the administrator had the authority
to, among other things, determine the per share fair market value of our common shares, select the individuals to whom awards may be granted; determine the number of shares covered by each award, approve the form(s) of agreement(s) and
other related documents used under the 2017 IBEX Plan, determine the terms and conditions of awards, amend outstanding awards, establish the terms of and implement an option exchange program, and construe and interpret the terms of the
2017 IBEX Plan and any agreements related to awards granted under the 2017 IBEX Plan. Our board of directors could also delegate authority to one of more of our officers to make awards under the 2017 IBEX Plan.
Available Shares
A maximum of 2,559,323 common shares was issuable under the 2017 IBEX Plan. This limit could be adjusted to reflect certain changes in our capitalization, such as share splits, reverse
share splits, share dividends, recapitalizations, rights offerings, reorganizations, mergers, consolidations, spin-offs, split-ups and similar transactions. If an award expired or became unexercisable for any reason without having been
exercised in full, or is surrendered pursuant to an option exchange program, the common shares subject to such award were available for further awards under the 2017 IBEX Plan. Common shares used to pay the exercise or purchase price of
an award or tax obligations were treated as not issued and would continue to be available under the 2017 IBEX Plan. Common shares issued under the 2017 IBEX Plan and later forfeited to us due to the failure to vest or repurchased by us at
the original purchase price paid to us for such common shares would again be available for future grant under the 2017 IBEX Plan.
Award Agreements
Awards granted under the 2017 IBEX Plan were evidenced by award agreements, which did not need to be identical and which could be modified to the extent necessary to comply with applicable
law in the relevant jurisdiction of the respective participant, that provided additional terms of the award, as determined by the administrator.
Stock Options
The 2017 IBEX Plan allowed the administrator to grant incentive stock options, as that term is defined in section 422 of the Internal Revenue Code, or non-statutory stock options. Only our
employees could receive incentive stock option awards. The term of each option could not exceed ten years, or five years in the case of an incentive stock option granted to a ten percent shareholder. No incentive stock option or
non-qualified stock option could have an exercise price less than the fair market value of a common share at the time of grant or, in the case of an incentive stock option granted to a ten percent shareholder, 110% of such share’s fair
market value. Options were exercisable at such time or times and subject to such terms and conditions as determined by the administrator at grant and the exercisability of such options could be accelerated by the administrator.
Restricted Stock
The 2017 IBEX Plan allowed the administrator to grant restricted stock awards. Once the restricted stock was purchased or received, the participant would have the rights equivalent to those
of a holder of our common shares, and would be a record holder when his or her purchase and the issuance of the common shares was entered upon the records of our duly authorized transfer agent. Unless otherwise determined by the
administrator, we would have a right to repurchase any grants of restricted stock upon a recipient’s voluntary or involuntary termination of employment for any reason at a price equal to the original purchase price of such restricted
stock.
Stockholder Rights
Except as otherwise provided in the applicable award agreement, and with respect to an award of restricted stock, a participant would have no rights as a shareholder with respect to common
shares covered by any award until the participant became the record holder of such common shares.
Amendment and Termination
Our board of directors could, at any time, could amend or terminate the 2017 IBEX Plan but no amendment or termination could be made that would materially and adversely affect the rights of
any participant under any outstanding award, without his or her consent.
Transferability
Subject to certain limited exceptions, awards granted under the 2017 IBEX Plan could not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will
or by the laws of descent or distribution.
Effective Date; Term
The 2017 IBEX Plan became effective on June 20, 2017 and would have expired on June 20, 2027 unless terminated earlier by the board of directors.
On December 28, 2018, the 2017 IBEX Plan was terminated and all grants awarded thereunder were cancelled.
Restricted Share Plan
On December 21, 2018, our board of directors and shareholders approved and adopted the 2018 Restricted Share Plan (the “2018 RSA Plan”). As of June 30, 2020, awards covering an aggregate of
1,841,660 Class B common shares had been made, of which 1,176,370 common shares (after giving effect to the automatic conversion of the Class B common shares into common shares upon our initial public offering), or 63.9%, subject to
awards under the 2018 RSA Plan have vested.
The following description of the 2018 RSA Plan is qualified in its entirety by the full text of the 2018 RSA Plan, which has been filed with the SEC as an exhibit.
Purpose
The 2018 RSA Plan enabled us to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to our employees, consultants and
directors, and to promote the success of our business.
Types of Awards
The 2018 RSA Plan provides for awards of Class B common shares. Upon the consummation of our initial public offering, all Class B common shares automatically converted into common shares.
Eligibility
Selected employees, consultants or directors of our company or our affiliates were eligible to receive non-statutory restricted stock awards under the 2018 RSA Plan, but only employees of
our company were eligible to receive incentive stock awards.
Administration
The 2018 RSA Plan is administered by our board of directors, a committee (or subcommittee) appointed by our board of directors, or any combination, as determined by our board of directors.
Subject to the provisions of the 2018 RSA Plan and, in the case of a committee (or subcommittee), the specific duties delegated by our board of directors to such committee (or subcommittee), the administrator has the authority to, among
other things, determine the per share fair market value of our common shares, select the individuals to whom awards may be granted; determine the number of shares covered by each award, approve the form(s) of agreement(s) and other
related documents used under the 2018 RSA Plan, determine the terms and conditions of awards, amend outstanding awards, establish the terms of and implement an option exchange program, and construe and interpret the terms of the 2018 RSA
Plan and any agreements related to awards granted under the 2018 RSA Plan. Our board of directors may also delegate authority to one of more of our officers to make awards under the 2018 RSA Plan.
Available Shares
Subject to adjustment, a maximum of 2,559,323.13 common shares could be awarded under the 2018 RSA Plan (after giving effect to the automatic conversion of the Class B common shares into
common shares upon our initial public offering). Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares.
This limit may be adjusted to reflect certain changes in our capitalization, such as share splits, reverse share splits, share dividends, recapitalizations, rights offerings,
reorganizations, mergers, consolidations, spin-offs, split-ups and similar transactions.
If any award of Class B common shares under the 2018 RSA Plan (“Restricted Shares”) expires or is forfeited in whole or in part, the unused Class B Common Shares covered by such Restricted
Share award shall again be available for the grant under the 2020 LTIP. Additionally, any Class B Common Shares delivered to the Company by a Participant to either used to purchase additional Restricted Shares or to satisfy the applicable
tax withholding obligations with respect to Restricted Shares (including shares retained from the Restricted Share award creating the tax obligation) shall be added back to the number of shares available for the future grant under the
2020 LTIP.
Restricted Shares
The board of directors may grant awards entitling recipients to acquire Restricted Shares, subject to the right of the Company to repurchase all or part of such Restricted Shares at their
issue price or other stated or formula price (or to require forfeiture of such shares if issued at no cost) from the recipient in the event that conditions specified by the board of directors in the applicable Restricted Share award are
not satisfied prior to the end of the applicable restriction period or periods established by the Board for such Restricted Share award.
The board of directors shall determine the terms and conditions of a Restricted Share award, including the conditions for vesting and repurchase (or forfeiture) and the issue price, if any.
Stockholder Rights
Except as otherwise provided in the applicable award agreement, and with respect to an award of Restricted Shares, a participant will have no rights as a shareholder with respect to common
shares covered by any award until the participant becomes the record holder of such common shares.
Amendment and Termination
Our board of directors may, at any time, amend or terminate the 2018 RSA Plan but no amendment or termination may be made that would materially and adversely affect the rights of any
participant under any outstanding award, without his or her consent.
Transferability
Subject to certain limited exceptions, awards of Restricted Shares under the 2018 RSA Plan may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other
than by will or by the laws of descent or distribution.
Effective Date; Term
The 2018 RSA Plan became effective on December 21, 2018 and expires on December 31, 2028 unless terminated earlier by the board of directors. As of May 20, 2020, the 2020 LTIP was approved
and no further awards will be made under the 2018 RSA Plan.
Phantom Stock Options
Phantom Stock Plans
In June 2013, each of IBEX Philippines Inc., IBEX Global Solutions (Private) Limited, The Resource Group Senegal S.A., Virtual World (Private) Limited adopted phantom stock plans
(collectively, the “Legacy Phantom Stock Plans”), which provided for grants of “phantom stock options” to certain of their executive officers and employees. Each phantom stock option provided the participant with a contractual right to
receive upon vesting an amount equal to the difference between the fair market value of a share at the time of exercise and the exercise price of the option per share. In February 2018, all Legacy Phantom Stock Plans were terminated and
phantom stock options granted under such plans were cancelled.
In February 2018, each of IBEX Global Solutions (Private) Limited, DGS (Private) Limited, eTelequote (Private) Limited, IBEX Global Solutions (Philippines) Inc., IBEX Global ROHQ, IBEX
Global Solutions Senegal S.A., and Virtual World (Private) Limited, and in March 2018, each of IBEX Global Jamaica Limited, and IBEX Global Solutions Nicaragua SA adopted phantom stock plans (collectively, the “Phantom Stock Plans”, which
provide for grants of “phantom stock options” to certain of their executive officers and employees. Each phantom stock option provides the participant with a contractual right to receive an amount equal to the difference between the fair
market value of a vested common share of IBEX Limited at the time of exercise and the exercise price of the option per share. In the event that the payment due to a grantee who has exercised an option exceeds $10,000, the relevant company
may elect in its sole discretion to make payments in equal installments (without interest) over a period not exceeding three years, provided that each installment shall be no less than $10,000 (unless the residual amount is less than
$10,000). On February 23, 2018, we granted 105,546 phantom stock options under the Phantom Stock Plans. On March 1, 2018, we granted 77,129 phantom stock options under the Phantom Stock Plans.
On December 28, 2018, we terminated the Phantom Stock Plans for IBEX Global Solutions (Private) Limited, DGS (Private) Limited, eTelequote (Private) Limited, IBEX Global Solutions Senegal
S.A., Virtual World (Private) Limited, and IBEX Global Solutions Nicaragua SA. All phantom stock options under these specific Phantom Stock Plans were cancelled upon termination of the identified Phantom Stock Plans.
The Phantom Stock Plans for IBEX Global Solutions (Philippines) Inc., IBEX Global ROHQ, and IBEX Global Jamaica Limited remain in effect. As of June 30, 2019, an aggregate amount of 41,993
phantom stock options has vested and an aggregate amount of 54,575 phantom stock options is outstanding under those plans. As of June 30, 2020, an aggregate amount of 45,684 phantom stock options have vested and an aggregate amount of
54,575 phantom stock options are outstanding under those plans.
IBEX Limited 2020 Long Term Incentive Plan
On May 20, 2020 (“Effective Date”), our board of directors and shareholders approved and adopted the 2020 LTIP. As of June 30, 2020, awards covering an aggregate of 338,432 common shares
(after giving effect to the automatic conversion of the Class B common shares into common shares upon our initial public offering) in the form of Share Options had been made, of which 40,500 common shares (after giving effect to the
automatic conversion of the Class B common shares into common shares upon our initial public offering) in the form of Share Options had vested as of such date.
No Awards (as defined below) will be made under the IBEX Holdings Limited 2018 RSA Plan on or after August 6, 2020.
The following description of the 2020 LTIP is qualified in its entirety by the full text of the 2020 LTIP, which has been filed with the SEC as an exhibit.
Purpose
We believe that the 2020 LTIP will enable us to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to our employees,
consultants and directors, and to promote the success of our business.
The 2020 Long Term Incentive Plan is designed to:
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promote the long-term financial interests and growth of our Company and its subsidiaries by attracting and retaining directors and employees, which include management as
well as other personnel;
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motivate management by means of growth-related incentives to achieve long-range goals; and
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further the alignment of the interests of participants and those of our shareholders, through opportunities for increased stock or share-based ownership in our Company.
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Types of Awards
The 2020 LTIP provides for awards of Class B common shares. Upon the consummation of our initial public offering, all Class B common shares automatically converted into common shares.
Eligibility
All of our officers, non-employee directors, employees and consultants are eligible to participate in the 2020 Long Term Incentive Plan.
Participation by Non-Employee Directors
Although our non-employee directors, including our independent directors, are not involved in the day-to-day running of our operations, they play an invaluable role in furthering our
business interests by contributing their experience and expertise. In particular, a number of our independent directors have substantial experience and expertise in financial and technology sectors and play an important role in helping us
shape our business strategy. It is crucial for us to be able to attract, retain and incentivize such individuals.
It may not always be possible to quantify the services and contributions of our non-employee directors to our Company, and accordingly, it may not always be possible to compensate them fully
or appropriately by increasing their directors’ fees or other cash payments. To that end, participation by non-employee directors in the 2020 Long Term Incentive Plan will provide our Company with a further avenue via which to acknowledge
and reward their services and contributions to our Company. In addition, we believe that opportunities for increased shares or share-based ownership in our Company will further the alignment of the interests of our non-employee directors
with the interests of our shareholders.
Administration
The 2020 Long Term Incentive Plan will be administered by the “Administrator”, as defined below.
For the purposes of the 2020 Long Term Incentive Plan, “Administrator” means our Compensation Committee, or such other committee(s) of director(s) duly appointed by our Board or our
Compensation Committee to administer the 2020 Long Term Incentive Plan or delegated limited authority to perform administrative actions under the 2020 Long Term Incentive Plan, and having such powers as shall be specified by our Board or
our Compensation Committee, provided, however, that at any time our Board may serve as the Administrator in lieu of or in addition to our Compensation Committee or such other committee(s) of director(s) to whom administrative authority
has been delegated. As of May 20, 2020, the Administrator is the Compensation Committee.
The Administrator has the authority, in its sole and absolute discretion, to grant Awards under the 2020 Long Term Incentive Plan to eligible individuals, and to take all other actions
necessary or desirable to carry out the purpose and intent of the 2020 Long Term Incentive Plan. Further, the Administrator has the authority, in its sole and absolute discretion, subject to the terms and conditions of the 2020 Long Term
Incentive Plan, to, among other things:
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determine the eligible individuals to whom, and the time or times at which, Awards shall be granted;
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determine the type of Awards to be granted to any eligible individual;
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determine the number of shares to be covered by or used for reference purposes for each Award or the value to be transferred pursuant to any Award; and
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determine the terms, conditions and restrictions applicable to each Award and any shares acquired pursuant thereto, including, without limitation, (i) the purchase price of any shares, (ii) the method
of payment for shares purchased pursuant to any Award, (iii) the method for satisfying any tax withholding obligation arising in connection with any Award, including by the withholding or delivery of shares, (iv) the timing,
terms and conditions of the exercisability, vesting or payout of any Award or any shares acquired pursuant thereto, (v) the performance goals applicable to any Award and the extent to which such performance goals have been
attained, (vi) the time of the expiration of an Award, (vii) any such modification, amendment or substitution that results in repricing of the Award which may be made without prior stockholder approval, (viii) the effect of a
participant’s Termination of Service, as defined in the 2020 Long Term Incentive Plan, on any of the foregoing and (ix) all other terms, conditions and restrictions applicable to any Award or shares acquired pursuant thereto as
the Administrator considers to be appropriate and not inconsistent with the terms of the 2020 Long Term Incentive Plan.
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Available Shares
Subject to adjustment, a maximum 1,287,326.13 common shares (after giving effect to the automatic conversion of the Class B common shares into common shares upon our initial public offering)
may be awarded under the 2020 LTIP. Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares.
This limit may be adjusted to reflect certain changes in our capitalization, such as share splits, reverse share splits, share dividends, recapitalizations, rights offerings,
reorganizations, mergers, consolidations, spin-offs, split-ups and similar transactions.
Subject to adjustment as provided in the provision of the 2020 Long Term Incentive Plan pertaining to the occurrence of certain corporate transactions, the maximum number of shares that may
be issued pursuant to share options granted under the 2020 Long Term Incentive Plan that are intended to qualify as “incentive stock options” as that term is defined in Section 422 of the Internal Revenue Code (the “Code”) is 3,500,000.
If any award of Class B common shares under the 2020 LTIP (“Restricted Shares”) or 2018 RSA Plan expires or is forfeited in whole or in part, the unused Class B Common Shares covered by such
awards shall again be available for the grant under the 2020 LTIP. Additionally, any Class B Common Shares delivered to the Company by a Participant to purchase additional Restricted Shares or to satisfy the applicable tax withholding
obligations with respect to any Awards (including shares retained from the Award creating the tax obligation) shall be added back to the number of shares available for the future grant of Awards under the 2020 LTIP.
Maximum Entitlements Under the 2020 Long Term Incentive Plan
The Administrator may establish compensation for directors who are not employees of our Company or any of our Affiliates, as defined in the 2020 Long Term Incentive Plan, or the Non-Employee
Directors, from time to time, provided that the sum of any cash compensation and the grant date fair value of Awards granted under the 2020 Long Term Incentive Plan to a non-employee director as compensation for services as a non-employee
director during any calendar year may not exceed $250,000 for an annual grant, provided however that in a non-employee’s director first year of service, compensation for services may not exceed $500,000. The Administrator may make
exceptions to this limit for individual non-employee directors in extraordinary circumstances, as the Administrator may determine in its discretion, provided that the non-employee director receiving such additional compensation may not
participate in the decision to award such compensation or in other compensation decisions involving non-employee director.
Awards
Awards may be granted individually or in tandem with other types of Awards, concurrently with or with respect to outstanding Awards. All Awards are subject to the terms and conditions
provided in the Award Agreement, which shall be delivered to the Participant receiving such Award upon, or as promptly as is reasonably practicable following, the grant of such Award. Unless otherwise specified by the Administrator, in
its sole discretion, or otherwise provided in the Award Agreement, an Award shall not be effective unless the Award Agreement is signed or otherwise accepted by IBEX and the Participant receiving the Award (including by electronic
delivery and/or electronic signature). Participants are not required to pay for the application or acceptance of Awards.
Share Options. The board may grant awards entitling recipients to acquire share options (“Share Options”). A Share Option means a right to purchase a
specified number of Common Shares from IBEX at a specified price during a specified period of time. The exercise price per share subject to a Share Option granted under the 2020 Long Term Incentive Plan shall not be less than the fair
market value of one share on the date of grant of the Share Option, except as provided under applicable law or with respect to Share Options that are granted in substitution of similar types of awards of a company acquired by our Company
or with which our Company combines (whether in connection with a corporate transaction, such as a merger, combination, consolidation or acquisition of property or stock, or otherwise) to preserve the intrinsic value of such awards. The
Administrator may from time to time grant to eligible individuals Awards of Incentive Share Options or Nonqualified Options; provided, however, that Awards of Incentive Share Options shall be
limited to employees of IBEX or of any current or hereafter existing “parent corporation” or “subsidiary corporation,” as defined in Sections 424(e) and 424(f) of the Code, respectively, of IBEX, and any other eligible individuals who are
eligible to receive Incentive Share Options under the provisions of Section 422 of the Code. No Share Option shall be an Incentive Share Option unless so designated by the Administrator at the time of grant or in the applicable Award
Agreement. Share Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Administrator; provided, however, that Awards of Share
Options may not have a term in excess of ten years’ duration unless required otherwise by applicable law. Except as provided in the applicable award agreement or otherwise determined by the Administrator, to the extent Share Options are
not vested and exercisable, a participant’s Share Options shall be forfeited upon his Termination of Service.
Share Appreciation Rights. The board may also grant awards of share appreciation rights. A share appreciation right entitles the Participant to
receive, subject to the provisions of the Plan and the applicable Award Agreement, a payment having an aggregate value equal to the product of (i) the excess of (A) the fair market value on the exercise date of one share of Common Share
over (B) the base price per share specified in the applicable Award Agreement, times (ii) the number of shares specified by the share appreciation right, or portion thereof, which is exercised. The base price per share specified in the
applicable Award Agreement shall not be less than the lower of the fair market value on the date of grant or the exercise price of any tandem share option to which the share appreciation right is related, or with respect to share
appreciation rights that are granted in substitution of similar types of awards of a company acquired by the Company or a Subsidiary or with which the Company or a Subsidiary combines (whether in connection with a corporate transaction,
such as a merger, combination, consolidation or acquisition of property or share, or otherwise) such base price as is necessary to preserve the intrinsic value of such awards.
Share appreciation rights shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Administrator; provided, however, that share
appreciation rights granted under the 2020 Long Term Incentive Plan may not have a term in excess of ten years unless otherwise required by applicable law.
Except as provided in the applicable award agreement or otherwise determined by the Administrator, to the extent share appreciation rights are not vested and exercisable, a participant’s
share appreciation rights shall be forfeited upon his Termination of Service.
Share Awards. The Administrator may from time to time grant to Eligible Individuals Awards of unrestricted Common Share or Restricted Share
(collectively, “Share Awards”) on such terms and conditions, such as performance based on certain performance criteria, and for such consideration, including no consideration or such minimum
consideration as the Administrator shall determine, subject to the limitations set forth in the 2020 LTIP. Share Awards shall be evidenced in such manner as the Administrator may deem appropriate, including via book-entry registration.
The board shall determine the terms and conditions of a Share Award, including the conditions for vesting and repurchase (or forfeiture) and the issue price, if any.
Share Units
The Administrator may, from time to time, grant to eligible individuals Awards of unrestricted share units or Restricted Share Units. For the purposes of the 2020 Long Term Incentive Plan,
“Restricted Share Unit” means a right granted to a participant to receive shares or cash at the end of a specified deferral period, which right may be conditioned on the satisfaction of certain requirements, including the satisfaction of
certain performance goals.
Restricted Share Units shall be subject to such vesting, risk of forfeiture and/or payment provisions as the Administrator may impose at the date of grant. The Restriction Period to which
such vesting and/or risk of forfeiture applies may lapse under such circumstances, including without limitation upon the attainment of performance goals, in such installments, or otherwise, as the Administrator may determine.
Until shares are issued to the participant in settlement of share units, the participant shall not have any rights of a shareholder with respect to the share units or the shares issuable
thereunder. The Administrator may grant the participant the right to dividend equivalents on share units, on a current, reinvested and/or restricted basis, subject to such terms as the Administrator may determine; provided, however, that
dividend equivalents declared payable on share units granted as a Performance Award shall rather than be paid on a current basis, be accrued and made subject to forfeiture at least until achievement of the applicable performance goal
relating to such share units.
Performance Shares and Performance Units
An award of Performance Shares, as that term is used in the 2020 LTIP, refers to shares of our common stock or stock units that are expressed in terms of our common stock, the issuance,
vesting, lapse of restrictions or payment of which is contingent on performance as measured against predetermined objectives over a specified performance period. An award of Performance Units, as that term is used in the 2020 LTIP, refers
to dollar-denominated units valued by reference to designated criteria established by the administrator, other than our common stock, whose issuance, vesting, lapse of restrictions or payment is contingent on performance as measured
against predetermined objectives over a specified performance period. The applicable award agreement will specify whether Performance Shares and Performance Units will be settled or paid in cash or shares of our common stock or a
combination of both, or will reserve to the administrator or the participant the right to make that determination prior to or at the payment or settlement date.
The Administrator will, prior to or at the time of grant, condition the grant, vesting or payment of, or lapse of restrictions on, an award of Performance Shares or Performance Units upon
(A) the attainment of performance goals during a performance period or (B) the attainment of performance goals and the continued service of the participant. The length of the performance period, the performance goals to be achieved during
the performance period, and the measure of whether and to what degree such performance goals have been attained will be conclusively determined by the Administrator in the exercise of its absolute discretion. Performance goals may include
minimum, maximum and target levels of performance, with the size of the award or payout of Performance Shares or Performance Units or the vesting or lapse of restrictions with respect thereto based on the level attained. An award of
Performance Shares or Performance Units will be settled as and when the award vests or at a later time specified in the award agreement or in accordance with an election of the participant, if the Administrator so permits, that meets the
requirements of Section 409A or Section 457A of the Code.
Performance goals applicable to performance-based awards may be awarded based on performance metrics to be attained within a predetermined performance period as they may apply to an
individual, one or more business units, divisions, or affiliates, or on a company-wide basis, and in absolute terms, relative to a base period, or relative to the performance of one or more comparable companies, peer groups, or an index
covering multiple companies.
The Administrator may, in its discretion, adjust the performance goals applicable to any awards to reflect any unusual or non-recurring events and other extraordinary items, impact of
charges for restructurings, discontinued operations and the cumulative effects of accounting or tax changes.
Other Share-Based Awards
The Administrator may, from time to time, grant to eligible individuals Awards in the form of Other Share-Based Awards. For the purposes of the 2020 Long Term Incentive Plan, “Other
Share-Based Award” means an Award of shares or any other Award that is valued in whole or in part by reference to, or that is otherwise based upon, shares, including without limitation dividend equivalents and convertible debentures.
Adjustment Events
In the event of a merger, amalgamation, consolidation, rights offering, statutory share exchange or similar event affecting our Company (each, a “Corporate Event”), or a share dividend,
share split, reverse share split, separation, spinoff, reorganization, extraordinary dividend of cash or other property, share combination or subdivision or recapitalization or similar event affecting the capital structure of our Company
(each, a “Share Change”), that occurs at any time after the Effective Date (including any such Corporate Event or Share Change that occurs after such adoption and coincident with or prior to the Effective Date), the Administrator shall
make equitable and appropriate substitutions or proportionate adjustments to (a) the aggregate number and kind of shares or other securities on which Awards under the 2020 Long Term Incentive Plan may be granted to eligible individuals,
(b) the maximum number of shares or other securities with respect to which Awards may be granted during any one calendar year to any individual, (c) the maximum number of shares or other securities that may be issued with respect to
incentive stock options granted under the 2020 Long Term Incentive Plan, (d) the number of shares or other securities covered by each outstanding Award and the exercise price, base price or other price per share, if any, and other
relevant terms of each outstanding Award and (e) all other numerical limitations relating to Awards, whether contained in the 2020 Long Term Incentive Plan or in award agreements; provided, however, that any fractional shares resulting
from any such adjustment shall be eliminated and that no such adjustment shall be made if as a result, the participant receives a benefit that a shareholder does not receive and any adjustment (except in relation to a capitalization
issue) must be confirmed in writing by the auditors of our Company (acting as experts and not as arbitrators) to be, in their opinion, fair and reasonable.
In the case of Corporate Events, the Administrator may make such other adjustments to outstanding Awards as it determines to be appropriate and desirable, which adjustments may include,
without limitation, (a) the cancellation of outstanding Awards in exchange for payments of cash, securities or other property or a combination thereof having an aggregate value equal to the value of such Awards, as determined by the
Administrator in its sole discretion (it being understood that in the case of a Corporate Event with respect to which shareholders receive consideration other than publicly traded equity securities of the ultimate surviving entity, any
such determination by the Administrator that the value of a share option or share appreciation right shall for this purpose be deemed to equal the excess, if any, of the value of the consideration being paid for each share pursuant to
such Corporate Event over the exercise price or base price of such share option or share appreciation right shall conclusively be deemed valid and that any share option or share appreciation right may be cancelled for no consideration
upon a Corporate Event if its exercise price or base price equals or exceeds the value of the consideration being paid for each share pursuant to such Corporate Event), (b) the substitution of securities or other property (including,
without limitation, cash or other securities of our Company and securities of entities other than our Company) for the shares subject to outstanding Awards and (c) the substitution of equivalent awards, as determined in the sole
discretion of the Administrator, of the surviving or successor entity or a parent thereof.
Change in Control
In the event of a change in control, as defined in the 2020 LTIP Plan, of our Company, outstanding awards will terminate upon the effective time of the change in control unless provision is
made for the continuation, assumption or substitution of awards by the surviving or successor entity or its parent. Unless an award agreement says otherwise, the following will occur with respect to awards that terminate in connection
with a change in control of our Company:
|
•
|
share options and share appreciation rights will become fully exercisable and holders of these awards will be permitted immediately before the change in control to exercise
them;
|
|
•
|
Restricted Shares and share units with time-based vesting (i.e., not subject to achievement of performance goals) will become fully vested immediately before the change in
control, and share units will be settled as promptly as is practicable in accordance with applicable law; and
|
|
•
|
Restricted Shares and share units that vest based on the achievement of performance goals will vest as if the performance goal for the unexpired performance period had been
achieved at the target level; and the performance share units will be settled as promptly as is practicable in accordance with applicable law.
|
Shareholder Rights
Except as otherwise provided in the applicable award agreement, and with respect to an award of Restricted Shares, a participant will have no rights as a shareholder with respect to common
shares covered by any award until the participant becomes the record holder of such common shares.
Amendment and Termination of 2020 LTIP
Our board of directors may, at any time, amend or terminate the 2020 LTIP but no amendment or termination may be made that would materially and adversely affect the rights of any participant
under any outstanding award, without his or her consent, except such an amendment made to comply with applicable law or rule of any securities exchange or market on which our shares are listed or admitted for trading or to prevent adverse
tax or accounting consequences to our company or the participant. If required to comply with Bermuda law and any other applicable laws or stock exchange rules or the rules of any automated quotation systems (other than any requirement
which may be disapplied by the Company following any available home country exemption), the Company shall obtain shareholder approval of any 2020 LTIP Plan amendment in such a manner and to such a degree as required.
Amendment of Awards
The Administrator may unilaterally amend the terms of any Award theretofore granted, but no such amendment shall materially impair the rights of any participant with respect to an Award
without the participant’s consent,, except such an amendment made to cause the 2020 Long Term Incentive Plan or Award to comply with applicable law, applicable rule of any securities exchange on which our shares of common stock are listed
or admitted for trading, or to prevent adverse tax or accounting consequences for the participant or our company or any of our Affiliates. For purposes of the foregoing sentence, an amendment to an Award that results in a change in the
tax consequences of the Award to the participant shall not be considered to be a material impairment of the rights of the participant and shall not require the participant’s consent.
Transferability
Subject to certain limited exceptions, Awards under the 2020 LTIP may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws
of descent or distribution.
Effective Date; Term
The 2020 Long Term Incentive Plan will remain in effect, subject to the right of our Board or our Compensation Committee to amend or terminate the 2020 Long Term Incentive Plan at any time,
until the earlier of (a) the earliest date as of which all Awards granted under the 2020 Long Term Incentive Plan have been satisfied in full or terminated and no shares approved for issuance under the 2020 Long Term Incentive Plan remain
available to be granted under new Awards, or (b) May 20, 2030. No Awards will be granted under the 2020 Long Term Incentive Plan after such termination date. Subject to other applicable provisions of the 2020 Long Term Incentive Plan, all
Awards made under the 2020 Long Term Incentive Plan on or before May 20, 2030, or such earlier termination of the 2020 Long Term Incentive Plan, shall remain in effect until such Awards have been satisfied or terminated in accordance with
the 2020 Long Term Incentive Plan and the terms of such Awards.
| C. |
Board Practices
|
Board Composition and Election of Directors
Board Composition
Our board of directors currently consists of six members. Our bye-laws provide that our board of directors shall consist of up to ten directors, unless otherwise determined by us in general
meeting. Our directors generally hold office for such terms as our shareholders may determine or, in the absence of such determination, until the next annual general meeting or until their successors are elected or appointed or their
office is otherwise vacated.
Our directors currently serve on the board of directors pursuant to the voting provisions of our bye-laws, under which certain directors may be nominated by TRGI.
For additional information regarding our board of directors, see “Description of Share Capital—Election and Removal of Directors.”
Director Independence
Our board of directors has undertaken a review of the independence of the directors and considered whether any director has a material relationship with us that could compromise his or her
ability to exercise independent judgment in carrying out his or her responsibilities. Based upon information requested from and provided by each director concerning such director’s background, employment and affiliations, including family
relationships, our board of directors determined that Ms. Ballou-Aares and Beck and Messrs. Jones and Leone, representing four of our six directors, are “independent directors” as defined under the listing standards of the Nasdaq Stock
Market. In making these determinations, our board of directors considered the current and prior relationships that each non-employee director has with our company and all other facts and circumstances that our board of directors deemed
relevant in determining their independence, including the beneficial ownership of our share capital by each non-employee director and the transactions involving them described in “Item 7B. Related Party Transactions.”
We are a “controlled company” under the rules of Nasdaq because more than 50% of the voting power of our shares are held by TRGI. See “Item 7A. Major Shareholders.” We intend to rely upon
the “controlled company” exception relating to the board of directors and committee independence requirements under the Nasdaq listing rules. Pursuant to this exception, we will be exempt from the rules that would otherwise require that
our board of directors consist of a majority of independent directors and that our compensation committee and nominating and governance committee be composed entirely of independent directors. The “controlled company” exception does not
modify the independence requirements for the audit committee, and we intend to comply with the requirements of the Exchange Act and the rules of Nasdaq, which require that our audit committee have a majority of independent directors, and
exclusively independent directors within one year following the effective date of our registration statement.
Board Committees
We have an audit committee, a compensation committee and a nominating and corporate governance committee. We have adopted a charter for each of these committees.
Audit Committee
Our audit committee consists of Ms. Ballou-Aares and Mr. Leone. Mr. Leone is the chair of the audit committee. Each member satisfies the independence requirements of the Nasdaq Stock Market
listing standards, and Mr. Leone qualifies as an “audit committee financial expert,” as defined in Item 16A of Form 20-F and as determined by our board of directors. The audit committee oversees our accounting and financial reporting
processes and the audits of our audited consolidated financial statements. The audit committee is responsible for, among other things:
| • |
making recommendations to our board regarding the appointment by the shareholders at the general meeting of shareholders of our independent auditors;
|
| • |
overseeing the work of the independent auditors, including resolving disagreements between management and the independent auditors relating to financial reporting;
|
| • |
pre-approving all audit and non-audit services permitted to be performed by the independent auditors;
|
| • |
reviewing the independence and quality control procedures of the independent auditors;
|
| • |
discussing material off-balance sheet transactions, arrangements and obligations with management and the independent auditors;
|
| • |
reviewing and approving all proposed related-party transactions;
|
| • |
discussing the annual audited consolidated and statutory financial statements with management;
|
| • |
annually reviewing and reassessing the adequacy of our audit committee charter;
|
| • |
meeting separately with the independent auditors to discuss critical accounting policies, recommendations on internal controls, the auditor’s engagement letter and independence letter and other material
written communications between the independent auditors and the management; and
|
| • |
attending to such other matters as are specifically delegated to our audit committee by our board from time to time.
|
Compensation Committee
Our compensation committee consists of Messrs. Khaishgi, Jones and Keen. Mr. Khaishgi is the chair of the compensation committee. The compensation committee assists the board in reviewing
and approving or recommending our compensation structure, including all forms of compensation relating to our directors and management. Members of our management may not be present at any committee meeting while the compensation of our
chief executive officer is deliberated. The compensation committee is responsible for, among other things:
| • |
reviewing and approving the compensation, including equity compensation, change-of-control benefits and severance arrangements, of our chief executive officer, chief financial officer and such other
members of our management as it deems appropriate;
|
| • |
overseeing the evaluation of our management;
|
| • |
reviewing periodically and making recommendations to our board with respect to any incentive compensation and equity plans, programs or similar arrangements; and
|
| • |
attending to such other matters as are specifically delegated to our compensation committee by our board from time to time.
|
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee consists of Messrs. Keen and Khaishgi. Mr. Khaishgi is the chair of the nominating and corporate governance committee. The nominating and
corporate governance committee assists the board in selecting individuals qualified to become our directors and in determining the composition of the board and its committees. The nominating and corporate governance committee is
responsible for, among other things:
| • |
recommending to the board of directors persons to be nominated for election or re-election to the board at any meeting of the shareholders;
|
| • |
overseeing the board of directors’ annual review of its own performance and the performance of its committees; and
|
| • |
considering, preparing and recommending to the board a set of corporate governance guidelines.
|
Other Corporate Governance Matters
The Sarbanes-Oxley Act, as well as related rules subsequently implemented by the SEC, requires foreign private issuers, including our company, to comply with various corporate governance
practices. In addition, rules provide that foreign private issuers may follow home country practice in lieu of corporate governance standards, subject to certain exceptions and except to the extent that such exemptions would be contrary
to U.S. federal securities laws.
We intend to take all actions necessary for us to maintain compliance as a foreign private issuer under the applicable corporate governance requirements of the Sarbanes-Oxley Act, the rules
adopted by the SEC and the Nasdaq listing standards.
Because we are a foreign private issuer, our directors and senior management are not subject to short-swing profit and insider trading reporting obligations under section 16 of the Exchange
Act. They will, however, be subject to the obligations to report changes in share ownership under section 13 of the Exchange Act and related SEC rules.
As a foreign private issuer, we are also exempt from certain corporate governance standards applicable to U.S. issuers. For example, Section 5605(b)(1) of the Nasdaq Listing Rules requires
listed companies to have, among other things, a majority of their board members be independent, and Section 5605(d) and 5605I require listed companies to have independent director oversight of executive compensation, nomination of
directors and corporate governance matters. In addition, we are not required to maintain a minimum of three members on our audit committee or to affirmatively determine that all members of our audit committee are “independent” using more
stringent criteria than those applicable to us as a foreign private issuer. As a foreign private issuer, however, we are permitted to follow Bermuda practice in lieu of the above requirements, under which there is no requirement that a
majority of our directors be independent.
We have opted out of shareholder approval requirements for the issuance of securities in connection with certain events such as the acquisition of stock or assets of another company, the
establishment of or amendments to equity-based compensation plans for employees, a change of control of us and certain private placements. To this extent, our practice varies from the requirements of Nasdaq Listing Rule 5635, which
generally requires an issuer to obtain shareholder approval for the issuance of securities in connection with such events.
Code of Business Conduct and Ethics
We have a code of business conduct and ethics applicable to our principal executive, financial and accounting officers and all persons performing similar functions. A copy of this code will be available on our website at www.ibex.co.
We expect that any amendments to the code, or any waivers of its requirements, will be disclosed on our website.
Risk Oversight
Our board of directors is currently responsible for overseeing our risk management process. The board of directors focuses on our general risk management strategy and the most significant
risks facing us, and ensures that appropriate risk mitigation strategies are implemented by management. The board of directors is also apprised of particular risk management matters in connection with its general oversight and approval of
corporate matters and significant transactions.
Our board of directors delegated to the audit committee oversight of our risk management process. Our other board committees will also consider and address risk as they perform their
respective committee responsibilities. All committees will report to the full board of directors as appropriate, including when a matter rises to the level of a material or enterprise level risk.
Our management is responsible for day-to-day risk management. This oversight includes identifying, evaluating, and addressing potential risks that may exist at the enterprise, strategic,
financial, operational, compliance and reporting levels.
| D. |
Employees
|
Our employees are our most valuable asset. Our success depends on our ability to hire, train and retain sufficient numbers of agents and other employees in a timely fashion at our facilities
to support our operations. Key enablers to meeting that challenge are our distinct culture and initiatives focused on employee recruitment, training, engagement and retention. These enable us to go into markets where we operate and create
a strong brand that helps us attract and retain talented employee and keep them highly engaged in delivering superior results and experiences for our clients.
As of June 30, 2020, we had 22,976 employees worldwide. The following table sets forth our employees by functional area:
|
Function
|
Number of Employees
|
Percent of Total
|
||||||
|
Production agents
|
18,456
|
80.3
|
%
|
|||||
|
Production support
|
2,805
|
12.2
|
%
|
|||||
|
Software engineers
|
287
|
1.2
|
%
|
|||||
|
Technology, telephony and network infrastructure
|
307
|
1.3
|
%
|
|||||
|
Data scientists and engineers
|
107
|
0.5
|
%
|
|||||
|
Sales and marketing
|
177
|
0.8
|
%
|
|||||
|
Corporate (management, administration, finance, legal, human resources
|
837
|
3.6
|
%
|
|||||
|
Total
|
22,976
|
100.0
|
%
|
|||||
None of our employees belong to a labor union and we have never suffered a material interruption of business as a result of a labor dispute. We consider our relations with our employees
worldwide to be good.
Culture
We believe that we have established a strong workplace culture which is key to our ability to attract and retain our talented workforce around the globe. Our culture is built on four core
values: respect, integrity, transparency and excellence. We strive to maintain a culture in which our leaders are coaches and mentors and our employees have voice and a sense of purpose and feel valued and respected. Furthermore, we
believe we have established a distinctive corporate culture characterized by innovation, speed and organizational nimbleness. In tandem with our strong workplace culture, our corporate culture has been instrumental to our growth and our
ability to deliver high-quality solutions to clients around the globe. We encourage a strong team orientation, which allows our talented workforce of over 22,500 employees to design and deliver innovative solutions to our clients around
the globe to optimize their customer lifecycle experience.
Recruitment
To ensure we can attract qualified employees, we strive to offer a competitive benefits package, a strong workplace culture and working environment and most importantly, competitive
compensation that either meets or exceeds marketplace standards. We deploy numerous tools that are effective in attracting employees. This includes working with local government workforce agencies in all geographies where we have a
presence; doing this ensures we have a presence as a local employer in every market and ensures we are included in their career fairs and are recommended consistently. Additionally, we have a strong employee referral program, which
encourages our current employees to recommend us to their family and friends. We have found this to be the greatest source of qualified individuals.
Training and Coaching
Our customer-facing agents typically go through one day of orientation from one to seven weeks of foundation skills. This includes customer specific training such as customer service
training, technical or sales training. Once agents have completed product specific training, which can last up to 240 hours depending on the client and the application, they are put into an on-the-job experience (lasting from 40 to 80
hours), during which the agents take live calls and receive hands-on training, coaching and feedback. They also experience quality assurance (QA) monitoring and reinforcement. Once agents have been trained and are on the production floor,
they receive consistent coaching and guidance. The coach plays the role of facilitator to fully empower the agents. Our coaching module equips the team managers with the necessary knowledge, skills and attitude required to be successful
mentors. Team managers are then able to engage effectively with mentees to address any non-performance issues and ensure our employees feel valued and recognized.
Employee Work Environment
Our employee work environment is anchored by our distinct culture. In addition, we provide attractive, functional physical spaces. Our workspaces are bright and modern with several common
areas for rest and recreation. Our centers reflect our culture’s values with open areas for coaching and celebrating success. Our workstations are ergonomically designed to provide maximum comfort to our employees. We consider our onsite
dining options, nurse’s stations, day-care and transportation services to be industry-leading. Furthermore, our technology is designed to enable the most efficient and productive work environment for our employees. Our intranet provides
access to pertinent and valuable information regarding schedules, job opportunities and important company announcements. Our technological enhancements allow employees to view information regarding their individual and team results.
Finally, our mobile apps and online systems allow the agents to manage their careers with us.
Retention
Our distinct culture, employee engagement, recruiting and training are all designed to ensure we retain our employees. As important as it is to work hard every day, we consider it as
important to ensure we have time for rewarding exceptional performance, fun events, volunteering in the community and celebrating accomplishments together. In order to engender our employees’ sense that they are an integral part and
valued member of our company, we strive to recognize the important times in our employees’ work life, including birthdays, birth of child and promotions. An example of our differentiated Employee Engagement program is our annual Very
Important Performer event where we host the top 5% of our workforce in each of the markets in which we operate at a multi-day offsite event at a five-star resort where we celebrate their success. Our senior leadership participates in this
important event, creating a bond between our leadership team and thousands of agents. This is one of our key programs to drive our industry-best retention rates and employee loyalty.
| E. |
Share ownership
|
The total number of shares of the company beneficially owned by our directors and executive officers as of September 30, 2020 was 1,493,861 which represents 8.1% of the total shares of the
company. See table in “Item 7A. Major Shareholders.”
| A. |
Major Shareholders
|
The following table sets forth information with respect to the beneficial ownership of our common shares as of September 30, 2020 by:
| • |
each of our directors;
|
| • |
each of our executive officers;
|
| • |
all of our directors and executive officers as a group; and
|
| • |
each person, or group of affiliated persons, who is known by us to beneficially own more than 5% of our common shares, and who are referred to as our major shareholders.
|
As of September 30, 2020, we had 18,388,167 issued and outstanding common shares, which includes 466,565 unvested restricted common shares. Beneficial ownership for the purposes of the following table is
determined in accordance with the rules and regulations of the SEC. These rules generally provide that a person is the beneficial owner of securities if such person has or shares the power to vote or direct the voting thereof, or to
dispose or direct the disposition thereof, to receive the economic benefit of ownership of the securities, or has the right to acquire such powers within 60 days. Common shares subject to options, restricted stock units, warrants or
other convertible or exercisable securities that are currently convertible or exercisable or convertible or exercisable within 60 days of September 30, 2020 are deemed to be outstanding and beneficially owned by the person holding such
securities. Common shares issuable pursuant to share options or warrants are deemed outstanding for computing the percentage ownership of the person holding such options or warrants but are not outstanding for computing the percentage
of any other person. To our knowledge, except as indicated in the footnotes to this table and pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all of
our common shares. As of September 30, 2020, we had 105 holders of record in the United States with approximately 36.2% of our issued and outstanding common shares.
|
Number
|
Percent
|
|||||||
|
Principal Shareholder
|
||||||||
|
The Resource Group International Limited (1)
|
11,416,683
|
61.6
|
%
|
|||||
|
Executive Officers and Directors
|
||||||||
|
Mohammed Khaishgi(2)
|
342,012
|
1.8
|
%
|
|||||
|
Karl Gabel(3)
|
137,217
|
*
|
||||||
|
Christy O’Connor(4)
|
56,647
|
*
|
||||||
|
Robert Dechant(5)
|
274,249
|
1.5
|
%
|
|||||
|
Jeffrey Cox(6)
|
455,919
|
2.5
|
%
|
|||||
|
Jason Tryfon(7)
|
28,225
|
*
|
||||||
|
Bruce Dawson(8)
|
48,761
|
*
|
||||||
|
David Afdahl(9)
|
62,242
|
*
|
||||||
|
Julie Casteel(10)
|
38,241
|
*
|
||||||
|
Shuja Keen(11)
|
18,977
|
*
|
||||||
|
Daniella Ballou-Aares(12)
|
14,113
|
*
|
||||||
|
John Jones(13)
|
16,634 |
*
|
||||||
|
Fiona Beck(14)
|
-
|
*
|
||||||
|
All executive officers and directors as a group (thirteen persons)(15)
|
1,493,237
|
8.1
|
%
|
|||||
|
* represents beneficial ownership of less than one percent (1%) of outstanding common shares.
|
||||||||
Except as otherwise set forth below, the address of the beneficial owner is c/o IBEX Limited, 1700 Pennsylvania Avenue NW, Suite 560, Washington, DC 20006, USA.
| (1) |
TRGI is controlled by TRGP. As of June 30, 2020, TRGP beneficially owned 46% of TRGI’s outstanding voting securities (45% if all outstanding non-voting common shares are converted into voting common
shares). The address for TRGI is Crawford House, 50 Cedar Avenue, Hamilton HM11, Bermuda. The address for TRGP is Centre Point Building, Level 18th, off Saheed-e-Millat Expressway, Karachi, Pakistan.
|
| (2) |
Includes (a) 206,275 common shares, (b) 80,540 unvested restricted common shares, which are scheduled to continue to vest in equal monthly increments of 4,737 shares on the first of each month, (c)
32,814 unvested restricted common shares under a restricted stock award agreement, which are subject to Company ownership- and share value-based vesting conditions (the “trigger”), and upon satisfaction of these conditions, 18,230
shares plus an additional amount based on the number of months between December 28, 2018 and the occurrence of the trigger initially vest and thereafter, vest in monthly increments of 1,823 shares commencing on the first of each
month following such initial vesting, and (d) 27,120 common shares underlying vested stock options.
|
| (3) |
Includes (a) 108,250 common shares, (b) 7,138 unvested restricted common shares, which are scheduled to continue to vest in equal monthly increments of 899 shares on the first of each month, (c) 8,052
unvested restricted common shares, which are scheduled to continue to vest in equal monthly increments of 893 shares on the first of each month, and (d) 13,777 common shares underlying vested stock options.
|
| (4) |
Includes (a) 30,783 common shares, (b) 18,477 unvested restricted common shares, which are scheduled to continue to vest in equal monthly increments of 1,026 shares on the first of each month, and (c)
7,387 common shares underlying vested stock options.
|
| (5) |
Includes (a) 162,661 common shares, (b) 31,810 unvested restricted common shares, which are scheduled to continue to vest in equal monthly increments of 3,176 shares on the first of each month, (c)
38,720 unvested restricted common shares which are subject to time- and performance-based vesting conditions, and upon satisfaction of these conditions, 5,598 shares initially vest and thereafter, vest in monthly increments of 466
shares commencing on the first of each month following such initial vesting, and (d) 41,058 common shares underlying vested stock options.
|
| (6) |
The balance includes (a) 418,698 common shares, (b) 21,665 unvested restricted common shares, which are scheduled to continue to vest in equal monthly increments of 1,353 shares on the first of each
month, (c) 4,888 unvested restricted common shares which are subject to time- and performance-based vesting conditions, and upon satisfaction of these conditions, 5,823 shares initially vest and thereafter, vest in monthly
increments of 485 shares commencing on the first of each month following such initial vesting, and (d) 10,668 common shares underlying vested stock options.
|
| (7) |
Includes (a) 22,145 common shares, (b) 3,842 unvested restricted common shares, which are scheduled to continue to vest in equal monthly increments of 384 shares on the first of each month, and (c) 2,238
common shares underlying vested stock options.
|
| (8) |
Includes (a) 33,347 common shares, (b) 7,687 unvested restricted common shares, which are scheduled to continue to vest in equal monthly increments of 765 shares on the first of each month, and (c) 7,727
common shares underlying vested stock options.
|
| (9) |
Includes (a) 26,343 common shares, (b) 24,204 unvested restricted common shares, which are scheduled to continue to vest in equal monthly increments of 1,052 shares on the first of each month, and (c)
11,695 common shares underlying vested stock options.
|
| (10) |
Includes (a) 19,590 common shares, (b) 11,758 unvested restricted common shares, which are scheduled to continue to vest in equal monthly increments of 653 shares on the first of each month, and (c)
6,893 common shares underlying vested stock options.
|
| (11) |
Includes (a) 17,472 common shares and (b) 1,505 common shares underlying vested stock options.
|
| (12) |
Includes (a) 12,994 common shares and (b) 1,119 common shares underlying vested stock options.
|
| (13) |
Includes (a) 12,994 common shares and (b) 3,640 common shares underlying vested stock options.
|
| (14) |
Fiona Beck was appointed as a director on our board on July 23, 2020.
|
| (15) |
Includes (a) 1,079,604 common shares, (b) 278,806 unvested restricted common shares, and (c) 135,451 common shares underlying vested stock options.
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| B. |
Related-Party Transactions
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For more information on our related party transactions, refer to Note 23 to our audited consolidated financial statements included at the end of this annual report.
Loans to Directors and Executive Officers for Purchase of Restricted Shares
In December 2018, we granted awards of an aggregate of 2,373,374 Class B common shares under the 2018 RSA Plan, of which 1,284,874 Class B common shares were pursuant to awards made to our
directors and executive officers. Under the terms of their awards, our directors and executive officers were required to purchase the Class B common shares covered by those awards. In satisfaction of the purchase price obligation, each of
our directors and executive officers delivered to us a promissory note in the amount of the aggregate purchase price for the Class B common shares covered by that individual’s award. Under each promissory note, 50% of the principal amount
owed is recourse to the borrower and 50% is non-recourse; the portion of the principal that is non-recourse is secured by a pledge over the Class B common shares awarded to the borrower. On May 20, 2020 the Compensation Committee and the
Board of Directors approved a distribution under the Management Incentive Plan to repay to the Company, the outstanding principal and interest of each of promissory note in full including an additional amount to satisfy any of the
individual executive officer’s tax obligations associated with such repayment. As such, upon payment, each of the executive officers’ promissory notes has been paid in full and such promissory notes have been canceled. TRG Holdings LLC
agreed to satisfy all of the outstanding principal and interest of the promissory notes on behalf of Mr. Khaishgi and Mr. Keen and upon satisfaction, the promissory notes for Messrs. Khaishgi and Keen have been paid in full and such
promissory notes have been canceled.
TRGH-iSky Loan
On August 7, 2018, TRG Holdings LLC entered into a loan agreement with iSky, Inc. to repay approximately CAD 1,459,516 (approx. US $1.1 million) related to a sales tax settlement on behalf
of iSky with the Canadian Revenue Agency at an interest rate of 15% per annum with a maturity date of August 7, 2019; provided however that such loan is payable immediately on demand upon the earlier of TRG Holdings LLC’s demand or an
initial public offering of iSky Inc.’s parent company, Ibex Limited. Funds borrowed under this loan arrangement were paid directly to the Canadian Revenue Agency. Pursuant to the terms of the loan, any additional amount of interest not
calculable at the time of the loan shall be paid made a part of the loan agreement and shall be repaid under the same terms as initial loan. This loan agreement was assumed by IBEX Limited from iSky, Inc. in June 2019 and the term
extended to August 7, 2020. The parties have agreed to extend the loan to October 31, 2020. The outstanding balance of the loan payable to TRG Holdings LLC was $1.5 million and $1.3 million as of June 30, 2020 and June 30, 2019,
respectively.
Ibex Global Solutions Limited (Pakistan), Virtual World Private Ltd, DGS Private Limited – Afiniti Software Solutions (Pvt) Limited and Afiniti, Inc.
Shares Services Agreement
Ibex Global Solutions Limited (Pakistan), Virtual World Private Ltd, DGS Private Limited – Afiniti Software Solutions (Pvt) Limited and Afiniti, Inc. are parties to a Master Services and
Cross Charge Agreement dated June 1, 2019 whereby the parties to the agreement each provide certain IT related services to the other and such services are cross charged to the other parties.
Dividend to TRGI
On July 21, 2020, our board of directors approved a one-time dividend of $4.0 million to our shareholders reflecting a portion of the cash generation from the business during fiscal year
2020. The dividend was paid on July 24, 2020 to TRGI, the holder of our Series A preferred share (outstanding prior to its automatic conversion into common shares in connection with our initial public offering), which was entitled to a
dividend preference that expired upon conversion of the Series A preferred share to common shares upon the completion of our initial public offering.
Stockholders’ Agreement
We are party to a Stockholders’ Agreement with TRGI dated as of September 15, 2017. The agreement requires that we obtain TRGI’s prior written consent before we or our subsidiaries take or
commit to take certain material actions, including, among others:
| • |
acquisition of the stock or assets of an unaffiliated entity in a single transaction or a series of related transactions with an enterprise value greater than $2.0 million;
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| • |
consolidation, merger, amalgamation or other business combination with any entity other than us or a wholly-owned subsidiary of ours, or a “Change in Control” (as defined in our debt instruments);
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disposition or transfer, in a single transaction or a series of related transactions, to another party of our or any of our subsidiaries’ assets with a value greater than $2.0 million in the aggregate or
for consideration greater than $2.0 million, other than in the ordinary course of business;
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| • |
entry into any corporate strategic relationship involving the payment, contribution or assignment by us or any of our subsidiaries of money or assets greater than $1.0 million;
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| • |
creation of any new class of equity securities, issuance of additional shares of any class of equity securities, or any offering of securities (except for awards under stockholder-approved equity plans
and issuances to our parent company or any of its subsidiaries);
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incurrence, assumption or guarantee of indebtedness by us to any third party;
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incurrence, assumption or guarantee of incremental indebtedness (as measured from indebtedness existing on September 15, 2017) by us, in a single transaction or a series of related transactions, in an
amount greater than $5.0 million;
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| • |
transfer of any senior note issued by e-Telequote Insurance, Inc. under a certain Note Purchase Agreement dated June 2017 (the “2017 ETQ Notes”) by any holder thereof or any amendment to the 2017 ETQ
Notes or the related note purchase agreement;
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| • |
repurchase of our equity securities or adoption of any share repurchase plan;
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| • |
capital expenditures in an aggregate amount greater than $10.0 million in any fiscal year;
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| • |
listing of any securities on any securities exchange;
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| • |
appointment and / or removal of independent auditors or any material change in our accounting policies and principles or internal control procedures;
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| • |
bankruptcy, liquidation, dissolution, winding up or similar event or action;
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| • |
any change of our principal lines of business, entry into new lines of business, or exit from the current lines of business;
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amendment, modification or repeal of any provision of our or our subsidiaries’ organizational documents; and
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commencement or settlement of any material litigation.
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The Stockholder’s Agreement further provides that, to the fullest extent permitted by law and subject to section 97 of the Companies Act and our Bye-laws:
| • |
TRGI and its partners, principals, directors, officers, members, managers, agents, employees and / or other representatives may directly or indirectly engage in the same or similar business activities or
lines of business as us or any of our subsidiaries, including those lines of business deemed to be competing with us or any of our subsidiaries;
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| • |
TRGI, its affiliates and their respective partners, principals, directors, officers, members, managers, agents, employees and / or other representatives may do business with any of our potential or
actual customers or suppliers;
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| • |
TRGI, its affiliates and their respective partners, principals, directors, officers, members, managers, agents, employees and / or other representatives may employ or otherwise engage any of our officers
or employees; and
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| • |
none of TRGI, its affiliates or their respective partners, principals, directors, officers, members, managers, agents, employees and / or other representatives shall have any duty to communicate or offer
any business opportunity that may be presented to TRGI or those other persons to us or shall be liable to us or any of our stockholders for breach of any fiduciary or other duty by reason of the fact that TRGI or such persons
pursues that business opportunity, directs that business opportunity to another person or fails to present that business opportunity, or information regarding that business opportunity to us unless, in the case of any such person
who is a director or officer of ours, that business opportunity is expressly offered to that director or officer in writing solely in his or her capacity as our director or officer.
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In addition, the Stockholder’s Agreement allows TRGI to disclose non-public information concerning us to existing and potential investors in TRGI or its affiliates, potential transferees of
TRGI’s equity interest in our parent company, potential participants in future transactions involving TRGI or its affiliates and other parties that TRGI deems reasonably necessary in connection with the conduct of its TRGI’s investment
and business activities, subject to any such recipient agreeing to keep that information confidential. The Stockholder’s Agreement remains in effect until TRGI ceases to own 10% or more of all shares issued by us (determined on an
as-converted basis).
Registration Rights Agreements
On September 15, 2017, we have entered into a registration rights agreement whereby we granted certain registration rights to TRGI, including the right, under certain circumstances and
subject to certain restrictions, to require us to register under the Securities Act, our common shares held by them. In addition, we have committed to file as promptly as possible after receiving a request from TRGI a shelf registration
statement registering secondary sales of our common shares held by TRGI. TRGI also has the ability to exercise certain piggyback registration rights in respect of common shares held by it in connection with registered offerings requested
by other holders of registration rights or initiated by us.
Amazon is entitled to customary shelf and piggy-back registration rights with respect to the shares issued upon exercise of the Amazon Warrant.
Limitations of Liability and Indemnification Matters
We intend to enter into indemnification agreements with each of our current directors and executive officers. These agreements will require us to indemnify these individuals to the fullest
extent permitted under Bermuda law against liabilities that may arise by reason of their service to us, and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. We also intend to
enter into indemnification agreements with our future directors and executive officers.
We entered into an indemnification agreement with Mr. Solazzo dated as of June 30, 2017 under which we have agreed to indemnify him for specified tax liabilities arising from the exchange of
his equity interest in Etelequote PLC for 478,115 of our common shares. The indemnification obligation is capped at $2.0 million, exclusive of certain reasonable expenses that Mr. Solazzo may incur in connection with defending against any
tax liability or any indemnifiable interest, fines, or penalties imposed on Mr. Solazzo.
Policies and Procedures With Respect to Related Party Transactions
We have policies and procedures whereby our Audit Committee is responsible for reviewing and approving related party transactions. In addition, our Code of Ethics requires that all of our
employees and directors inform us of any material transaction or relationship that comes to their attention that could reasonably be expected to create a conflict of interest, subject to the provisions of the Stockholders’ Agreement (as
described above). Further, at least annually, each director and executive officer will complete a detailed questionnaire that asks questions about any business relationship that may give rise to a conflict of interest and all transactions
in which we are involved and in which the executive officer, a director or a related person has a direct or indirect material interest.
Licensing and Sublicensing Agreements
License of Clearview Software
iSky, Inc. and TRG Holdings LLC are party to a license agreement dated as of July 1, 2014 under which TRG Holdings has purchased 900 access licenses to iSky’s Clearview software for a fee of
$1.8 million.
License of Ibex Global Solutions, Inc. f/k/a TRG Customer Solutions Software
IBEX Global Europe S.A.R.L. and Ibex Global Solutions, Inc. f/k/a TRG Customer Solutions, Inc. were party to an Intellectual Property License Agreement dated as of July 1, 2013 under which
IBEX Global Europe S.A.R.L. licensed proprietary software to Ibex Global Solutions, Inc. in exchange for royalty payments. This agreement terminated on June 30, 2019.
Software Services Agreement with Afiniti
Pursuant to a Standard Terms and Conditions agreement and Commercial Schedule, each dated November 14, 2017, between our subsidiary Ibex Global Solutions, Inc. f/k/a TRG Customer Solutions,
Inc. dba IBEX Global Solutions and SATMAP Incorporated dba Afiniti, Inc., Afiniti Inc. may provide certain intelligent call routing services to IBEX Global Solutions in exchange for a fee equal to $1,800 per supported call center seat per
year for up to 2,000 call center seats. Under these agreements, IBEX Global Solutions had a prepayment credit with Afiniti Inc. equal to $1.1 million as of June 30, 2020.
Pursuant to a Standard Terms and Conditions agreement and Commercial Schedule, each dated December 1, 2010, as amended on January 14, 2014, between our subsidiary Digital Globe Services,
Inc. and SATMAP Incorporated dba Afiniti, Inc., Afiniti Inc. may provide certain intelligent call routing services to Digital Globe Services, Inc. in exchange for a fee equal to $9 per incremental revenue generating unit generated through
the service. During the years ended June 30, 2020 and 2019, the amounts invoiced by Afiniti, Inc. to Digital Globe Services, Inc. under this agreement were $48,349 and $70,028, respectively.
Contribution of Intellectual Property
On October 19, 2017, The Resource Group International Limited assigned to us all right and title in certain call center software as a contribution to our surplus capital.
Services Agreements
Pursuant to a Service Agreement dated April 1, 2013 between our subsidiary Ibex Global Solutions, Inc. f/k/a TRG Customer Solutions, Inc. and its affiliate TRG Holdings LLC, TRG Customer
Solutions (Canada), Inc. agreed to employ certain TRG Holdings LLC personnel, for which Ibex Global Solutions, Inc. bills TRG Holdings on a cost-plus basis. During the fiscal year ended June 30, 2020 and June 30, 2019, the amount invoiced
by Ibex Global Solutions, Inc. to TRG Holdings under this agreement was $69,485 and $111,052, respectively.
Pursuant to a Services Agreement dated May 1, 2014 between our subsidiary Ibex Global Solutions, Inc. f/k/a TRG Customer Solutions, Inc. and its affiliate SATMAP Incorporated dba Afiniti,
Inc., Ibex Global Solutions, Inc. agreed to provide information technology services to Afiniti, Inc. which are billed at a cost-plus basis. During the fiscal year ended June 30, 2020 and June 30, 2019, the amount invoiced by Ibex Global
Solutions, Inc. to Afiniti, Inc. under this agreement was $657 and $2,767, respectively.
Sublease of Office Space
Pursuant to an agreement dated June 30, 2018, Ibex Global Solutions, Inc. f/k/a TRG Customer Solutions, Inc. and iSky, Inc. have agreed to sublease office space in Washington, D.C. leased by
TRG Holdings, LLC. On July 1, 2018, iSky, Inc. exercised its right to terminate the sub-lease agreement and effectively Ibex Global Solutions, Inc. became the sole sub-lessee. The lease amount payable under this sublease is $26,616 per
month with nominal increases that go into effect as of July 1, 2020 and thereafter.
Pursuant to an agreement dated June 1, 2017, between our subsidiary, IBEX Global Solutions (Private) Limited and TRG (Private) Limited, TRG (Private) Limited agreed to lease certain office
space in Pakistan to IBEX Global Solutions (Private) Limited. The lease amount payable under this agreement is approximately $1,400 per month.
Participation in Health and Welfare Plans
Our subsidiary Ibex Global Solutions, Inc. f/k/a TRG Customer Solutions, Inc. and its affiliate TRG Holdings LLC are parties to a Third Party Services Agreement dated April 1, 2013 whereby
employees of TRG Holdings LLC and its affiliates are permitted to participate in the health, dental, and life insurance plans offered by Ibex Global Solutions, Inc. to its employees. TRG Holdings LLC is obligated to indemnify Ibex Global
Solutions, Inc. for any claims arising out of the participation in such plans by employees of TRG Holdings and its affiliates.
Pursuant to a Third Party Services Agreement dated May 1, 2014 between Ibex Global Solutions, Inc. f/k/a TRG Customer Solutions, Inc., SATMAP Incorporated, and TRG Holdings LLC, Ibex Global
Solutions, Inc. directly permit SATMAP Incorporated to participate in the health, dental, and life insurance plans offered by Ibex Global Solutions, Inc. to its employees. SATMAP Incorporated is obligated to indemnify Ibex Global
Solutions, Inc. for any claims arising out of the participation in such plans by employees of SATMAP Incorporated. As of January 1, 2018, SATMAP Incorporated terminated the Third Party Services Agreement and no longer participates in the
health, dental and life insurance plans of TRG Customers Solutions, Inc.
Consolidated Financial Statements
Our audited consolidated financial statements are included at the end of this annual report, starting at page F-1.
Legal Proceedings
We are subject to various claims and legal actions in the ordinary course of business. We are currently of the opinion that these claims and legal actions will not have a material adverse impact on our
consolidated position and / or the results of our operations.
A case was filed in November 2014 in the US District Court of Tennessee as a collective action under the US Fair Labor Standards Act (“FLSA”) and class action under Tennessee law, alleging
that plaintiff were forced to work “off the clock” without being paid for such time. In December 2014, a similar FLSA collection action case was filed against IBEX Global Solutions in the US District Court for the District of Columbia. In
February 2015, the two cases were consolidated in Tennessee and Plaintiff agreed to submit all claims to binding arbitration before the American Arbitration Association. Approximately 3,500 individuals opted into the FLSA class action
claims, and, after the amendment to add claims under the state laws of Pennsylvania and Oregon, there were class action claims under various state laws involving approximately 25,000 potential class action claimants. State class
certification brief was filed April 14, 2018. In April 2019, the parties engaged in a mediation. On June 14, 2019, the parties entered into a Settlement Agreement, which was approved by the arbitrator on June 19, 2019. Pursuant to the
Settlement Agreement, all claims for FLSA claims and Rule 23 claims were made on a claims-made basis. Individuals were required to fill out a claim form and send it to the Third Party Administrator in order to receive funds under the
settlement. Pursuant to the Settlement Agreement, on July 3, 2019, we funded a total amount of $3.3 million to the Qualified Settlement Fund. The fees included (i) $975,000 for the FLSA claimants; (ii) $2.2 million for attorneys’ fees;
(iii) $0.1 million for the service awards; and (iv) $0.1 million for claims administration costs. All funds were held in the Qualified Settlement Fund until final approval by the arbitrator. Following the closure of the claims period on
October 15, 2019, on November 7, 2019, the parties appeared before the Arbitrator and the Arbitrator approved the Final Order. On November 20, 2019, we made a payment to the Qualified Settlement Fund in the additional amount of $1.2
million for payment in full of all Rule 23 Claims and any Company tax obligations for payments to such individuals. The Andrews case was officially dismissed with prejudice by the Court on July 15, 2020 through an Agreed Stipulation to
Dismiss with Prejudice.
On July 26, 2018, Digital Globe Services, Inc. received an indemnification notice related to AllConnect, Inc. v. Kandela LLC Case No. 2:18-cv-05959SJO
(SSx) pending in the U.S. District Court for the Central District of California, Western Division relating to patent infringement for certain call center search for services capabilities provided by Digital Globe Services, Inc. under
the Dealer Network Agreement entered into in 2014 between Kandela, LLC and Digital Globe Services, Inc. via its ‘‘BundleDealer.com’’ portal. On June 3, 2020, AllConnect, Inc. and Kandela LLC entered into a settlement agreement and on
June 5, 2020 the U.S. District Court dismissed the case with prejudice. Digital Globe Services, Inc. agreed to pay $0.03 million of Kandela LLC’s legal fees and expenses incurred in connection with Kandela LLC’s defense of the matter.
On June 5, 2020, pursuant to settlement and joint stipulation, the court dismissed the claims of AllConnect with prejudice.
Dividend Distribution Policy
We currently do not plan to declare dividends on our common shares in the foreseeable future. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our
business. The payment of dividends, if any, would be at the discretion of our board of directors and would depend on our results of operations, capital requirements, financial condition, prospects, contractual arrangements, any
limitations on payment of dividends present in our current and future debt agreements and other factors that our board of directors may deem relevant.
| B. |
Significant Changes
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We are not aware of any significant changes other than what has been discussed in other parts of this annual report. Please refer to footnote 31 of our audited consolidated financial
statements beginning on page F-1 for a discussion of subsequent events.
Our common shares are currently listed on the Nasdaq Global Market under the symbol “IBEX”.
| B. |
Plan of Distribution
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Not applicable.
| C. |
Markets
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Our common shares began trading on the Nasdaq Global Market under the symbol “IBEX” on August 7, 2020.
| D. |
Selling Shareholders
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Not applicable.
| E. |
Dilution
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Not applicable.
| F. |
Expenses of the Issue
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Not applicable.
| A. |
Share Capital
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Not applicable.
| B. |
Memorandum and Articles of Association
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The information set forth in our Registration Statement on Form F-1 (File No. 333-239821), as amended, originally filed with the SEC on July 10, 2020 and declared effective by the SEC on
August 6, 2020, under the headings “Description of Share Capital” is incorporated herein by reference.
| C. |
Material Contracts
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On August 6, 2020, we, along with TGRI, entered into an underwriting agreement with Citigroup Global Markets Inc. and RBC Capital Markets, LLC as representatives of the several underwriters named therein, with respect to the primary
and secondary offering of our common shares sold in our initial public offering. We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act.
“Item 4. Information on the Company—History and development of the company,” “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Financing Arrangements,” “Item 6. Directors,
Senior Management and Employees—Compensation,” and “Item 7B. Related-Party Transactions” are incorporated herein by reference.
| D. |
Exchange Controls
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We have been designated by the BMA as a non-resident for Bermuda exchange control purposes. This designation allows us to engage in transactions in currencies other than the Bermuda dollar,
and there are no restrictions on our ability to transfer funds (other than funds denominated in Bermuda dollars) in and out of Bermuda or to pay dividends to U.S. residents who are holders of our common shares.
The BMA has pursuant to its statement of June 1, 2005 given its general permission under the Bermuda Exchange Control Act 1972 (and its related regulations) for the issue and transfer of our
common shares to and between non-residents of Bermuda for exchange control purposes, provided our common shares are listed on the Nasdaq Global Market, or any other appointed stock exchange. This general permission would cease to apply if
our common shares were to cease to be so listed and in such event specific permission would be required from the BMA for all issues and transfers of our common shares subject to certain exceptions set out in the BMA statement of June 1,
2005.
Accordingly, in giving such consent or permissions, neither the BMA nor the Registrar of Companies in Bermuda shall be liable for the financial soundness, performance or default of our
business or for the correctness of any opinions or statements expressed in this annual report. Certain issues and transfers of common shares involving persons deemed resident in Bermuda for exchange control purposes require the specific
consent of the BMA.
In accordance with Bermuda law, share certificates are only issued in the names of companies, partnerships or individuals. In the case of a shareholder acting in a special capacity (for
example as a trustee), certificates may, at the request of the shareholder, record the capacity in which the shareholder is acting. Notwithstanding such recording of any special capacity, we are not bound to investigate or see to the
execution of any such trust.
| E. |
Taxation
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MATERIAL U.S. AND BERMUDA INCOME TAX CONSEQUENCES
The following discussion is a description of the material Bermuda and U.S. federal income tax consequences of an investment in our common shares. This discussion is not exhaustive of all
possible tax considerations. In particular, this discussion does not address the tax consequences under state, local, and other national (e.g., non-Bermuda and non-U.S.) tax laws. Accordingly, we urge you to consult your own tax advisor
regarding your particular tax circumstances and the tax consequences under state, local, and other national tax laws. The following discussion is based upon laws and relevant interpretations thereof in effect and available as of the date
hereof, all of which are subject to change, possibly with retroactive effect.
Bermuda Tax Consequences
The following is a discussion of the material Bermuda tax consequences of an investment in our common shares. The following discussion is not exhaustive of all possible tax considerations.
We urge you to consult your own tax advisor regarding your particular tax circumstances.
Taxation of the Companies
At the present time, there is no Bermuda income or profits tax, withholding tax, capital gains tax, capital transfer tax, estate duty or inheritance tax payable by us or by our shareholders
in respect of our shares. We have received from the Minister of Finance of Bermuda under The Exempted Undertaking Tax Protection Act 1966, as amended, an assurance that, in the event that Bermuda enacts legislation imposing tax computed
on profits, income, any capital asset, gain or appreciation, or any tax in the nature of estate duty or inheritance, the imposition of any such tax shall not be applicable to us or to any of our operations or shares, debentures or other
obligations, until March 31, 2035. The assurance does not exempt us from paying import duty on goods imported into Bermuda. In addition, all entities employing individuals in Bermuda are required to pay a payroll tax and there are other
sundry taxes payable, directly or indirectly, to the Bermuda government. We and our subsidiaries incorporated in Bermuda pay annual government fees to the Bermuda government.
Taxation of Holders
Currently, there is no Bermuda income or profits tax, withholding tax, capital gains tax, capital transfer tax, estate duty or inheritance tax payable by our shareholders in respect of our
common shares. The issue, transfer, or redemption of our common shares is not currently subject to stamp duty.
U.S. Federal Income Tax Consequences
The following discussion of the material U.S. federal income tax consequences of the acquisition, ownership and disposition of our common shares is based upon current law and does not
purport to be a comprehensive discussion of all the tax considerations that may be relevant to a decision to purchase our common shares. This summary is based on current provisions of the Internal Revenue Code of 1986, as amended, or the
Code, existing, final, temporary and proposed U.S. Treasury Regulations, administrative rulings and judicial decisions, in each case in effect and available on the date of this annual report. All of the foregoing are subject to change,
which change could apply retroactively and could affect the tax consequences described below.
This section describes the material U.S. federal income tax consequences to U.S. holders, as defined below, of common shares. This discussion addresses only the U.S. federal income tax
considerations for U.S. holders that acquire the common shares at their original issuance and hold the common shares as capital assets. This summary does not address all U.S. federal income tax matters that may be relevant to a particular
U.S. holder. Each prospective investor should consult a professional tax advisor with respect to the tax consequences of the acquisition, ownership or disposition of the common shares. This summary
does not address tax considerations applicable to a holder of common shares that may be subject to special tax rules including, without limitation, the following:
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certain financial institutions;
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insurance companies;
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dealers or traders in securities, currencies, or notional principal contracts;
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tax-exempt entities;
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regulated investment companies or real estate investment trusts;
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persons that hold the common shares as part of a hedge, straddle, conversion, constructive sale or similar transaction involving more than one position;
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an entity classified as a partnership and persons that hold the common shares through partnerships or certain other pass-through entities;
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certain holders (whether individuals, corporations or partnerships) that are treated as expatriates for some or all U.S. federal income tax purposes;
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persons who acquired the common shares as compensation for the performance of services;
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persons holding the common shares in connection with a trade or business conducted outside of the U.S.;
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a U.S. holder who holds the common shares through a financial account at a foreign financial institution that does not meet the requirements for avoiding withholding with respect to certain payments
under Sections 1471 through 1474 of the Code;
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holders that own (or are deemed to own) 10% or more of our shares by vote or value; and
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holders that have a “functional currency” other than the U.S. dollar.
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Further, this discussion does not address alternative minimum, gift or estate tax consequences or the indirect effects on the holders of equity interests in entities that own our common
shares. In addition, this discussion does not consider the U.S. tax consequences to holders of common shares that are not “U.S. holders” (as defined below).
For the purposes of this discussion, a “U.S. holder” is a beneficial owner of common shares that is (or is treated as), for U.S. federal income tax purposes:
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an individual who is either a citizen or resident of the U.S.;
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a corporation, or other entity that is treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the U.S. or any state of the U.S. or the District of
Columbia;
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an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
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a trust, if a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of the substantial decisions of
such trust or has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person within the meaning of the Code.
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If a partnership holds common shares, the tax treatment of a partner and such partnership will generally depend upon the status of the partner and upon the activities of the partnership.
We will not seek a ruling from the U.S. Internal Revenue Service, (“IRS”), with regard to the U.S. federal income tax treatment of an investment in our common shares, and we cannot assure
you that that the IRS will agree with the conclusions set forth below.
Distributions
Subject to the discussion under “Passive foreign investment company considerations” below, the gross amount of any distribution actually or
constructively received by a U.S. holder with respect to common shares will be taxable to the U.S. holder as a dividend to the extent of such U.S. holder’s pro rata share of our current and accumulated earnings and profits as determined
under U.S. federal income tax principles. Distributions in excess of such pro rata share of our earnings and profits will be non-taxable to the U.S. holder to the extent of, and will be applied against and reduce, the U.S. holder’s
adjusted tax basis in the common shares. Distributions in excess of the sum of such pro rata share of our earnings and profits and such adjusted tax basis will generally be taxable to the U.S. holder as capital gain from the sale or
exchange of property. However, since we do not calculate our earnings and profits under U.S. federal income tax principles, it is expected that any distribution will be reported as a dividend, even if that distribution would otherwise be
treated as a non-taxable return of capital or as capital gain under the rules described above. The amount of any distribution of property other than cash will be the fair market value of that property on the date of distribution. A
corporate U.S. holder will not be eligible for any dividends-received deduction in respect of a dividend received with respect to our common shares.
While we do not currently plan to pay any dividends, the currency of any dividends that we may pay is subject to future determination. If we pay any such dividends in a currency other than
U.S. dollars (a “foreign currency”), the amount of a distribution paid to a U.S. holder in a foreign currency will be the U.S. dollar value of the foreign currency calculated by reference to the spot exchange rate on the day the U.S.
holder actually or constructively receives the distribution, regardless of whether the foreign currency is converted into U.S. dollars at that time. Any foreign currency gain or loss a U.S. holder realizes on a subsequent conversion of
foreign currency into U.S. dollars will be U.S. source ordinary income or loss. If dividends received in a foreign currency are converted into U.S. dollars on the day they are actually or constructively received, a U.S. holder should not
be required to recognize foreign currency gain or loss in respect of the dividend.
Under the Code and subject to the discussion below regarding the “Medicare Tax,” qualified dividends received by non-corporate U.S. holders (i.e.,
individuals and certain trusts and estates) are currently subject to a maximum income tax rate of 20%. This reduced income tax rate is applicable to dividends paid by “qualified foreign corporations” to such non-corporate U.S. holders
that meet the applicable requirements, including a minimum holding period (generally, at least 61 days without protection from the risk of loss during the 121-day period beginning 60 days before the ex-dividend date). A non-U.S.
corporation (other than a corporation that is classified as a passive foreign investment company, (“PFIC”), for the taxable year in which the dividend is paid or the preceding taxable year) generally will be considered to be a qualified
foreign corporation (a) if it is eligible for the benefits of a comprehensive tax treaty with the U.S. which the Secretary of the Treasury of the U.S. determines is satisfactory for purposes of this provision and which includes an
exchange of information provision or (b) with respect to any dividend it pays on shares of stock which are readily tradable on an established securities market in the U.S. Our common shares will be listed on the Nasdaq Global Market,
which has been determined to be an established securities market in the U.S. Based on the foregoing, we expect to be considered a qualified foreign corporation under the Code. Accordingly, dividends paid by us to non-corporate U.S.
holders with respect to shares that meet the minimum holding period and other requirements are expected to be treated as “qualified dividend income.” However, dividends paid by us will not qualify for the 20% maximum U.S. federal income
tax rate if we are treated, for the tax year in which the dividends are paid or the preceding tax year, as a PFIC for U.S. federal income tax purposes, as discussed below.
Dividends received by a U.S. holder with respect to common shares generally will be treated as foreign source income for the purposes of calculating that holder’s foreign tax credit
limitation. For this purpose, dividends distributed by us generally will constitute “passive category income” (but, in the case of some U.S. holders, may constitute “general category income”).
Sale or Other Disposition of Common Shares
A U.S. holder will generally recognize gain or loss for U.S. federal income tax purposes upon the sale or exchange of common shares in an amount equal to the difference between the U.S.
dollar value of the amount realized from such sale or exchange and the U.S. holder’s tax basis for those common shares. Subject to the discussion under “Passive foreign investment company considerations” below, this gain or loss will
generally be a capital gain or loss and will generally be treated as from sources within the U.S. Such capital gain or loss will be treated as long-term capital gain or loss if the U.S. holder has held the common shares for more than one
year at the time of the sale or exchange. Long-term capital gains of non-corporate holders may be eligible for a preferential tax rate; the deductibility of capital losses is subject to limitations.
Medicare Tax
An additional 3.8% tax (“Medicare Tax”), is imposed on all or a portion of the “net investment income” (which includes taxable dividends and net capital gains, adjusted for deductions
properly allocable to such dividends or net capital gains) received by (i) U.S. holders that are individuals with modified adjusted gross income of over $200,000 ($250,000 in the case of joint filers, $125,000 in the case of married
individuals filing separately) and (ii) certain trusts or estates.
Passive Foreign Investment Company Considerations
A corporation organized outside the U.S. generally will be classified as a PFIC for U.S. federal income tax purposes in any taxable year in which, after applying the applicable look-through rules, either: (i) at least 75% of its gross
income is passive income, or (ii) on average at least 50% of the gross value of its assets is attributable to assets that produce passive income or are held for the production of passive income. In arriving at this calculation, a pro rata
portion of the income and assets of each corporation in which we own, directly or indirectly, at least a 25% interest, as determined by the value of such corporation, must be taken into account. Passive income for this purpose generally
includes dividends, interest, royalties, rents and gains from commodities and securities transactions. We believe that we were not a PFIC for any previous taxable year. Based on our estimated gross income, the average value of our gross
assets, and the nature of the active businesses conducted by our “25% or greater” owned subsidiaries, we do not believe that we will be classified as a PFIC in the current taxable year and do not expect to become one in any taxable year
in the foreseeable future. However, our status for any taxable year will depend on our assets and activities in each year, and because this is a factual determination made annually after the end of each taxable year, there can be no
assurance that we will not be considered a PFIC for the current taxable year or any future taxable year. The market value of our assets may be determined in large part by reference to the market price of our common shares, which is likely
to fluctuate after our initial public offering (and may fluctuate considerably given that market prices of technology companies have been especially volatile). In addition, the composition of our income and assets will be affected by how,
and how quickly, we spend the cash we raised in our initial public offering. If we were a PFIC for any taxable year during which a U.S. holder held common shares, under the “default PFIC regime” (i.e., in the absence of one of the
elections described below), gain recognized by the U.S. holder on a sale or other disposition (including a pledge) of the common shares would be allocated ratably over the U.S. holder’s holding period for the common shares. The amounts
allocated to the taxable year of the sale or other disposition and to any year before we became a PFIC would be taxed as ordinary income. The amount allocated to each other taxable year would be subject to tax at the highest rate in
effect for individuals or corporations, as appropriate, for that taxable year, and an interest charge would be imposed on the resulting tax liability for that taxable year. Similar rules would apply to the extent any distribution in
respect of common shares exceeds 125% of the average of the annual distributions on common shares received by a U.S. holder during the preceding three years or the holder’s holding period, whichever is shorter.In the event we were treated as a PFIC, the tax consequences under the default PFIC regime described above could be avoided by either a “mark-to-market” or “qualified electing fund,” or QEF,
election. A U.S. holder making a mark-to-market election (if the eligibility requirements for such an election were satisfied) generally would not be subject to the PFIC rules discussed above, except with respect to any portion of the
holder’s holding period that preceded the effective date of the election. Instead, the electing holder would include in ordinary income, for each taxable year in which we were a PFIC, an amount equal to any excess of (a) the fair market
value of the common shares as of the close of such taxable year over (b) the electing holder’s adjusted tax basis in such common shares. In addition, an electing holder would be allowed a deduction in an amount equal to the lesser of (a)
the excess, if any, of (i) the electing holder’s adjusted tax basis in the common shares over (ii) the fair market value of such common shares as of the close of such taxable year or (b) the excess, if any, of (i) the amount included in
ordinary income because of the election for prior taxable years over (ii) the amount allowed as a deduction because of the election for prior taxable years. The election would cause adjustments in the electing holder’s tax basis in the
common shares to reflect the amount included in gross income or allowed as a deduction because of the election. In addition, upon a sale or other taxable disposition of common shares, an electing holder would recognize ordinary income or
loss (not to exceed the excess, if any, of (a) the amount included in ordinary income because of the election for prior taxable years over (b) the amount allowed as a deduction because of the election for prior taxable years).
Alternatively, a U.S. holder making a valid and timely QEF election generally would not be subject to the default PFIC regime discussed above. Instead, for each PFIC year to which such an
election applied, the electing holder would be subject to U.S. federal income tax on the electing holder’s pro rata share of our net capital gain and ordinary earnings for that year, regardless of whether such amounts were actually
distributed to the electing holder. Although we currently intend to make available the information necessary to permit a U.S. holder to make a valid QEF election for any taxable year that we determine we are treated as a PFIC, there can
be no assurance that we will continue to do so in future years.
If we are considered a PFIC for the current taxable year or any future taxable year, a U.S. holder may be required to file annual information returns for such year, whether or not the U.S.
holder disposed of any common shares or received any distributions in respect of common shares during such year.
Backup Withholding and Information Reporting
Foreign Account Tax Compliance Act, (“FATCA”), and Related Provisions
Under certain circumstances, the company or its paying agent may be required, pursuant to the FATCA provisions of the Code (or analogous provisions of non-U.S. law) and regulations or
pronouncements thereunder, any “intergovernmental agreement” entered into pursuant to those provisions or any U.S. or non-U.S. fiscal or regulatory legislation, rules, guidance, notes or practices adopted pursuant to any such agreement,
to withhold U.S. tax at a rate of 30% on all or a portion of payments of dividends or other corporate distributions which are treated as “foreign passthru payments” made on or after the date that is two years after the date of publication
in the Federal Register of final regulations defining the term “foreign passthru payment”, if such payments are not exempt from such withholding. The company believes, and this discussion assumes, that the company is not a “foreign
financial institution” for purposes of FATCA. The rules regarding FATCA and “foreign passthru payments,” including the treatment of proceeds from the disposition of common shares, are not completely clear, and further guidance may be
issued by the IRS that would clarify how FATCA might apply to dividends or other amounts paid on or with respect to common shares.
Specified Foreign Financial Assets
Certain individual U.S. Holders that own “specified foreign financial assets” with an aggregate value in excess of US$50,000 on the last day of the tax year or more than US$75,000 at any
time during the tax year are generally required to file an information statement along with their tax returns, currently on Form 8938, with respect to such assets. “Specified foreign financial assets” include any financial accounts held
at a non-U.S. financial institution, as well as securities issued by a non-U.S. issuer that are not held in accounts maintained by financial institutions. Higher reporting thresholds apply to certain individuals living abroad and to
certain married individuals. Regulations extend this reporting requirement to certain entities that are treated as formed or availed of to hold direct or indirect interests in specified foreign financial assets based on certain objective
criteria. U.S. Holders who fail to report the required information could be subject to substantial penalties. In addition, the statute of limitations for assessment of tax would be suspended, in whole or part. Prospective investors should
consult their own tax advisors concerning the application of these rules to their investment in the common shares, including the application of the rules to their particular circumstances.
| F. |
Dividends and paying agents
|
Not applicable.
| G. |
Statements by experts
|
Not applicable.
| H. |
Documents on display
|
The SEC maintains a website at www.sec.report that contains reports, proxy and information statements and other information regarding registrants that make electronic filings through its
Electronic Data Gathering, Analysis, and Retrieval, (“EDGAR”), system All our Exchange Act reports and other SEC filings will be available through the EDGAR system. You may also access information about IBEX through our corporate
website https://www.ibex.co. The information contained in both websites is not incorporated by reference into this annual report.
| I. |
Subsidiary Information
|
Not applicable.
| ITEM 11. |
Information relating to “Quantitative and qualitative disclosure about market risk” has been described in detail under the heading “Item 18. Financial Statements – Note 22.”
Not applicable.
| ITEM 13. |
Not applicable.
| ITEM 14. |
Initial Public Offering
In August 2020, we sold 3,571,429 common shares, each with a par value of $0.000111650536, in our initial public offering and TRGI, our largest shareholder, sold 1,190,476 common shares at a public offering
price of $19.00 per share as part of the same offering. The net offering proceeds to us, before expenses, and after deducting underwriting discounts and commissions were approximately $63.1 million. The offering commenced on August 7,
2020 and did not terminate before all of the securities registered in the registration statement were sold (other than the common shares subject to the underwriters’ 30-day option to purchase additional shares). The effective date of
the registration statement, File No. 333-239821, for our initial public offering of common shares was August 6, 2020, which was after the ending date of the reporting period covered by this annual report on Form 20-F. Citigroup and
RBC Capital Markets acted as joint book-running managers of the offering and as representatives of the several underwriters named in the underwriting agreement.
$1.6 million of the net proceeds from our initial public offering has been used to pay deal related expenses. The balance is held in cash and cash equivalents and is intended to be used to
build out additional facilities as well as expand existing facilities, invest in upgraded support systems that improve our internal employee management and real time financial reporting, and/or to repay high interest debt. None of the
net proceeds of our initial public offering were paid directly or indirectly to any director, officer, or persons owning ten percent or more of our common shares, or to any of our related parties.
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as this term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to provide reasonable assurance that information required
to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s (“SEC”) rules and forms, and
that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Our Chief Executive
Officer and Chief Financial Officer recognize that these controls, no matter how well designed and operated, cannot provide absolute assurance that the objectives of these controls will be met.
Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2020. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of June 30, 2020, due to a material weakness in our internal control over financial reporting related to the execution and review of complex accounting matters. Notwithstanding the material weakness in internal control over financial reporting described below, our management concluded that our consolidated financial statements in this annual report present fairly, in all material respects, the Company’s financial position, results of operations and cash flows as of the dates, and for the periods presented, in conformity with IFRS as issued by the IASB.
Internal Controls Over Financial Reporting
In connection with our fiscal year ended June 30, 2018, we and our independent registered public accounting firm identified two material weaknesses in our internal control over financial reporting as
defined in Rule 12b-2 under the Exchange Act. A “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement in
our financial statements will not be prevented or detected on a timely basis. Specifically, the material weaknesses related to various control deficiencies related to (i) information technology general controls and (ii) revenue
recognition at one of our subsidiaries. The material weakness that related to revenue recognition at one of our subsidiaries resulted from duplicating revenue recognition from one of our clients and caused us to overstate our revenues and
receivables by approximately $0.8 million during the fiscal year ended June 30, 2018. As of June 30, 2019, we and our independent registered public accounting firm determined that these material weaknesses were remediated.
During the fiscal year ended June 30, 2019, we and our independent registered public accounting firm identified one material weakness in our internal control over financial reporting related to our estimate of renewable revenue and related provision for Etelequote Limited. Specifically, corporate financial management review controls failed in estimating Etelequote Limited renewable receivable revenue, which is complex and requires a high level of judgment under IFRS 15. As a result of our management review controls failure, we recorded adjustments of $1.9 million (before tax), increasing our estimated renewable receivable revenue in the statement of comprehensive income and loss and renewable receivable in the statement of financial position as of June 30, 2019. During the preparation of our interim condensed consolidated financial statements as of March 31, 2019 and for the nine month periods ended March 31, 2020 and 2019, we and our independent registered public accounting firm again identified material weaknesses in our internal control over financial reporting related to our estimate of renewable revenue and related provision, and related tax effects, for Etelequote Limited for the nine month period ended March 31, 2019. Specifically, corporate financial management review controls failed in estimating Etelequote Limited renewable receivable revenue, which is complex and requires a high level of judgment under IFRS 15. As a result of our management review controls failure, we recorded adjustments of $7.0 million (before tax), increasing our estimated renewable receivable revenue in the statement of profit or loss and other comprehensive income (included in Net income for the period, discontinued operations, net of tax) for the nine month period ended March 31, 2019 and renewable receivable in the statement of financial position as of March 31, 2019. As of June 30, 2020, we and our independent registered public accounting firm determined that this material weakness was remediated, due to the disposal of Etelequote Limited at the end of June 2019.
During the audit for the fiscal year ended June 30, 2020, we and our independent registered public accounting firm identified a material weakness in our internal control over financial reporting related to the execution and review
of complex accounting matters. Due to a failure in procedures with respect to the execution, review, supervision and monitoring of complex accounting matters, a number of adjustments were identified and made to the consolidated
financial statements during the course of our audit. Management believes that progress continues to be made towards the implementation of an effective internal control environment, as we continue to design and implement common
policies, IT general controls, procedures and controls for financial reporting. We have many individual policies, procedures and controls already in place and appropriate financial systems have been, and are being, implemented to
establish an effective internal control environment.
As an emerging growth company, we have taken, and are taking, actions to remediate the material weakness in our internal control over financial reporting. Key elements of the remediation effort made and being made, include, but are not limited to, the following initiatives:
| • |
Continuing to develop and implement an overall, formalized internal control framework,
|
| • |
Hiring additional personnel with expertise in technical accounting and SEC reporting, and
|
| • |
Developing and implementing a training plan for personnel involved with or having an impact on the financial reporting function.
|
Our management is committed to achieving and thereafter maintaining a strong internal control environment, and as such, will continue to evaluate and improve our disclosure controls and
procedures and internal controls over financial reporting, taking additional measures as necessary to remediate the material weakness noted above.
See “Risk Factors—Risks Related to our Business—If we are unable to implement and maintain effective internal control over financial reporting, our results of operations and the price of our common shares
could be adversely affected.”
| ITEM 16A. |
Our Board has determined that Mr. John Leone is an audit committee financial expert as defined in Item 16A of Form 20-F and as determined by our board of directors. Mr. Leone is independent as such term is
defined in Rule 10A-3 under the Exchange Act and under the listing standards of the Nasdaq Global Market.
We have adopted a Code of Business Conduct and Ethics that is applicable to all of the directors, executives, employees and independent contractors of IBEX and our subsidiaries. A copy of the Code of Business
Conduct and Ethics is available on our website at www.ibex.co. The Nominating and Corporate Governance Committee of the board of directors is responsible for overseeing the Code of Business
Conduct and Ethics and must approve any amendments or modifications thereof. The board of directors (in the case of a violation by a director or executive officer) or the Legal Department (in case of a violation by any other person)
may in its discretion, waive a violation of the Code of Business Conduct and Ethics. We expect that any amendments to the Code of Business Conduct and Ethics, or any waivers of its requirements, will be disclosed on our website.
BDO has served as our independent registered public accounting firm for fiscal years 2020 and 2019. Our accountant’s fees for professional services in fiscal years 2020 and 2019 are as follows:
|
Year ended June 30
|
|||||||||
|
2020
|
2019
|
||||||||
|
Audit Fees
|
$
|
1,399,743
|
$
|
552,813
|
|||||
|
Audit-related Fees
|
-
|
-
|
|||||||
|
Tax Fees
|
-
|
-
|
|||||||
|
Other Fees
|
-
|
-
|
|||||||
|
Total fees and services
|
$
|
1,399,743
|
$
|
552,813
|
|||||
“Audit Fees” are the aggregate fees for the audit of our annual consolidated financial statements and annual statutory financial statements, reviews of interim financial statements, review of our registration statement, and related consents.
“Audit-related Fees” are the aggregate fees for assurance and related services that are reasonably related to the performance of the audit and are not reported under Audit Fees.
“Tax Fees” are the aggregate fees for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning related services.
“Other Fees” are any additional amounts for products and services provided by the principal accountant.
There were no “Audit-related Fees,” “Tax Fees,” or “Other Fees” during the fiscal years 2020 or 2019.
Our audit committee has adopted a pre-approval policy for the engagement of our independent accountant to perform certain audit and non-audit services.
| ITEM 16D. |
Not applicable.
| ITEM 16E. |
Not applicable.
| ITEM 16F. |
Not applicable.
| ITEM 16G. |
CORPORATE GOVERNANCE
|
As a “foreign private issuer,” as defined by the SEC, we are permitted to follow home country corporate governance practices, instead of certain corporate governance practices required by the Nasdaq Global
Market for U.S. domestic issuers. While we intend to follow most Nasdaq Global Market corporate governance listing standards, we follow Bermuda corporate governance practices in lieu of Nasdaq Global Market corporate governance listing
standards as follows:
| • |
Exemption from the requirement to have a compensation committee comprised solely of independent members of the board of directors;
|
| • |
Exemption from quorum requirements applicable to meetings of shareholders. Such quorum requirements are not required under Bermuda law. In accordance with generally accepted business practice, our amended and restated articles
of association provide alternative quorum requirements that are generally applicable to meetings of shareholders;
|
| • |
Exemption from the Nasdaq Global Market corporate governance listing standards applicable to domestic issuers requiring disclosure within four business days of any determination to grant a waiver of the code of business conduct
and ethics to directors and officers. Although we will require board approval of any such waiver, we may choose not to disclose the waiver in the manner set forth in the Nasdaq Global Market corporate governance listing standards,
as permitted by the foreign private issuer exemption; and
|
| • |
Exemption from the requirement to obtain shareholder approval for certain issuances of securities, including shareholder approval of share option plans.
|
We intend to take all actions necessary for us to maintain compliance as a foreign private issuer under the applicable corporate governance requirements of the Sarbanes-Oxley Act, the rules adopted by the
SEC and the Nasdaq corporate governance rules and listing standards. Because we are a foreign private issuer, our directors and senior management are not subject to short-swing profit and insider trading reporting obligations under
Section 16 of the Exchange Act. They are, however, subject to the obligations to report changes in share ownership under Section 13 of the Exchange Act and related SEC rules.
| ITEM 16H. |
MINE SAFETY DISCLOSURE
|
Not applicable.
| ITEM 17. |
We have elected to provide financial statements pursuant to Item 18.
| ITEM 18. |
Our audited consolidated financial statements are included at the end of this annual report.
| ITEM 19. |
EXHIBITS
|
The following exhibits are filed as part of this annual report on Form 20-F:
|
Exhibit
Number
|
|
Description of Document
|
|
|
1.1
|
|
||
|
1.2*
|
|||
|
2.1
|
|
||
|
2.2
|
|
||
|
2.3
|
|||
|
2.4
|
|||
|
2.5
|
|||
|
2.6
|
|||
|
4.1+
|
|
||
|
4.2
|
|
||
|
4.3
|
|
||
|
4.4
|
|
||
|
4.5
|
|
||
|
4.6+
|
|||
|
4.7
|
|||
|
4.8
|
|||
|
4.9
|
|||
|
4.10
|
||
|
4.11
|
||
|
4.12
|
||
|
4.13
|
||
| 4.14* | ||
|
4.15+
|
||
|
4.16+
|
||
|
4.17+
|
||
|
4.18+
|
||
|
4.19+
|
||
|
4.20
|
||
|
4.21+
|
||
| 4.22# |
Seventh Amendment, dated July 1, 2020, to Loan and Security Agreement, dated March 31, 2015, by and among Digital Globe Services, Inc., TelsatOnline Inc., 7 Degrees LLC and Heritage Bank of Commerce
|
|
|
4.23+
|
||
|
4.24
|
||
|
4.25
|
||
|
4.26
|
||
|
4.27
|
|
4.28
|
||
|
4.29+
|
||
|
4.30+
|
||
|
4.31
|
||
|
4.32
|
||
|
4.33+
|
||
|
4.34
|
||
|
4.35
|
||
|
4.36
|
||
|
4.37
|
||
|
4.38
|
||
|
4.39
|
||
|
4.40+
|
||
|
4.41
|
||
|
4.42
|
||
|
4.43
|
||
|
4.44
|
||
|
4.45*
|
||
|
8.1*
|
|
|
|
11.1*
|
||
|
12.1*
|
|
|
|
12.2*
|
|
|
|
13.1*
|
|
|
|
15.1*
|
||
|
101.INS*
|
XBRL Instance Document
|
|
|
101.SCH*
|
XBRL Taxonomy Extension Schema Document
|
|
|
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
101.DEF*
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
101.LAB*
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
*
|
Filed herewith.
|
|
#
|
Certain schedules and exhibits to this agreement have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished supplementally to the
SEC upon request.
|
|
+
|
Confidential treatment requested at the time of filing or portions of the exhibit have been omitted, as applicable.
|
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
|
IBEX LIMITED
|
||
|
By:
|
/s/ Robert Dechant
|
|
|
Title:
|
Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
||
Date: October 22, 2020
111
IBEX LIMITED
|
Page
|
|
|
F-2
|
|
|
F-3
|
|
|
F-4
|
|
|
F-5
|
|
|
F-6
|
|
|
F-7
|
F-1
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
Ibex Limited
Hamilton, Bermuda
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of Ibex Limited (the “Company”) as of June 30, 2020 and 2019, the related consolidated statements of profit or loss and other comprehensive income (loss), changes in equity, and cash flows for each of the three years in the period ended June 30, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at June 30, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2020, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ BDO LLP
BDO LLP
We have served as the Company’s auditor since 2017.
Reading, United Kingdom
October 22, 2020
F-2
|
Notes
|
As of June
30, 2020
|
As of June
30, 2019
|
||||||||||
|
(US$’000)
|
||||||||||||
|
Assets
|
||||||||||||
|
Non-current assets
|
||||||||||||
|
Goodwill
|
4
|
11,832
|
11,832
|
|||||||||
|
Other intangible assets
|
5
|
2,781
|
2,928
|
|||||||||
|
Property and equipment
|
6
|
84,588
|
82,309
|
|||||||||
|
Investment in joint venture
|
7
|
331
|
227
|
|||||||||
|
Deferred tax asset
|
18
|
2,223
|
2,517
|
|||||||||
|
Warrant asset
|
28
|
2,611
|
3,316
|
|||||||||
|
Other assets
|
8
|
4,834
|
3,398
|
|||||||||
|
Total non-current assets
|
109,200
|
106,527
|
||||||||||
|
Current assets
|
||||||||||||
|
Trade and other receivables
|
9
|
62,579
|
71,134
|
|||||||||
|
Due from related parties
|
23
|
1,587
|
1,768
|
|||||||||
|
Cash and cash equivalents
|
10
|
21,870
|
8,873
|
|||||||||
|
Total current assets
|
86,036
|
81,775
|
||||||||||
|
Total assets
|
195,236
|
188,302
|
||||||||||
|
Equity and liabilities
|
||||||||||||
|
Equity attributable to owners of the parent
|
||||||||||||
|
Share capital
|
12
|
12
|
12
|
|||||||||
|
Additional paid-in capital
|
12
|
96,207
|
96,207
|
|||||||||
|
Other reserves
|
29,456
|
29,585
|
||||||||||
|
Accumulated deficit
|
(109,527
|
)
|
(117,176
|
)
|
||||||||
|
Total equity
|
16,148
|
8,628
|
||||||||||
|
Non-current liabilities
|
||||||||||||
|
Deferred revenue
|
11
|
434
|
753
|
|||||||||
|
Lease liabilities
|
6.2
|
62,044
|
58,602
|
|||||||||
|
Borrowings
|
13
|
3,782
|
7,184
|
|||||||||
|
Deferred tax liability
|
18
|
117
|
147
|
|||||||||
|
Other non-current liabilities
|
14
|
7,058
|
1,607
|
|||||||||
|
Total non-current liabilities
|
73,435
|
68,293
|
||||||||||
|
Current liabilities
|
||||||||||||
|
Trade and other payables
|
15
|
53,213
|
46,890
|
|||||||||
|
Income tax payables
|
3,087
|
1,467
|
||||||||||
|
Lease liabilities
|
6.2
|
12,668
|
10,632
|
|||||||||
|
Borrowings
|
13
|
27,476
|
41,835
|
|||||||||
|
Deferred revenue
|
11
|
3,470
|
4,388
|
|||||||||
|
Due to related parties
|
23
|
5,739
|
6,169
|
|||||||||
|
Total current liabilities
|
105,653
|
111,381
|
||||||||||
|
Total liabilities
|
179,088
|
179,674
|
||||||||||
|
Total equity and liabilities
|
195,236
|
188,302
|
||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-3
IBEX Limited
|
Notes
|
June 30, 2020
|
June 30, 2019
|
June 30, 2018
|
|||||||||||||
|
(US$’000)
|
||||||||||||||||
|
Revenue
|
25
|
405,135
|
368,380
|
342,200
|
||||||||||||
|
Payroll and related costs
|
26
|
276,255
|
254,592
|
252,925
|
||||||||||||
|
Share-based payments
|
19
|
359
|
4,087
|
8,386
|
||||||||||||
|
Reseller commission and lead expenses
|
17,328
|
27,877
|
28,059
|
|||||||||||||
|
Depreciation and amortization
|
24,472
|
20,895
|
12,182
|
|||||||||||||
|
Other operating costs
|
27
|
67,208
|
54,124
|
58,425
|
||||||||||||
|
Income / (loss) from operations
|
19,513
|
6,805
|
(17,777
|
)
|
||||||||||||
|
Finance expenses
|
17
|
(9,428
|
)
|
(7,709
|
)
|
(3,093
|
)
|
|||||||||
|
Income / (loss) before taxation, continuing operations
|
10,085
|
(904
|
)
|
(20,870
|
)
|
|||||||||||
|
Income tax (expense) / benefit
|
18
|
(2,315
|
)
|
(3,615
|
)
|
108
|
||||||||||
|
Net income / (loss) for the year, continuing operations
|
7,770
|
(4,519
|
)
|
(20,762
|
)
|
|||||||||||
|
Net income on discontinued operation, net of tax
|
30.2
|
-
|
15,484
|
4,881
|
||||||||||||
|
Net income / (loss) for the year
|
7,770
|
10,965
|
(15,881
|
)
|
||||||||||||
|
Other comprehensive income / (loss)
|
||||||||||||||||
|
Item that will not be subsequently reclassified to profit or loss
|
||||||||||||||||
|
Actuarial (loss) / gain on retirement benefits
|
14.1
|
(184
|
)
|
109
|
693
|
|||||||||||
|
Item that will be subsequently reclassified to profit or loss
|
||||||||||||||||
|
Foreign currency translation adjustment
|
(248
|
)
|
(316
|
)
|
182
|
|||||||||||
|
Cash flow hedge - changes in fair value
|
15.3
|
(518
|
)
|
-
|
-
|
|||||||||||
|
(950
|
)
|
(207
|
)
|
875
|
||||||||||||
|
Total comprehensive income / (loss) for the year
|
6,820
|
10,758
|
(15,006
|
)
|
||||||||||||
|
(US$)
|
||||||||||||||||
|
Loss per share from continuing operations attributable to the ordinary equity holders of the parent
|
||||||||||||||||
|
Basic loss per share
|
20
|
-
|
-
|
-
|
||||||||||||
|
Diluted loss per share
|
20
|
-
|
(0.36
|
)
|
(1.85
|
)
|
||||||||||
|
Loss per share attributable to the ordinary equity holders of the parent
|
||||||||||||||||
|
Basic loss per share
|
20
|
-
|
-
|
-
|
||||||||||||
|
Diluted loss per share
|
20
|
-
|
-
|
(1.42
|
)
|
|||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-4
|
Attributable to shareholders of the Holding Company
|
||||||||||||||||||||||||||||||||||||
|
Issued, Subscribed and Paid in Capital
|
Other Reserves
|
|||||||||||||||||||||||||||||||||||
|
Share
Capital
|
Senior
Preferred
Shares
|
Additional
Paid in
Capital
|
Re-
organization
Reserve
|
Share
Option
Plans
|
Foreign Currency
Translation
Reserve
|
Others
|
Accumulated
Deficit
|
Total Equity
Attributable to the
Holding Company
|
||||||||||||||||||||||||||||
|
(US$’000)
|
||||||||||||||||||||||||||||||||||||
|
Balance, July 1, 2017
|
12
|
20,000
|
96,207
|
15,849
|
7,132
|
(710
|
)
|
282
|
(110,034
|
)
|
28,738
|
|||||||||||||||||||||||||
|
Comprehensive income for the year
|
||||||||||||||||||||||||||||||||||||
|
Loss for the year ended June 30, 2018
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(15,881
|
)
|
(15,881
|
)
|
|||||||||||||||||||||||||
|
Other Comprehensive Income
|
-
|
-
|
-
|
-
|
-
|
182
|
693
|
-
|
875
|
|||||||||||||||||||||||||||
|
Total Comprehensive income / (loss) for the year
|
-
|
-
|
-
|
-
|
-
|
182
|
693
|
(15,881
|
)
|
(15,006
|
)
|
|||||||||||||||||||||||||
|
Transactions with Owners
|
||||||||||||||||||||||||||||||||||||
|
Dividend distribution
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(146
|
)
|
(146
|
)
|
|||||||||||||||||||||||||
|
Share-based transactions
|
-
|
-
|
-
|
-
|
8,936
|
-
|
-
|
-
|
8,936
|
|||||||||||||||||||||||||||
|
Sale of subsidiary
|
-
|
-
|
-
|
5,431
|
-
|
-
|
-
|
-
|
5,431
|
|||||||||||||||||||||||||||
|
-
|
-
|
-
|
5,431
|
8,936
|
-
|
-
|
(146
|
)
|
14,221
|
|||||||||||||||||||||||||||
|
Balance, June 30, 2018 (as previously stated)
|
12
|
20,000
|
96,207
|
21,280
|
16,068
|
(528
|
)
|
975
|
(126,061
|
)
|
27,953
|
|||||||||||||||||||||||||
|
Adjustment on initial adoption of IFRS 15- Revenue from Contracts with Customers
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(2,080
|
)
|
(2,080
|
)
|
|||||||||||||||||||||||||
|
Balance, July 1, 2018 (as restated)
|
12
|
20,000
|
96,207
|
21,280
|
16,068
|
(528
|
)
|
975
|
(128,141
|
)
|
25,873
|
|||||||||||||||||||||||||
|
Comprehensive income for the year
|
||||||||||||||||||||||||||||||||||||
|
Profit for the year ended June 30, 2019
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
10,965
|
10,965
|
|||||||||||||||||||||||||||
|
Other Comprehensive Income
|
-
|
-
|
-
|
-
|
-
|
(316
|
)
|
109
|
-
|
(207
|
)
|
|||||||||||||||||||||||||
|
Total Comprehensive income / (loss) for the year
|
-
|
-
|
-
|
-
|
-
|
(316
|
)
|
109
|
10,965
|
10,758
|
||||||||||||||||||||||||||
|
Transactions with Owners
|
||||||||||||||||||||||||||||||||||||
|
Redemption of senior preferred shares (Note 12.3)
|
-
|
(5,972
|
)
|
-
|
-
|
-
|
-
|
-
|
-
|
(5,972
|
)
|
|||||||||||||||||||||||||
|
Sale of subsidiary
|
||||||||||||||||||||||||||||||||||||
|
Net assets of sale of subsidiary (Note 30.2)
|
-
|
(14,028
|
)
|
-
|
(11,536
|
)
|
(2,030
|
)
|
-
|
-
|
-
|
(27,594
|
)
|
|||||||||||||||||||||||
|
Share-based transactions (Note 19)
|
-
|
-
|
-
|
-
|
5,563
|
-
|
-
|
-
|
5,563
|
|||||||||||||||||||||||||||
|
Balance, June 30, 2019
|
12
|
-
|
96,207
|
9,744
|
19,601
|
(844
|
)
|
1,084
|
(117,176
|
)
|
8,628
|
|||||||||||||||||||||||||
|
Comprehensive income for the year
|
||||||||||||||||||||||||||||||||||||
|
Profit for the year ended June 30, 2020
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
7,770
|
7,770
|
|||||||||||||||||||||||||||
|
Other Comprehensive Income
|
-
|
-
|
-
|
-
|
-
|
(248
|
)
|
(702
|
)
|
-
|
(950
|
)
|
||||||||||||||||||||||||
|
Total Comprehensive income / (loss) for the year
|
-
|
-
|
-
|
-
|
-
|
(248
|
)
|
(702
|
)
|
7,770
|
6,820
|
|||||||||||||||||||||||||
|
Transactions with Owners
|
||||||||||||||||||||||||||||||||||||
|
Repurchase of Share-based transaction (Note 30.2)
|
-
|
-
|
-
|
83
|
(96
|
)
|
-
|
-
|
-
|
(13
|
)
|
|||||||||||||||||||||||||
|
Dividend distribution (Note 21)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(121
|
)
|
(121
|
)
|
|||||||||||||||||||||||||
|
Share-based transactions (Note 19)
|
-
|
-
|
-
|
-
|
834
|
-
|
-
|
-
|
834
|
|||||||||||||||||||||||||||
|
Balance, June 30, 2020
|
12
|
-
|
96,207
|
9,827
|
20,339
|
(1,092
|
)
|
382
|
(109,527
|
)
|
16,148
|
|||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-5
IBEX Limited
|
Notes
|
June 30,
2020
|
June 30,
2019
|
June 30,
2018
|
|||||||||||||
|
(US$’000)
|
||||||||||||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||||||||||
|
Income / (loss) before taxation
|
29
|
10,085
|
19,410
|
(15,935
|
)
|
|||||||||||
|
Adjustments for:
|
||||||||||||||||
|
Depreciation and amortization
|
24,472
|
21,805
|
12,419
|
|||||||||||||
|
Amortization of warrant asset
|
705
|
643
|
-
|
|||||||||||||
|
Foreign currency translation (gain) / loss
|
(195
|
)
|
78
|
521
|
||||||||||||
|
Share warrants
|
28
|
3,138
|
(364
|
)
|
(3,326
|
)
|
||||||||||
|
Phantom expense
|
19.2
|
(31
|
)
|
(300
|
)
|
757
|
||||||||||
|
Share-based payments
|
19
|
390
|
5,262
|
8,936
|
||||||||||||
|
Allowance of expected credit losses
|
9
|
224
|
343
|
1,048
|
||||||||||||
|
Share of profit from investment in joint venture
|
7
|
(534
|
)
|
(351
|
)
|
(280
|
)
|
|||||||||
|
(Gain) / loss on disposal of fixed assets
|
(10
|
)
|
(140
|
)
|
43
|
|||||||||||
|
Provision for defined benefit scheme
|
14.1
|
121
|
129
|
310
|
||||||||||||
|
Impairment on intangibles
|
5
|
777
|
163
|
-
|
||||||||||||
|
Finance costs
|
9,429
|
13,383
|
5,335
|
|||||||||||||
|
Decrease / (Increase) in trade and other receivables
|
9,042
|
(18,019
|
)
|
758
|
||||||||||||
|
Increase in renewal receivables
|
-
|
(35,022
|
)
|
(17,022
|
)
|
|||||||||||
|
(Increase) / decrease in prepayments and other assets
|
(1,435
|
)
|
(173
|
)
|
1,599
|
|||||||||||
|
Increase in trade and other payables and other liabilities
|
7,107
|
8,997
|
4,406
|
|||||||||||||
|
Cash inflow / (outflow) operations
|
63,285
|
15,844
|
(431
|
)
|
||||||||||||
|
Interest paid
|
(9,429
|
)
|
(13,054
|
)
|
(4,451
|
)
|
||||||||||
|
Income taxes paid
|
(2,137
|
)
|
(588
|
)
|
(865
|
)
|
||||||||||
|
Net cash inflow / (outflow) from operating activities
|
51,719
|
2,202
|
(5,747
|
)
|
||||||||||||
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||||||||||
|
Purchase of property and equipment
|
6
|
(4,283
|
)
|
(5,612
|
)
|
(5,194
|
)
|
|||||||||
|
Purchase of other intangible assets
|
5
|
(982
|
)
|
(622
|
)
|
(571
|
)
|
|||||||||
|
Return on investment from joint venture
|
7
|
-
|
96
|
82
|
||||||||||||
|
Proceed from sale of assets
|
30.1
|
-
|
188
|
144
|
||||||||||||
|
Cash adjustment from sale of subsidiary to parent company
|
30.2
|
-
|
(3,554
|
)
|
-
|
|||||||||||
|
Capital repayment from joint venture
|
7
|
430
|
420
|
100
|
||||||||||||
|
Net cash outflow from investing activities
|
(4,835
|
)
|
(9,084
|
)
|
(5,439
|
)
|
||||||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||||||||||
|
Proceeds from line of credit
|
127,567
|
168,674
|
222,750
|
|||||||||||||
|
Repayments of line of credit
|
(142,118
|
)
|
(162,851
|
)
|
(216,254
|
)
|
||||||||||
|
Proceeds from borrowings
|
1,000
|
36,617
|
1,360
|
|||||||||||||
|
Repayment of borrowings
|
(8,033
|
)
|
(6,081
|
)
|
(6,230
|
)
|
||||||||||
|
Repayment of related party loans
|
23.7
|
-
|
(1,200
|
)
|
(1,000
|
)
|
||||||||||
|
Principal payments on lease obligations
|
(12,162
|
)
|
(10,535
|
)
|
(3,163
|
)
|
||||||||||
|
(Repayment) / proceeds from private placement notes
|
13.5
|
-
|
(14,500
|
)
|
5,870
|
|||||||||||
|
Dividend distribution
|
21
|
(121
|
)
|
(1,600
|
)
|
(146
|
)
|
|||||||||
|
Payment of senior preferred shares
|
12.3
|
-
|
(5,972
|
)
|
-
|
|||||||||||
|
Net cash (outflow) / inflow from financing activities
|
(33,867
|
)
|
2,552
|
3,187
|
||||||||||||
|
Effects of exchange rate difference on cash and cash equivalents
|
(20
|
)
|
(316
|
)
|
197
|
|||||||||||
|
Net increase / (decrease) in cash and cash equivalents
|
12,997
|
(4,646
|
)
|
(7,802
|
)
|
|||||||||||
|
Cash and cash equivalents at beginning of the year
|
8,873
|
13,519
|
21,321
|
|||||||||||||
|
Cash and cash equivalents at end of the year
|
21,870
|
8,873
|
13,519
|
|||||||||||||
|
Non-cash items
|
||||||||||||||||
|
New leases
|
24,295
|
89,771
|
1,857
|
|||||||||||||
|
Issuance of warrants
|
28
|
(833
|
)
|
(150
|
)
|
(4,291
|
)
|
|||||||||
|
Actuarial gain on defined benefit scheme
|
14.1
|
184
|
(109
|
)
|
(693
|
)
|
||||||||||
|
Sale of subsidiary
|
30.2
|
-
|
27,594
|
-
|
||||||||||||
The accompanying notes are an integral part of these consolidated financial statements
F-6
IBEX Limited
| 1. |
THE GROUP AND ITS OPERATIONS
|
IBEX Holdings Limited “the Holding Company”, was incorporated on February 28, 2017 and changed its name to IBEX Limited on September 11, 2019. IBEX Limited is hereinafter also referred
to as “the Holding Company”. The registered office of the Holding Company is situated at Crawford House, 50 Cedar Avenue, Hamilton HM 11, Bermuda, which is also the principal place of business of the Holding Company. “The Group” or the “Company”
refers to the Holding Company and its subsidiaries. The Holding Company is controlled by and majority owned by The Resource Group International Limited (“TRGI”) (the “Controlling Shareholder”), of which TRG Pakistan Limited holds a majority
interest in TRGI. These consolidated financial statements of the Holding Company as of June 30, 2020 and 2019 and for the years ended June 30, 2020, 2019 and 2018 (hereafter the financial year) comprise the
financial statements of IBEX Limited and its subsidiaries.
The Group is a leading end-to-end provider of technology-enabled customer lifecycle experience (“CLX”) solutions. Through the Group’s integrated CLX platform, a comprehensive portfolio of solutions is
offered to optimize customer acquisition, engagement, expansion and experience for clients. The Group leverages sophisticated technology and proprietary analytics, in combination with its global contact and delivery center footprint and business
process outsourcing expertise, to protect and enhance clients’ brands. The Group manages approximately 60 million interactions each year with consumers on behalf of clients through an omni-channel approach, using voice, web, chat and email.
On June 26, 2019, the Holding Company transferred the shares of Etelequote Limited (ETQ) to the parent company TRGI. The disposal of ETQ is described in Note 30.2.
The financial position of the Group, its cash, liquidity position and borrowing facilities are described in Note 10, Note 22.3 and Note 13 respectively to the consolidated financial statements. In
addition, Notes 22 and 24 to the consolidated financial statements include the Group’s objectives, policies and processes for managing its capital; financial risk management objectives; details of financial instruments; exposures to credit risk,
market risks and liquidity risks.
Going Concern
As of June 30, 2020, the Group has a net income of $7.8 million, net cash generated from operating activities of $51.7 million and an accumulated deficit of $109.5 million, as compared to June 2019
in which the Company had a net income of $11.0 million, net cash generated in operating activities of $2.2 million and an accumulated deficit of $117.2 million. Current liabilities exceed current assets by $19.6 million as of June 30, 2020 of
which $27.5 million is associated with borrowings, including line of credit which was drawn to $21.5 million at June 30, 2020 (See Note 13.2). The Group has cash and cash equivalents of $21.9 million as of June 30, 2020. As disclosed in Note 31,
Subsequent Events, the Company raised net proceeds of $63.1 million in August 2020 from the initial public offering of its common stock on the Nasdaq Global Market. The Company intends to use the net proceeds received from the offering primarily
for building out additional facilities as well as expand existing facilities, investing in upgraded support systems that improve our internal employee management and real time financial reporting, and/or to repay high interest debt.
The accompanying consolidated financial statements have therefore been prepared assuming that the Group will continue as a going concern for at least a period of twelve months from the date of approval of these
consolidated financial statements. This basis of accounting contemplates the recovery of the Group’s assets and the satisfaction of liabilities in the normal course of business.
In March 2020, the World Health Organization declared the outbreak of COVID-19 as a global pandemic (the “Pandemic”). The Pandemic has had a widespread and detrimental effect on the global economy and has adversely impacted the Company’s
business and results of operations. The Company has experienced travel bans, states of emergency, quarantines, lockdowns, “shelter in place” orders, business restrictions and shutdowns in most countries where it operates. The Company’s containment
measures have impacted its day-to-day operations and disrupted its business.
The adverse impact of the Pandemic was primarily operational in nature related to the complexities of ensuring staffing in those of our sites where the local authorities had imposed lockdowns. Client demand for our services remained robust
despite the Pandemic, and our revenues during the fourth quarter of the fiscal year ended June 30, 2020 were $100.9 million which represents an increase of approximately 14.8% over our revenues for the same period in fiscal year 2019. The high
level of client demand reflects the nature of our client base, where the Pandemic increased demand for customer support, and as a result, our client pricing remained stable, and in some cases, we were able to win client bonuses related to
operational execution.
The Company incurred one-time expenses of $6.1 million (net of client reimbursements) primarily in the form of hotel accommodation expenses for the fiscal year ended June 30, 2020. However, the Company believes that its liquidity and operating
cash flow will be sufficient to absorb additional costs for a period of at least 12 months from date of approval of the consolidated financial statements. Refer to Note 24 and Note 31 for capital risk management and initial public offering (“IPO”),
respectively.
The Group believes that the Pandemic presents both medium term risks and opportunities for our business. In terms of risks, any weakening of the economy could have an overall impact on the level of consumer demand for goods and services, with
knock-on effect on the demand from consumer-facing businesses for customer support. On the other hand, our client base has a heavy preponderance of companies that either provide online services or are enablers of the online economy, and a
prolongation of consumer online activity due to the Pandemic is likely to result in continued demand for services from our clients.
F-7
The Group’s forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current monetary facilities and plans. Management therefore has a
reasonable expectation that the Group has adequate resources to continue its operational existence for a period of at least twelve months from the date of approval of these consolidated financial statements. Thus, they continue to adopt the going
concern basis of accounting in preparation of these consolidated financial statements.
The Group is comprised of the Holding Company and the following direct subsidiaries with the location (country of incorporation and principal place of business), nature of business and ownership percentage:
|
Ownership %
|
||||||||||
|
Description
|
Location
|
Nature of Business
|
2020
|
2019
|
||||||
|
Subsidiaries
|
||||||||||
|
IBEX Global Limited
|
Bermuda
|
Holding Company
|
100
|
%
|
100
|
%
|
||||
|
DGS Limited
|
Bermuda
|
Holding Company
|
100
|
%
|
100
|
%
|
||||
|
iSky Inc.
|
Bermuda
|
Holding Company
|
100
|
%
|
100
|
%
|
||||
|
iSky Canada Technologies Inc.
|
Canada
|
Market Research
|
100
|
%
|
100
|
%
|
||||
Please refer to Note 30 for the indirect subsidiaries of the Holding Company.
| 2. |
BASIS OF PREPARATION
|
| 2.1. |
Statement of compliance
|
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (IFRS), as issued by
the International Accounting Standards Board (IASB).
The principal accounting policies applied in the preparation of the consolidated financial statements are set out below. These policies have been consistently applied to all of the years presented,
except with respect to the adoption of accounting standards described below:
The Group has adopted IFRS 15 as of July 1, 2018 and early adopted IFRS 16 Leases as of July 1, 2018.
The Group has adopted IFRIC 23 effective from July 1, 2019 and reassessed its judgements and estimates related to income tax treatments in various jurisdictions. There are no material uncertain tax
treatments that would require adjustment to the income tax expense.
These consolidated financial statements do not include any information or disclosures that, not requiring presentation due to their qualitative significance, have been determined as immaterial or of
no relevance pursuant to the concepts of materiality or relevance defined in the IFRS conceptual framework, insofar as the Group’s consolidated financial statements, taken as a whole, are concerned. All amounts are presented in thousands of
dollars, unless otherwise indicated, rounded to the nearest $1,000.
| 2.2. |
Basis of accounting and presentation
|
Through the Reorganization Transaction, which took place in April 2017, the Holding Company acquired from TRGI 100% ownership of IBEX Global Limited, Etelequote Limited, DGS Limited, iSky Inc. and various subsidiaries (listed above and in Note
30, - referred to as “the Continuing Business Entities”) and issued its shares to TRGI in exchange. Prior to the Reorganization Transaction TRGI controlled each of the Continuing Business Entities by virtue of its controlling interests in the
predecessors to IBEX Global Limited, Etelequote Limited, DGS Limited and iSky Inc., all of which now have become part of the Group, which is controlled by TRGI.
As common control transactions are outside the scope of IFRS 3 ‘Business Combinations’ the management has, as required by International Accounting Standard (IAS) 8 ‘Accounting Policies, Change in
Accounting Estimates and Errors’, used its judgement in applying an accounting policy which reflects the economic substance of the transaction to account for the Continuing Business Entities.
The Group’s management considers the pooling of interest method of accounting to be appropriate to account for the combination of various
subsidiaries controlled by TRGI with the Holding Company. As a result, the Holding Company and its subsidiaries are presented as if they have legally been a group of companies since TRGI controlled each entity.
F-8
| 2.3. |
Basis of measurement
|
The consolidated financial statements have been prepared on the basis of historical cost convention, except as otherwise disclosed, and assuming that the Group will continue as a going concern, which
contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
| 2.4. |
Functional and presentation currency
|
As noted in Note 25.1, the Group generates more than 97% of its revenue in the United States of America, which is denominated in United States Dollars (US$ or USD). However, the Group conducts
transactions in multiple currencies to carry out its business in various other jurisdictions as needed. The consolidated financial statements are presented in US$, which is the Holding Company’s functional and presentation currency. Amounts are
rounded to the nearest thousands of US$, unless otherwise stated.
Transactions denominated in foreign currencies are translated into $USD at the exchange rate at the end of the previous month-end. Monetary items in the statement of financial position are translated
at the closing rate at each reporting date and the relevant translation adjustments are recognized in the financial result.
| 2.5. |
Critical accounting estimates and judgements
|
These consolidated financial statements are prepared in conformity with IFRS as issued by the IASB, which requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the periods. Accounting estimates require the use of significant management assumptions and judgments as to future
events, and the effect of those events cannot be predicted with certainty. The accounting estimates will change as new events occur, more experience is acquired and more information is obtained. We evaluate and update our assumptions and estimates
on an ongoing basis and use outside experts to assist in that evaluation when we deem necessary.
In the process of applying the Group’s accounting policies, management has made the following estimates and judgments which are significant to the consolidated financial statements:
Accounting estimates
| • |
Impairment of intangibles
|
Goodwill: The calculation for considering the impairment of the carrying amount of goodwill requires a comparison of the recoverable amount of the cash-generating
units to which goodwill has been allocated, to the value of goodwill and the associated assets in the consolidated statement of financial position. The calculation of recoverable amount requires an estimate of the future cash flows expected
to arise from the cash generating unit. Judgement is applied in selection of a suitable discount rate and terminal value. The key assumptions made in relation to the impairment of goodwill are set out in Note 4.
Indefinite Lived Intangibles (patent and trademarks): The indefinite lived intangibles are tested for impairment by comparing their carrying amount to the estimates of their fair value based on estimates of
discounted cash flow method. In those instances where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is written down
accordingly. For more information see Note 5.
| • |
Impairment of financial assets
|
The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade receivables and contract assets. To measure expected credit losses on a
collective basis, trade receivables and contract assets are grouped based on similar credit risk and aging. The contract assets have similar risk characteristics to the trade receivables for similar types of contracts. For more information see Note
22.
| • |
Depreciation and amortization
|
Estimation of useful lives of property and equipment and intangible assets: The Group estimates the useful lives of property and equipment and intangible assets based on the period over
which the assets are expected to be available for use. The estimated useful lives of property and equipment and intangible assets are reviewed periodically and are updated if expectations differ from previous estimates due to physical wear and
tear, technical or commercial obsolescence and legal or other limits on the use of the assets. For more information see Note 5 and 6.
F-9
| • |
Market value of common shares / fair market value of warrants
|
As the Company is not listed on a public market place as of June 30, 2020, the calculation of the market value of its common shares is subject to a greater degree of estimation in determining the
basis for any share awards that the Company may issue.
For purposes of determining the historical share-based compensation expense, the Company used the Monte Carlo simulation to calculate the fair value of the restricted stock awards (the “RSAs”) on the
grant date. The determination of the grant date fair value of the RSAs using a pricing model is affected by estimates and assumptions regarding a number of complex and subjective variables. These variables include the estimated fair value of the
common shares, the expected price volatility of the common shares over the expected term of the RSAs and exercise and cancellation behaviors, each of which are estimated as follows:
| • |
Fair value of the Company’s common shares. As the Company’s common shares are not publicly traded as of June 30, 2020, the Company must estimate the fair value of the common shares, as discussed in
“Valuations of Common Shares” below.
|
| • |
Volatility. Since there is no trading history for the Company’s common shares as of June 30, 2020, the expected price volatility for the common shares was estimated using the average historical volatility of
the shares of our industry peers as of the grant date of the Company’s RSAs over a period of history commensurate with the expected life of the awards. To the extent that volatility of the share price increases in the future, the estimates
of the fair value of the awards to be granted in the future could increase, thereby increasing share-based payment expense in future periods. When making the selection of the industry peers to be used in measuring implied volatility of the
RSAs, the Company considered the similarity of their products and business lines, as well as their stage of development, size and financial leverage. The Company intends to continue to consistently apply this process using the same or
similar public companies until a sufficient amount of historical information regarding the volatility of the Company’s own share price becomes available, or unless circumstances change such that the identified companies are no longer
similar to the Company, in which case, more suitable companies whose share prices are publicly available would be utilized in the calculation.
|
| • |
Expected life of the RSAs. The Company calculated the weighted-average expected life of the RSAs to be four years based on management’s best estimates regarding the effect of vesting schedules. RSAs granted
may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent or distribution.
|
Valuations of Common Shares
Given the absence of an active market for the Company’s common shares as of June 30, 2020, the Company was required to estimate the fair value of its common shares at the time of each grant. The
Company considered objective and subjective factors in determining the estimated fair value of its common shares on each RSA grant date. Factors considered by the Company included the following:
| • |
third-party valuations of the Company’s common shares;
|
| • |
the lack of marketability of Company’s common shares;
|
| • |
the Company’s historical and projected operating and financial performance;
|
| • |
the Company’s introduction of new services;
|
| • |
the Company’s stage of development;
|
| • |
the global economic outlook and its expected impact on the business;
|
| • |
the market performance of comparable companies; and
|
| • |
the likelihood of achieving a liquidity event for the common shares underlying the awards, such as an initial public offering or sale of the Company, given prevailing market conditions.
|
The Company determined valuations of its common shares for purposes of granting awards through a two-step valuation process described below. The Company first estimated the value of its equity. The
Company utilized the income and market approaches to estimate its equity value. Then, the Company’s equity value was allocated across the Company’s various equity securities to arrive at a value for the common shares. The income approach, which
relies on a discounted cash flow (“DCF”) analysis, measures the value of a company as the present value of its future economic benefits by applying an appropriate risk-adjusted discount rate to expected cash flows, based on forecasts of revenue and
costs.
The Company used two forms of the market approach to determine a fair market value for its equity: (i) the guideline public company method (the “GPCM”), and (ii) the merger and acquisition method (the
“MAM”).
The GPCM involves the review of pricing and performance information for public companies deemed generally similar to a subject company and subject to similar industry dynamics. The MAM consists of a
review of transactions involving similar companies over the last five years. The valuation conclusion was based on the income approach (using DCF analysis), GPCM, and MAM. The Company assigned more weight to the DCF as it better reflected the
Company’s operations and placed less weight to the GPCM and MAM. More specifically, less weight was assigned to the MAM as compared to the GPCM given the limited number of transactions involving comparable companies, which made the MAM less
meaningful relative to the GPCM.
For each valuation report, the Company first prepared a financial forecast to be used in the computation of the enterprise value using the income approach. The financial forecasts took into account
our past experience and future expectations. Second, the risks associated with achieving these forecasts were assessed in selecting the appropriate discount rate. There is inherent uncertainty in these estimates. Third, the Company allocated the
resulting equity value among the securities that comprise our capital structure. The aggregate value of the common shares was then divided by the number of common shares outstanding to arrive at the per share value.
F-10
Since the fair value of the Company’s common shares has been determined partially by using the DCF analysis, the valuations have been heavily dependent on the Company estimates of revenue, costs and
related cash flows. These estimates are highly subjective and may change frequently based on both new operating data as well as various macroeconomic conditions that impact the Company’s business. Each of the valuations was prepared using data that
was consistent with the Company’s then-current operating plans that the Company was using to manage its business.
In addition, the DCF calculations are sensitive to highly subjective assumptions that the Company was required to make relating to its financial forecasts and the selection of an appropriate discount
rate, which was based on the Company’s estimated cost of equity.
The Company’s discount rate was determined based on the stage of development at each valuation date and was quantified based on a risk-free discount rate for government debt, capital markets risk, the
Company’s sector and size.
The Company granted 2,373,374 restricted share awards at a fair value of $0.61 per restricted common share in December 2018. The fair value of the restricted common shares was based on a Monte Carlo
simulation, which can be considered a form of the probability weighted expected return method (“PWERM”), using an equity value as determined via the income approach (present value of discounted cash flows) and the market approaches (guideline
public company method and mergers and acquisition method).
On December 22, 2018, the preference shares were entitled to an aggregate of $149.2 million in participating and non-participating preference. This amount was significantly higher than the fair value
of the Company as determined by the Board of Directors as of November 30, 2018 on the basis of the independent valuation referred to in the previous paragraph. Because the common shares are not entitled to any distribution until the applicable
preferences are satisfied, the fair value of the common shares was significantly lower than the fair value of the preference shares on November 30, 2018.
Additionally, the Company will also require the calculation of the fair market value of the warrants associated with the Amazon transaction. For factors used in determining the fair value of the
warrants refer to Note 28.
| • |
Legal provisions:
|
The Group reviews outstanding legal cases following developments in the legal proceedings and at each reporting date, in order to assess the need for provisions and disclosures in its consolidated
financial statements. Among the factors considered in making decisions on provisions are the nature of litigation, claim or assessment, the legal process and potential level of damages in the jurisdiction in which the litigation, claim or
assessment has been brought, the progress of the case (including the progress after the date of the consolidated financial statements but before those statements are issued), the opinions or views of legal advisers, experience on similar cases and
any decision of the Group’s management as to how it will respond to the litigation, claim or assessment. Refer to Note 16.
Judgements
| • |
Leases:
|
In some cases, judgement may be required in determining whether a contract contains a lease. This assessment involves the exercise of judgement about whether it depends on specific lease, whether the
Group obtains substantially all the economic benefits from the use of that asset and whether the Group has the right to direct the use of that asset. In addition, determining the lease term, the Group considers all facts and circumstances that
create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain (in accordance with
lease contracts) to be extended (or not terminated).
The lease liability is measured at the present value of the lease payments discounted using the interest rate implicit in the lease. If the implicit rate cannot be readily determined, the Group uses an incremental borrowing rate specific to the country, term and currency of the contract.
| • |
Staff retirement plans:
|
The net defined benefit pension scheme assets or liabilities are recognized in the Group’s consolidated statement of financial position. The determination of the position requires assumptions to be
made regarding future salary increases, mortality, discount rates and inflation. The key assumptions made in relation to the pension plans are set out in Note 14.1.
| • |
Share-based payments:
|
The share-based payments expense is recognized in the Group’s consolidated statement of profit or loss and comprehensive income. The key assumptions made in relation to the share-based payments are
set out in Note 19.
| • |
Provision for taxation:
|
The Group is subject to income tax in several jurisdictions and significant judgement is required in determining the provision for income taxes. During the ordinary course of business, there are
transactions and calculations for which the ultimate tax determination is uncertain. As a result, the company recognizes tax liabilities based on estimates of whether additional taxes and interest will be due. These tax liabilities are recognized
when, despite the company’s belief that its tax return positions are supportable, the Company believes that certain positions are likely to be challenged and may not be fully sustained upon review by tax authorities. The Company believes that its
accruals for tax liabilities are adequate for all open audit years based on its assessment of many factors including past experience and interpretations of tax law. This assessment relies on estimates and assumptions and may involve a series of
complex judgments about future events. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact income tax expense in the period in which such determination is made.
The key assumptions made in relation to tax provisioning are set out in Note 18.
F-11
| 3. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
| 3.1. |
Basis of consolidation
|
The consolidated financial statements present the results of the Holding Company and its subsidiaries as if they formed a single entity. Intercompany transactions and balances between group companies
are therefore eliminated in full.
Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements are present:
| • |
power over the investee,
|
| • |
exposure to variable returns from the investee, and
|
| • |
the ability of the investor to use its power to affect those variable returns.
|
Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.
De-facto control exists in situations where the Company has the practical ability to direct the relevant activities of the investee without holding the majority of the voting rights. In determining
whether de-facto control exists the Company considers all relevant facts and circumstances, including:
| • |
The size of the company’s voting rights relative to both the size and dispersion of other parties who hold voting rights
|
| • |
Substantive potential voting rights held by the Company and by other parties
|
| • |
Other contractual arrangements
|
| • |
Historic patterns in voting attendance
|
The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the consolidated statement of financial position, the acquiree’s identifiable
assets, liabilities and contingent liabilities are initially recognized at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of profit or loss and other comprehensive income
from the date on which control is obtained. They are deconsolidated from the date on which control ceases.
Joint arrangements
The Group is a party to a joint arrangement when there is a contractual arrangement that confers joint control over the relevant activities of the arrangement to the Group and at least one other
party. Joint control is assessed under the same principles as control over subsidiaries.
The group classifies its interests in joint arrangements as either:
| • |
Joint ventures: where the Group has rights to only the net assets of the joint arrangement
|
| • |
Joint operations: where the Group has both the rights to assets and obligations for the liabilities of the joint arrangement.
|
In assessing the classification of interests in joint arrangements, the Group considers:
| • |
The structure of the joint arrangement
|
| • |
The legal form of joint arrangements structured through a separate vehicle
|
| • |
The contractual terms of the joint arrangement agreement
|
| • |
Any other facts and circumstances (including any other contractual arrangements).
|
F-12
Joint ventures are initially recognized in the consolidated statement of financial position at cost. Subsequently joint ventures are then accounted for using the equity method, where the Group’s share
of post-acquisition profits and losses and other comprehensive income is recognized in the consolidated statement of profit or loss and other comprehensive income (except for losses in excess of the Group’s investment in the joint ventures unless
there is an obligation to make good those losses).
Any premium paid for an investment in a joint venture above the fair value of the Group’s share of the identifiable assets, liabilities and contingent liabilities acquired is capitalized and included
in the carrying amount of the investment in joint venture. Where there is objective evidence that the investment in a joint venture has been impaired the carrying amount of the investment is tested for impairment in the same manner as other
non-financial assets.
Unrealized gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint ventures. Unrealized losses are also eliminated unless the
transaction provides evidence of an impairment of the asset transferred. Accounting policies of the joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group.
Non-current assets (or disposal groups) held for sale and discontinued operations
Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale
is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits, financial assets and investment property
that are carried at fair value and contractual rights under insurance contracts, which are specifically exempt from this requirement.
An impairment loss is recognized for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognized for any subsequent increases in fair
value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognized. A gain or loss not previously recognized by the date of the sale of the non-current asset (or disposal group) is
recognized at the date of derecognition. Non-current assets (including those that are part of a disposal group) are not depreciated or amortized while they are classified as held for sale. Interest and other expenses attributable to the liabilities
of a disposal group classified as held for sale continue to be recognized. Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from the other assets in the statement
of financial position. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the statement of financial position.
A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of
operations, is part of a single coordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately in the
statement of profit or loss. Refer to Note 30.2.
| 3.2. |
Property and equipment
|
Owned
Items of property, plant and equipment are initially recognized at cost. The initial cost of an item of property and equipment consists of its purchase price including import duties, taxes and
directly attributable costs of bringing the asset to its working condition and location for the intended use. Additionally, any direct labor costs that is directly attributable to the development of software is capitalized.
Depreciation on assets under construction does not commence until they are complete and available for use. Depreciation is provided on all other items of property, plant and equipment so as to reduce
their carrying value over their expected useful economic lives.
Depreciation on property and equipment is provided using the straight line method. A full month’s depreciation is charged in the month of addition, and no depreciation is charged in the month of
disposal. Rates of depreciation are disclosed in Note 6 (property and equipment).
F-13
|
Property and equipment
|
Useful economic life
|
Depreciation
method
|
|
Buildings on freehold land
|
10 years
|
Straight line
|
|
Leasehold improvements
|
3 - 5 years or life of lease if less
|
Straight line
|
|
Furniture, fixture and office equipment
|
3 - 5 years
|
Straight line
|
|
Telecommunications and computer equipment
|
3 years
|
Straight line
|
|
Vehicles
|
5 years
|
Straight line
|
|
Right of Use Assets
|
expected term of lease
|
Straight line
|
The assets’ residual values, useful lives and methods of depreciation are reviewed at each financial year-end and adjusted prospectively, if appropriate.
Right of use assets and lease liabilities
This standard is mandatory for the accounting period beginning on January 1, 2019, but the Group early adopted it on July 1, 2018 under the modified retrospective approach.
The Group recognizes a right-of-use asset and a lease liability at the commencement date, except for short-term leases of 12 months or less and low value. Measurement of right-of-use assets and lease liabilities are
as follows:
| • |
The lease liability is initially measured at the commencement date at the present value of the remaining lease payments using the incremental borrowing rate specific to the country, term and currency of the contract. The lease liability
is subsequently measured at amortized cost using the effective interest rate method and re-measured (with a corresponding adjustment to the related ROU asset) when there is change in future lease payments in case of renegotiation, change of
an index or rate or in case of reassessment of options. Interest on the lease liability is measured on the discount rate.
|
| • |
At inception, the ROU asset comprises the initial lease liability, initial direct costs and the obligation to refurbish the asset, less any incentives granted by the lessors. The ROU asset is depreciated over the shorter of the lease
term or the useful life of the underlying asset. The ROU asset is subject to testing for impairment if there is an indicator for impairment, as indicated in Note 3.4.
|
Payments associated with short-term leases and leases of low-value assets are recognized on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12
months or less.
ROU assets are included in the heading Property and Equipment (see Note 6.2), the lease liability is shown separately as current and non-current in the statements of financial position, and interest
on the lease liability is included in the heading Finance Expenses.
| 3.3. |
Intangible assets
|
| 3.3.1. |
Goodwill
|
Goodwill represents the excess of the cost of a business combination over the total acquisition date fair value of the identifiable assets, liabilities and contingent liabilities acquired.
Cost comprises the fair value of assets given, liabilities assumed and equity instruments issued, plus the amount of any non-controlling interests in the capital plus, if the business combination is
achieved in stages, the fair value of the existing equity interest in the capital. Contingent consideration is included in cost at its acquisition date fair value and, in the case of contingent consideration classified as a financial liability,
re-measured subsequently through the consolidated statement of profit or loss. Direct costs of acquisition are expensed immediately.
Goodwill is capitalized as an intangible asset with any impairment in carrying value being charged to the profit or loss. Where the fair value of identifiable assets, liabilities and contingent
liabilities exceed the fair value of consideration paid, the excess is credited in full to the profit or loss on the acquisition date.
F-14
| 3.3.2. |
Other intangible assets
|
Externally acquired intangible assets are initially recognized at cost and subsequently amortized on a straight-line basis over their useful economic lives.
Intangible assets are recognized on business combinations if they are separable from the acquired entity or give rise to other contractual/legal rights. The amounts ascribed to such intangibles are
arrived at by using appropriate valuation techniques
Expenditure on internally developed products is capitalized if it can be demonstrated that:
| • |
it is technically feasible to develop the product for it to be sold
|
| • |
adequate resources are available to complete the development
|
| • |
there is an intention to complete and sell the product
|
| • |
the Group is able to sell the product
|
| • |
sale of the product will generate future economic benefits, and
|
| • |
expenditure on the project can be measured reliably
|
Capitalized development costs are amortized over the periods the Group expects to benefit from selling the products developed. The amortization expense is included within the “Depreciation and
amortization” line in the profit or loss. Development expenditures not satisfying the above criteria and expenditures associated with the research phase of internal projects is charged out in the consolidated statements of profit or loss and other
comprehensive loss.
The significant intangibles recognized by the Group, their useful economic lives and the methods used to determine the cost of intangibles acquired in a business combination are as follows:
|
Intangible Asset
|
Useful economic life
|
Valuation method
|
|
Customer lists
|
5 - 6 years
|
Straight line
|
|
Software
|
3 - 5 years
|
Straight line
|
| 3.4. |
Impairment of non-financial assets
|
Goodwill and other intangibles:
Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken annually at the financial year end. Additionally, these assets are subject to impairment
tests whenever events or changes in circumstances which indicate that their carrying amount may not be recoverable. In those instances where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair
value less costs to sell), the asset is written down accordingly.
When it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the smallest group of assets to which it belongs for which there are separately
identifiable cash flows; its cash generating units (“CGUs”).
Goodwill is allocated on initial recognition to each of the Group’s CGUs that are expected to benefit from a business combination that gives rise to the goodwill.
Property and Equipment:
The carrying amounts of the Group’s assets including right-of-use assets are reviewed at the end of each reporting period to determine whether there is any indication of impairment
loss. If any such indication exists, the asset’s recoverable amount is estimated in order to determine the extent of the impairment loss, if any. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset’s fair value less cost to sell and value in use. Impairment losses are charged to the profit and loss in other operating expenses. During the years ended June 30,
2020 and 2019, no impairments have been recorded.
F-15
Impairment charges are included in the profit or loss, except to the extent they reverse gains previously recognized in other comprehensive income. An impairment loss recognized for goodwill is not
reversed.
| 3.5. |
Financial instruments
|
| 3.5.1. |
Financial assets
|
The Group classifies all its financial assets at amortized cost. The Group has not classified any of its financial assets at fair value through profit or loss.
The Group includes in this category trade and other receivables, deposits, due from related parties and cash and cash equivalents.
These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services to
customers (e.g. trade receivables), but also incorporate other types of contractual monetary asset.
They are initially recognized at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortized cost using the effective interest rate method,
less provision for impairment.
For impairment provisions, the Group applies the IFRS 9 simplified approach to measure expected credit losses using a lifetime expected credit loss provision for trade receivables to measure expected credit losses on a
collective basis. Trade receivables are grouped based on a similar credit risk and ageing. Our historic treatment is not materially different to the simplified approach under IFRS 9. The Company measures ECL and recognizes credit loss allowance at
each reporting date. The measurement of ECL reflects: (i) an unbiased and probability weighted amount that is determined by evaluating a range of possible outcomes, (ii) time value of money and (iii) all reasonable and supportable information that
is available without undue cost and effort at the end of each reporting period about past events, current conditions and forecasts of future conditions. The expected loss rates are based on the Group’s historical credit losses experienced over the
three year period prior to the period end. The historical loss rates are then adjusted for current and forward-looking information on macroeconomic factors affecting the Group’s customers. The Group has identified the gross domestic product (GDP),
unemployment rate and inflation rate as the key macroeconomic factors in the countries where the Group operates. Other financial assets includes time deposits and other receivables, and the Group has determined that credit risk has not increased
significantly on those assets and considers to have low credit risks at the reporting date.
The Group applies the IFRS 9 general approach to measure expected credit losses using a lifetime expected credit loss provision for related party balances to measure expected credit losses on a
collective basis.
From time to time, the Group elects to renegotiate the terms of trade receivables due from customers with which it has previously had a good trading history. Such renegotiations will lead to changes
in the timing of payments rather than changes to the amounts owed and, in consequence, the new expected cash flows are discounted at the original effective interest rate and any resulting difference to the carrying value is recognized in the profit
and loss.
The Group’s assets at amortized costs comprise trade and other receivables, deposits, due from related parties and cash and cash equivalents in the consolidated statement of financial position.
Cash and cash equivalents includes cash in hand, deposits held at call with banks, and other short term highly liquid investments with original maturities of three months or less.
| 3.5.2. |
Financial liabilities
|
The Group classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was acquired.
Fair value through profit and loss (“FVTPL”):
The warrant liability is classified as a financial liability at FVTPL and valued using the Monte Carlo simulation. Financial liabilities at FVTPL are stated at fair value, with any gains or losses
arising on re-measurement recognized in profit or loss.
Fair value through other comprehensive income (“FVTOCI”):
The Group uses cash flow hedge to manage interest rate risk. The swaps are accounted for at fair value at each balance sheet date and the changes in the market price are recorded in other
comprehensive income.
The positive fair values of interest rate swaps are included in other receivables and other comprehensive income. The negative fair values of interest rate swaps are included in payables and other
comprehensive income.
F-16
Financial liabilities at amortized cost:
The Group includes in this category trade and other payables, borrowings, and due to related parties.
Trade payables and other short-term monetary liabilities, which are initially recognized at fair value and subsequently carried at amortized cost using the effective interest method. Gains and losses
are recognized in the profit or loss when the liabilities are derecognized as well as through the effective interest rate method amortization process. The effective interest method is a method of calculating the amortized cost of a financial
liability and of allocating interest costs over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability or (where appropriate) to the
net carrying amount on initial recognition.
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instruments. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment. Changes in assumptions could significantly affect the estimates.
Financial liabilities at amortized cost are initially recognized at fair value net of any transaction costs directly attributable to the issue of the instrument.
Interest bearing liabilities are subsequently measured at amortized cost using the effective interest rate method, which ensures that any interest expense over the period to repayment is at a constant
rate on the balance of the liability carried in the consolidated statement of financial position.
For the purposes of each financial liability, interest expense includes initial transaction costs and any premium payable on redemption, as well as any interest or coupon payable while the liability
is outstanding.
Receivables and payables made to the Group companies outside the control of IBEX Limited are presented under the heading due to/from related parties. When denominated in a currency other than the US
dollar, they are translated to US dollar at closing rates. Related parties receivables and payables are initially recognized at fair value and subsequently measured at amortized cost.
| 3.6. |
Trade receivables
|
Trade receivables are recognized and carried at original invoice amount less an allowance for expected credit losses.
| 3.7. |
Cash and cash equivalents
|
Cash and cash equivalents includes cash in hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less. Bank overdrafts are
shown within loans and borrowings in current liabilities on the consolidated statement of financial position.
| 3.8. |
Revenue from Contracts with Customers
|
The Group has adopted IFRS 15 as of July 1, 2018 with Cumulative catch-up approach.
IFRS 15 lays out a five step process to ascertain the amount and timing of revenue that should be recognized.
| • |
Step 1: Identify the contract: The Company determines whether a contract exists between the reporting entity and customers that identifies rights, payment terms, has commercial substance and basis for collectability can be determined.
|
| • |
Step 2: Identify the Performance Obligations: The Company reviews the nature of the goods or service to be rendered in the contract and whether these are distinct. The reporting entity should recognize the revenue when it satisfies the
performance obligations.
|
| • |
Step 3: Determine the transaction price: The amount of consideration expected to be received is defined which may be fixed or variable. With variable consideration the reporting entity can reasonably estimate the expected consideration.
This step includes consideration of the various criteria which need to be identified and analyzed in determining whether revenues are fixed, variable or both.
|
| • |
Step 4: Allocate the transaction price to the performance obligations in the contracts – Where separate performance obligations exist, the reporting entity allocates and assigns the consideration to the respective performance
obligations.
|
| • |
Step 5: Revenue Recognition: Recognize revenue to when the entity satisfies the performance obligations.
|
F-17
Business Process Outsource (BPO):
Revenues from contact center services are recognized over the period as the services are performed on the basis of the number of billable hours or other contractually agreed metrics. Revenues from inbound and
outbound telephonic and internet-based communication services that are customized to the customers’ needs are recognized at the contractual rates as services are provided. Revenues for the initial training that occurs upon commencement of a new
client contract are deferred and recognized over the estimated life of the client program if that training is billed to a client. Training revenues are deferred and then recognized on a straight-line basis over the life of the client contract, as
it is not considered to have a standalone value to the customer. The related expenses are immediately charged to the statement of profit or loss as incurred. Revenues are recognized in the amount as per the contractual billing rights which has a
right to invoice net of discounts, incentives, and other credits as per contractual terms. The contact center solutions consist of customer service, technical support and other value added outsourced back office services. This omni-channel offering
is delivered through voice, email, chat, SMS, social media and other communication applications.
Revenues from CX services are recognized over the period of a client’s subscription contract on a basis that reflects usage of the product at the client’s location. Revenues and expenses related to set-up fees to
customize the customer experience solution for client’s specific needs are deferred and recognized on a straight-line basis over the period in which the related service delivery is expected to be performed. Revenues related to additional consulting
services are recognized over the period as the related services are performed on a per hour basis. The customer experience solution is comprised of a comprehensive suite of proprietary software tools to measure, monitor and manage the customer
experience.
Revenues from Digital services are recognized upon the successful purchase of clients’ services as reported to the Group in monthly, semi-monthly or weekly intervals by clients. The data provided by clients to the
Group include detail on pricing and product level activations from all channels (i.e. web-portal orders, call center orders, or affiliate or partner orders placed on the Group’s behalf) on the basis of which the clients calculate the payments owed
to the Group. The payments received are reconciled to the activation data transmitted to the Group by the clients. Revenue is recognized from Digital Services at a point of time. Most of the digital solutions are based on two steps: (a) generating
or purchasing a lead or a prospect, and (b) converting that lead or prospect into a customer, most frequently through a voice-based channel. Customers are primarily acquired for clients in the telecommunications, cable, technology and insurance
industries.
Revenues from ETQ (discontinued operations) consist of commissions earned primarily from the sale by the Group to senior citizens and other eligible recipients (e.g. people with disabilities) of Medicare private
insurance policies offered by leading U.S. insurance carriers. The commissions earned are dependent on the type of Medicare product sold, where the insured is based and the month in which the policy becomes effective. The commissions are based on a
pre-determined rate card for which guidance and ranges are set by the regulatory body - CMS (Center for Medicare and Medicaid). The Company recognizes revenue on the sale date of the insurance policy after taking appropriate provisions for any
cancellations during the first year of sale. Once the Carrier accepts a new insured, a carrier confirmation number is generated and the sale is made on the date the policy comes into effect. The Carrier then pays a commission to Company at the
agreed rates for the first full year (initial year) of the policy.
For renewal commissions, the Group incorporates a combination of historical lapse and premium increase data along with available industry and insurance carrier experience data to estimate forecasted renewal
consideration and constrain revenue recognized to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. The uncertainty associated with the variable consideration is subsequently
resolved when the policy renews.
Costs of fulfilling contracts do not result in the recognition of an asset as the majority of revenue is recognized over time and control of the asset is transferred to the customer when the service is transferred
therefore no asset in relation to costs to fulfil contracts has been recognized. In relation to costs incurred to obtain a contract, no asset is recognized because the majority of costs (i.e. travel, employee commission, administrative expenses)
are short-term in nature and also insignificant therefore they are recognized in the profit and loss account when incurred.
| 3.9. |
Provisions
|
A provision is recognized in the statement of financial position when the Group has a legal or constructive obligation as a result of a past event; it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
The Group has recognized provisions against legal disputes. Provisions are made for costs to defend legal disputes where it is considered that an outflow of economic benefit is probable. Provisions
are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase
in the provision due to passage of time is recognized as interest expense in profit and loss. Provisions are reviewed at each statement of financial position date and adjusted to reflect the current best estimate.
F-18
| 3.10. |
Profit or loss from discontinued operations
|
A discontinued operation is a component of the Group that either has been disposed of, or is classified as held for sale. Profit or loss from discontinued operations comprises the post-tax profit or
loss of discontinued operations and the post-tax gain or loss recognized on the measurement to fair value less costs to sell or on the disposal group(s) constituting the discontinued operation (see also Note 30.2).
| 3.11. |
Retirement benefits
|
Defined contribution pension schemes
Contributions to defined contribution pension schemes are charged to the profit or loss in the year to which they relate.
United States based subsidiaries
The Group’s United States (“US”) based subsidiaries have qualified defined contribution plans. Employees who meet certain eligibility requirements, as defined, are able to contribute up to federal
annual maximums. The Retirement Plan provides for company matching contributions of 25.0% of the first 6.0% of employee contributions to the Retirement Plan, which vests 25.0% per year over a four-year period.
TRG Marketing Solutions Limited
This subsidiary operates a defined contribution pension plan with a third party. Under this scheme, TRG Marketing Solutions Limited makes contributions for employees who have not opted out of the
voluntary pension scheme.
Virtual World (Private) Limited and IBEX Global Solutions (Private) Limited
Virtual World (Private) Limited, IBEX Global Solutions (Private) Limited, and DS (Private) Limited operate a defined contribution plan (i.e. recognized provident fund scheme) for all its permanent
employees. Equal monthly contributions at the rate of 6.5% of the basic salary (Virtual World (Private) Limited) and 6.5% of the gross salary (IBEX Global Solutions (Private) Limited and DGS (Private) Limited) are made to the Provident Fund (the
Fund) both by the subsidiaries and the employees of the respective entities. The assets of the Fund are held separately under the control of trustees for such fund. Contributions made by the subsidiaries are charged to the profit or loss.
Defined benefit schemes
Defined benefit scheme surpluses and deficits are measured at:
| • |
The fair value of plan assets at the reporting date; less
|
| • |
Plan liabilities calculated using the projected unit credit method discounted to its present value using yields available on high quality corporate bonds that have maturity dates approximating to the terms of
the liabilities and are denominated in the same currency as the post-employment benefit obligations; less
|
| • |
The effect of minimum funding requirements agreed with scheme trustees
|
Re-measurements of the net defined obligation are recognized directly within other comprehensive income. The re-measurements include:
| • |
Actuarial gains and losses
|
| • |
Return on plan assets (interest exclusive)
|
| • |
Any asset ceiling effects (interest exclusive)
|
Service costs are recognized in the profit or loss, and include current and past service costs as well as gains and losses on curtailments.
Net interest expense / income is recognized in the profit or loss, and is calculated by applying the discount rate used to measure the defined benefit obligation / asset at the beginning of the annual
period to the balance of the net defined benefit obligation / asset, considering the effects of contributions and benefit payments during the period.
Gains or losses arising from changes to scheme benefits or scheme curtailment are recognized immediately in the profit or loss. Settlements of defined benefit schemes are recognized in the period in
which the settlement occurs.
F-19
IBEX Philippines, Inc. and IBEX Global Solutions (Philippines) Inc. operate an unfunded defined benefit scheme.
Under the plan, pension costs are actuarially determined using the projected unit credit method. This method considers each period of service as giving rise to an additional unit of benefit
entitlement and measures each unit separately to build up the final obligation. Gains or losses on the curtailment or settlement of pension benefits are recognized when the curtailment or settlement occurs. All actuarial gains and losses are
recognized in the year in which they arise, with re-measurements presented within other comprehensive income. The net interest cost is derived by applying a single discount rate to the net surplus or deficit of the fund.
| 3.12. |
Share-based payments
|
In December 2018, the Group terminated both the Stock Option Plan as well as the Phantom Plan, with the exception of those in IBEX Global Solutions (Philippines) Inc., IBEX Global ROHQ, and IBEX
Global Jamaica Limited. The Group in the same period issued the Restricted Stock Plan (RSA). During the year June 30, 2020, the Group issued the Long Term Incentive Plan (LTIP). The details of the share-based compensation plans are given in Note
19 (Share based compensation plans) to these consolidated financial statements.
The Company uses the fair value method of accounting for the share options, restricted stock award plan and long term incentive plan. The fair value of these share options are estimated using the
option pricing model. The measurement of share options at fair value is based on the option pricing model taking into account the following variables:
| • |
The share price.
|
| • |
The strike price.
|
| • |
Volatility determined based on historical prices of our shares.
|
| • |
The duration, which has been estimated as the difference between the valuation date of the warrant plans and final exercise date.
|
| • |
The risk free interest rate.
|
The measurement of the RSA and option plans are based on the valuation provided by a third party valuation firm which the Group applied as the Fair Value of the awards.
Where equity settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the profit or loss over the vesting period.
Where the terms and conditions of awards are modified before they vest, the increase in the fair value of the awards, measured immediately before and after the modification, is also charged to the
consolidated statement of comprehensive income over the remaining vesting period.
The Group also operates a Phantom share option scheme (a cash settled share-based payment). An option pricing model (Black Scholes) is used to measure the Group’s liability at each reporting date,
taking into account the terms and conditions and the extent to which employees have rendered service. Movements in the liability (other than cash payments) are recognized in the profit or loss.
| 3.13. |
Warrant Shares
|
The Company accounts for the warrants to purchase its common shares in accordance with the provisions of IAS 32 − Financial Instruments: Presentation and IFRS 9 – Financial Instruments. The Company
classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net-cash settle the contract if an event occurs and if that event is outside the control of the Company) or (ii) gives the
counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement).
The Company assessed the classification of warrant as of the date it was issued and determined that such instruments met the criteria for liability classification. The warrant is reported on the
consolidated statement of financial position as a liability at fair value using the Black-Scholes valuation method. The initial value was recorded as a long term liability on the consolidated statements of financial position with the common shares
underlying the warrant which have vested recorded as contra revenue and the remainder recorded to long term assets.
The total fair value of the warrant liability is determined at the end of each reporting period by multiplying the fair value of a warrant by the total number of warrants that are expected to vest
under the arrangement based on the satisfaction of the specified revenue milestones provided in the warrant. The total number of warrants that are expected to vest is based upon the cumulative revenues that are expected, as determined at the end of
each reporting period, to be earned from Amazon during a period of 7.5 years ending on June 30, 2024.
In December 2017, the Group elected to utilize the Black Scholes valuation model to calculate the fair value of the Amazon warrants as the imminent IPO was anticipated to be $14.0 to $15.0, which
would have no impact on the warrant’s strike price. As the IPO did not consummate in March 2018 as anticipated, the Monte Carlo simulation was used to value the warrants in June 2018 to capture the anti-dilution feature if a qualified IPO were to
occur within the next year for calculating the value of the warrants.
F-20
The measurement of the warrant at fair value as of the initial measurement date is based on the Black Scholes valuation model taking into account the following variables:
| • |
The share price.
|
| • |
The strike price.
|
| • |
Volatility determined based on historical prices of our shares.
|
| • |
The duration, which has been estimated as the difference between the valuation date of the warrant plans and final exercise date.
|
| • |
The risk free interest rate.
|
At the end of each reporting period, the Company has fair valued the warrant liability with changes in fair value through profit and loss. For the year ended June 30, 2020 and June 30, 2019, the
Company used the Monte Carlo simulation, which requires the input of subjective assumptions, including the expected volatility and the expected term.
Given the absence of an active market for the common shares as of June 30, 2020, the Company is required to estimate the fair value of its common shares at the time of each grant.
The Company considers a variety of factors in estimating the fair value of its common shares on each measurement date, including:
| • |
the Company’s historical and projected operating and financial performance;
|
| • |
the Company’s introduction of new products and services;
|
| • |
the Company’s completion of strategic acquisitions;
|
| • |
the Company’s stage of development;
|
| • |
the global economic outlook and its expected impact on the Company’s business; and
|
| • |
the market performance of comparable companies.
|
The long-term asset will be amortized on a systematic basis over the life of the arrangement as revenue is recognized for the transfer of the related goods or services as included Note 3.8. The
Company will review the asset on a reporting period basis to determine whether an impairment is required. In the event that an impairment is needed, the company will reduce the asset and offset to revenues.
| 3.14. |
Income taxes
|
Current tax
Current tax expense is based on taxable income at the current rates of taxation of the respective jurisdictions after taking into account applicable tax credits, rebates and exemptions available, if
any.
Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions, where
appropriate, on the basis of amounts management expects to pay to the tax authorities. Any such provisions are based on estimates and are subject to changing facts and circumstances considering the progress of ongoing tax audits, case law and new
legislation.
Deferred tax
Deferred tax assets and liabilities are recognized where the carrying amount of an asset or liability in the consolidated statement of financial position differs from its tax base, except for
differences arising on:
| • |
The initial recognition of goodwill
|
| • |
The initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit, and
|
| • |
Investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the
foreseeable future
|
Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilized.
F-21
The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the deferred tax liabilities /
assets are settled / recovered.
Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes
levied by the same tax authority on either:
| • |
The same taxable group company, or
|
| • |
Different group entities which intend either to settle current tax assets and liabilities on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period in which
significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.
|
| 3.15. |
Foreign Currency
|
Foreign currency translation
Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which they operate (their “Functional Currency”) are recorded at
the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and
liabilities are recognized immediately in the profit or loss. The net exchange losses amounted to $0.4 million for the year ended June 30, 2020 (June 30, 2019: $1.3 million; June 30, 2018: $0.4
million).
On consolidation, the results of overseas operations are translated into dollars at rates approximating to those ruling when the transactions took place. All assets and liabilities of overseas
operations, including goodwill arising on the acquisition of those operations, are translated at the rate ruling at the reporting date. Exchange differences arising on translating the opening net assets at the opening rate and the results of
overseas operations at the actual rate are recognized in other comprehensive income and accumulated in the foreign exchange reserve. Exchange differences recognized profit or loss in Group entities’ separate consolidated financial statements on
the translation of long term monetary items forming part of the Group’s net investment in the overseas operation concerned are reclassified to other comprehensive income and accumulated in the foreign exchange reserve on consolidation.
On disposal of a foreign operation, the cumulative exchange differences recognized in the foreign exchange reserve relating to that operation up to the date of disposal are transferred to the profit
or loss as part of the profit or loss on disposal.
Transactions denominated in foreign currencies are translated into $USD at the exchange rate at the end of the previous month-end. Monetary items in the statement of financial position are translated
at the closing rate at each reporting date and the relevant translation adjustments are recognized in financial result.
| 3.16. |
Offsetting of financial assets and financial liabilities
|
Financial assets and financial liabilities are offset when the entity has a legally enforceable right to offset the recognized amounts and intends either to settle these on net basis or to realize the
assets and settle the liabilities simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or winding up of the entity or
the counterparties.
| 3.17. |
Dividend
|
Dividends declared subsequent to the balance sheet date are considered as non-adjusting events and are recognized in the consolidated financial statements in the year in which such dividends are
approved / transfers are made.
| 3.18. |
Hedge accounting
|
The Group designates and documents the use of certain derivatives and other financial assets or financial liabilities as hedging instruments against changes in fair values of recognized assets and liabilities (fair
value hedges) and highly probable forecast transactions (cash flow hedges). The effectiveness of such hedges is assessed at inception and verified at regular intervals and at least on a quarterly basis to ensure that an economic relationship exists
between the hedged item and the hedging instrument.
The Group uses cash flow hedges to mitigate a particular risk associated with a recognized asset or liability or highly probable forecast transactions, such as variability of expected interest payments and receipts.
If a highly probable forecast transaction results in the recognition of a non-monetary asset, the cumulative loss/(gain) is added to / (subtracted from) the cost of the asset acquired (“basis adjustment”). The same
approach is followed where a cash flow hedge of a hedged forecast transaction for a non-financial asset or non-financial liability becomes a firm commitment to which fair value hedge accounting is applied. Otherwise the cumulative gain or loss
recognized in other comprehensive income is reclassified from the cash flow hedge reserve to profit or loss at the same time as the hedged transaction affects profit or loss. The two transactions are recognized in the same line item. If a forecast
transaction is no longer considered highly probable but the forecast transaction is still expected to occur, the cumulative gain or loss recognized in other comprehensive income is frozen and recognized in profit or loss. Subsequent changes in the
fair value of the derivative are recognized in profit or loss. If the Group closes out its position before the transaction takes place (even though it is still expected to take place) the cumulative gain or loss on changes in fair value of the
derivative is similarly recognized. If, at any point, the hedged transaction is no longer expected to occur, the cumulative gain or loss is reclassified from the cash flow hedge reserve to profit or loss immediately. The effective portion of gains
and losses on derivatives used to manage cash flow interest rate risk (such as floating to fixed interest rate swaps) are also recognized in other comprehensive income and accumulated in the cash flow hedge reserve. However, if the Group closes out
its position early, the cumulative gains and losses recognized in other comprehensive income are frozen and reclassified from the cash flow hedge reserve to profit or loss using the effective interest method. The ineffective portion of gains and
losses on derivatives used to manage cash flow interest rate risk are recognized in profit or loss within finance charges.
F-22
| 3.19. |
Standards, interpretations and amendments not yet effective
|
| • |
On January 23, 2020, the International Accounting Standards Board (IASB or the Board) issued amendments to IAS 1 Presentation of Financial Statements (the amendments) to clarify that liabilities are classified as either current or
non-current, depending on the rights that exist at the end of the reporting period. These amendments should be applied for annual periods beginning on or after January 1, 2022, retrospectively in accordance to IAS 8. On July 15, 2020, IASB
issued an amendment that defers the effective date of January 2020 amendments by one year, so that the entities would be required to apply the amendment for annual periods beginning on or after January 1, 2023.
|
The Company is assessing the impact of the amendment and expects that the impact would not have a material impact on the financial statements.
| • |
On May 28, 2020, the IASB published ‘Covid-19-Related Rent Concessions (Amendment to IFRS 16)’ amending IFRS 16 to:
|
| - |
provide lessees with an exemption from assessing whether a COVID-19-related rent concession is a lease modification;
|
| - |
require lessees that apply the exemption to account for COVID-19-related rent concessions as if they were not lease modifications;
|
| - |
require lessees that apply the exemption to disclose that fact; and
|
| - |
Require lessees to apply the exemption retrospectively in accordance with IAS 8, but not require them to restate prior period figures.
|
The amendment is effective for annual reporting periods beginning on or after June 1, 2020. However, the Company is not considered to avail these concessions.
| • |
On August 27, 2020, the IASB issued an amendments in Interest Rate Benchmark Reform which introduce a practical expedient for modifications required by the reform, clarify that hedge accounting is not discontinued solely because of the
IBOR reform, and introduce disclosures that allow users to understand the nature and extent of risks arising from the IBOR reform to which the entity is exposed to and how the entity manages those risks as well as the entity’s progress in
transitioning from IBORs to alternative benchmark rates, and how the entity is managing this transition. The amendment is effective for the periods beginning on or after 1 January 2021.
|
The Company is assessing the impact of the amendment and expects that the impact would not have a material impact on the financial statements.
| 4. |
GOODWILL
|
|
June 30,
2020
|
June 30,
2019
|
|||||||
|
(US$’000)
|
||||||||
|
Goodwill as of beginning of the year
|
11,832
|
11,832
|
||||||
|
Goodwill acquired during the year
|
-
|
-
|
||||||
|
Goodwill impaired during the year
|
-
|
-
|
||||||
|
Goodwill as of end of the year
|
11,832
|
11,832
|
||||||
F-23
A cash-generating unit (CGU) is the smallest group of assets that independently generates cash flow and whose cash flow is largely independent of the cash flows generated by other assets. Goodwill
arose on various historical acquisitions made by predecessor companies and at June 30, 2020 and June 30, 2019, the carrying amount of goodwill is allocated as follows:
|
June 30, 2020
|
June 30, 2019
|
|||||||
|
(US$’000)
|
||||||||
|
IBEX
|
11,626
|
11,626
|
||||||
|
DGS
|
206
|
206
|
||||||
|
11,832
|
11,832
|
|||||||
The calculation of value in use for the business operations is most sensitive to changes in the following assumptions which are discussed below, together with the amounts by which these
key assumptions would have to change (independent of other changes in assumptions) for an impairment to arise. Management has calculated the recoverable amount of the cash generating unit to exceed its carrying amount by $174.0 million.
Testing for impairment of goodwill
Key assumptions applied in impairment testing
The recoverable amounts of all the CGUs have been determined from value in use calculations based on cash flow projections from formally approved budgets covering a three year period from 2021 to
2023. The first year of the projections is based on detailed budgets prepared by management as part of the Group’s performance and control procedures. Subsequent years are based on extrapolations using the key assumptions listed below which are
management approved projections. The discount rate applied to cash flow projections beyond three-years is extrapolated using a terminal growth rate which represents the expected long-term growth rate of the Business Process Outsourcing (“BPO”)
sector.
The following rates were used by the Group for the years ended June 30, 2020, 2019 and 2018:
|
Average
revenue
growth rate
|
Average
Gross
Margin
|
Discount
Rate
|
Terminal
Growth
Rate
|
|||||||||||||
|
%
|
%
|
%
|
%
|
|||||||||||||
|
June 30, 2020
|
7.9
|
26.2
|
13.2
|
5
|
||||||||||||
|
June 30, 2019
|
5.6
|
25.5
|
10.6
|
5
|
||||||||||||
|
June 30, 2018
|
6.7
|
18.7
|
11.5
|
5
|
||||||||||||
The calculation of value in use for the business operations is most sensitive to changes in the following assumptions:
Revenue growth
Revenue growth assumptions have been derived from projections prepared by management. Management is of the view that these assumptions are reasonable considering current market conditions. An
impairment in the carrying value of goodwill would not arise if the 2021-2023 average revenue growth rate declined to nil. Over the projected period of three years, COVID 19 has not significantly impacted the revenue and gross margins of the
Company.
Cost of sales and gross margin
Cost of sales has been projected on the basis of multiple strategies planned by management to ensure profitable operations. These strategies include cost minimization mechanisms such as offshore
migration of labor, centralization of support activities and increasing efficiency of service delivery, resulting in improved gross margins over the forecasted period. An impairment in the carrying value of goodwill would not arise if the 2021
estimated gross margin is decreased significantly.
Discount rate
Discount rates reflect management estimates of the rate of return required for the business and are calculated after taking into account the prevailing risk-free rate, industry risk and business risk.
Discount rates are calculated using the weighted average cost of capital. An impairment in the carrying value of goodwill would not arise if the weighted average cost of capital were to increase significantly.
F-24
| 5. |
OTHER INTANGIBLE ASSETS
|
|
Patents
|
Trademarks
|
Customer
lists
|
Software
|
Total
|
||||||||||||||||
|
(US$’000)
|
||||||||||||||||||||
|
Cost
|
||||||||||||||||||||
|
At July 1, 2019
|
541
|
371
|
2,817
|
18,464
|
22,193
|
|||||||||||||||
|
Additions
|
-
|
-
|
-
|
2,021
|
2,021
|
|||||||||||||||
|
Foreign exchange movements
|
-
|
-
|
-
|
(19
|
)
|
(19
|
)
|
|||||||||||||
|
At June 30, 2020
|
541
|
371
|
2,817
|
20,466
|
24,195
|
|||||||||||||||
|
Accumulated amortization
|
||||||||||||||||||||
|
At July 1, 2019
|
196
|
-
|
2,477
|
16,592
|
19,265
|
|||||||||||||||
|
Impairment charge for the year
|
-
|
-
|
-
|
777
|
777
|
|||||||||||||||
|
Amortization charge for the year
|
-
|
-
|
89
|
1,283
|
1,372
|
|||||||||||||||
|
At June 30, 2020
|
196
|
-
|
2,566
|
18,652
|
21,414
|
|||||||||||||||
|
Net book value
|
||||||||||||||||||||
|
At June 30, 2020
|
345
|
371
|
251
|
1,814
|
2,781
|
|||||||||||||||
|
At June 30, 2019
|
345
|
371
|
340
|
1,872
|
2,928
|
|||||||||||||||
|
Cost
|
||||||||||||||||||||
|
At July 1, 2018
|
541
|
371
|
2,817
|
18,348
|
22,077
|
|||||||||||||||
|
Additions
|
-
|
-
|
-
|
622
|
622
|
|||||||||||||||
|
Foreign exchange movements
|
-
|
-
|
-
|
28
|
28
|
|||||||||||||||
|
Disposal of subsidiary
|
-
|
-
|
-
|
(534
|
)
|
(534
|
)
|
|||||||||||||
|
At June 30, 2019
|
541
|
371
|
2,817
|
18,464
|
22,193
|
|||||||||||||||
|
Accumulated amortization and impairment
|
||||||||||||||||||||
|
At July 1, 2018
|
196
|
-
|
2,187
|
15,513
|
17,896
|
|||||||||||||||
|
Disposal of subsidiary
|
-
|
-
|
-
|
(521
|
)
|
(521
|
)
|
|||||||||||||
|
Impairment charge for the year
|
-
|
-
|
163
|
-
|
163
|
|||||||||||||||
|
Amortization charge for the year
|
-
|
-
|
127
|
1,600
|
1,727
|
|||||||||||||||
|
At June 30, 2019
|
196
|
-
|
2,477
|
16,592
|
19,265
|
|||||||||||||||
|
Net book value
|
||||||||||||||||||||
|
At June 30, 2019
|
345
|
371
|
340
|
1,872
|
2,928
|
|||||||||||||||
|
At June 30, 2018
|
345
|
371
|
630
|
2,835
|
4,181
|
|||||||||||||||
|
Amortization Rate
|
16.67% to 50.00%
|
20.00% to 33.33%
|
||||||||||||||||||
|
Estimated remaining useful life
|
||||||||||||||||||||
|
Customer Lists
|
5 - 6 Years
|
|||||||||||||||||||
|
Software
|
3 - 5 Years
|
|||||||||||||||||||
Amortization charge for the years ended June 30, 2020 and 2019 comprise of:
|
June 30,
2020
|
June 30,
2019
|
June 30,
2018
|
||||||||||
|
(US$’000)
|
||||||||||||
|
Amortization from continuing operations
|
1,372
|
1,722
|
2,273
|
|||||||||
|
Amortization from discontinued operations
|
-
|
5
|
15
|
|||||||||
|
Total
|
1,372
|
1,727
|
2,288
|
|||||||||
| 5.1. |
Net book value of software licenses held under financing is $0.9 million as of June 30, 2020 (June 30, 2019: $0.3 million).
|
F-25
| 5.2. |
As of June 30, 2020, Software includes, on a net basis, nil (June 30,
2019: $0.4 million) capitalized for an internally generated software tool titled as “Clearview”. Management has assessed the useful life of Clearview to be five years.
|
| 5.3. |
Trademarks and patents are capitalized at cost of acquisition and are not amortized but are tested for impairment annually. Trademarks and patents have an indefinite life on the grounds of the proven
longevity of the trademarks or patents and the Group’s commitment to maintaining those trademarks or patents.
|
| 5.4. |
Estimated amortization expense for the next five years is projected to be:
|
|
|
June 30, 2020
|
June 30, 2019
|
June 30, 2018
|
|||||||
|
|
(US$)
|
|||||||||
|
2021
|
0.9 million
|
1.2 million
|
1.6 million
|
|||||||
|
2022
|
0.7 million
|
0.8 million
|
1.1 million
|
|||||||
|
2023
|
0.4 million
|
0.2 million
|
0.3 million
|
|||||||
|
2024
|
-
|
-
|
0.2 million
|
|||||||
|
2025
|
-
|
-
|
0.2 million
|
|||||||
During the year ended June 30, 2020, impairment amounting to $0.7 million (June 30, 2019: $0.2 million, June 30, 2018: nil) was recognized in other operating costs.
F-26
| 6. |
PROPERTY AND EQUIPMENT
|
|
Buildings
|
Leasehold
Improvements
|
Furniture,
fixture and
equipment
|
Computer
Equipment
|
Vehicles
|
Assets
under
Construction
|
Total
|
||||||||||||||||||||||
|
(US$’000)
|
||||||||||||||||||||||||||||
|
Cost
|
||||||||||||||||||||||||||||
|
At July 1, 2019
|
74,077
|
17,318
|
19,775
|
42,984
|
759
|
2,781
|
157,694
|
|||||||||||||||||||||
|
Additions
|
12,288
|
1,638
|
5,704
|
6,775
|
393
|
741
|
27,539
|
|||||||||||||||||||||
|
Transfer from CWIP
|
-
|
1,128
|
710
|
943
|
-
|
(2,781
|
)
|
-
|
||||||||||||||||||||
|
Foreign exchange movements
|
358
|
43
|
221
|
71
|
(64
|
)
|
-
|
629
|
||||||||||||||||||||
|
Disposal
|
(3,058
|
)
|
-
|
-
|
(170
|
)
|
(62
|
)
|
-
|
(3,290
|
)
|
|||||||||||||||||
|
At June 30, 2020
|
83,665
|
20,127
|
26,410
|
50,603
|
1,026
|
741
|
182,572
|
|||||||||||||||||||||
|
Accumulated depreciation
|
||||||||||||||||||||||||||||
|
At July 1, 2019
|
10,422
|
12,674
|
14,329
|
37,451
|
509
|
-
|
75,385
|
|||||||||||||||||||||
|
Charge for the year
|
12,149
|
2,418
|
3,085
|
5,279
|
169
|
-
|
23,100
|
|||||||||||||||||||||
|
Disposal
|
(434
|
)
|
-
|
-
|
(19
|
)
|
(48
|
)
|
-
|
(501
|
)
|
|||||||||||||||||
|
At June 30, 2020
|
22,137
|
15,092
|
17,414
|
42,711
|
630
|
-
|
97,984
|
|||||||||||||||||||||
|
Net book value
|
||||||||||||||||||||||||||||
|
At June 30, 2020
|
61,528
|
5,035
|
8,996
|
7,892
|
396
|
741
|
84,588
|
|||||||||||||||||||||
|
At June 30, 2019
|
63,655
|
4,644
|
5,446
|
5,533
|
250
|
2,781
|
82,309
|
|||||||||||||||||||||
|
Cost
|
||||||||||||||||||||||||||||
|
At July 1, 2018
|
641
|
16,585
|
18,456
|
39,617
|
310
|
33
|
75,642
|
|||||||||||||||||||||
|
Adoption of IFRS 16
|
52,910
|
-
|
-
|
623
|
200
|
-
|
53,733
|
|||||||||||||||||||||
|
At July 1, 2018 - restated
|
53,551
|
16,585
|
18,456
|
40,240
|
510
|
33
|
129,375
|
|||||||||||||||||||||
|
Additions
|
30,925
|
1,101
|
2,453
|
4,034
|
356
|
2,781
|
41,650
|
|||||||||||||||||||||
|
Transfer from CWIP
|
-
|
-
|
-
|
33
|
-
|
(33
|
)
|
-
|
||||||||||||||||||||
|
Foreign exchange movements
|
(1,599
|
)
|
(64
|
)
|
(219
|
)
|
(456
|
)
|
(35
|
)
|
-
|
(2,373
|
)
|
|||||||||||||||
|
Disposal of subsidiary
|
(8,800
|
)
|
(301
|
)
|
(910
|
)
|
(865
|
)
|
(10
|
)
|
-
|
(10,886
|
)
|
|||||||||||||||
|
Disposal
|
-
|
(3
|
)
|
(5
|
)
|
(2
|
)
|
(62
|
)
|
-
|
(72
|
)
|
||||||||||||||||
|
At June 30, 2019
|
74,077
|
17,318
|
19,775
|
42,984
|
759
|
2,781
|
157,694
|
|||||||||||||||||||||
|
Accumulated depreciation
|
||||||||||||||||||||||||||||
|
At July 1, 2018
|
225
|
10,750
|
12,267
|
33,226
|
275
|
-
|
56,743
|
|||||||||||||||||||||
|
Disposal of subsidiary
|
(609
|
)
|
(56
|
)
|
(349
|
)
|
(418
|
)
|
(4
|
)
|
-
|
(1,436
|
)
|
|||||||||||||||
|
Charge for the year
|
10,806
|
1,980
|
2,411
|
4,643
|
238
|
-
|
20,078
|
|||||||||||||||||||||
|
At June 30, 2019
|
10,422
|
12,674
|
14,329
|
37,451
|
509
|
-
|
75,385
|
|||||||||||||||||||||
|
Net book value
|
||||||||||||||||||||||||||||
|
At June 30, 2019
|
63,655
|
4,644
|
5,446
|
5,533
|
250
|
2,781
|
82,309
|
|||||||||||||||||||||
|
At June 30, 2018
|
416
|
5,835
|
6,189
|
6,391
|
35
|
33
|
18,899
|
|||||||||||||||||||||
|
Depreciation rate
|
10.00% or lease term
|
20.00% to 33.33% or lease term
|
20.00% to 33.33% or lease term
|
33.33% or lease term
|
20.00% or lease term
|
|||||||||||||||||||||||
No impairment of property, plant and equipment was recorded in the years ending June 30, 2020, 2019 and 2018.
F-27
Depreciation charge for the years ended June 30, 2020, 2019 and 2018 comprise of:
|
June 30,
2020
|
June 30,
2019
|
June 30,
2018
|
||||||||||
|
(US$’000)
|
||||||||||||
|
Depreciation from continuing operations
|
23,100
|
19,173
|
9,910
|
|||||||||
|
Depreciation from discontinued operations
|
-
|
905
|
222
|
|||||||||
|
Total
|
23,100
|
20,078
|
10,132
|
|||||||||
| 6.1. |
Right of use assets comprise of:
|
|
Building
|
Leasehold
Improvements
|
Furniture,
fixture and
equipment
|
Computer
Equipment
|
Vehicles
|
Assets
under
Construction
|
Total
|
||||||||||||||||||||||
|
(US$’000)
|
||||||||||||||||||||||||||||
|
Right-of-use assets
|
||||||||||||||||||||||||||||
|
Balance at July 1, 2019
|
63,357
|
321
|
1,320
|
913
|
282
|
1,488
|
67,681
|
|||||||||||||||||||||
|
Transfer from CWIP
|
-
|
388
|
703
|
397
|
-
|
(1,488
|
)
|
-
|
||||||||||||||||||||
|
Additions
|
12,288
|
1,474
|
4,900
|
2,835
|
309
|
-
|
21,806
|
|||||||||||||||||||||
|
Disposal - net of depreciation
|
(2,624
|
)
|
-
|
-
|
(151
|
)
|
(5
|
)
|
-
|
(2,780
|
)
|
|||||||||||||||||
|
Foreign exchange movements
|
323
|
34
|
121
|
28
|
(9
|
)
|
-
|
497
|
||||||||||||||||||||
|
Depreciation charge for the year
|
(12,068
|
)
|
(710
|
)
|
(1,959
|
)
|
(1,061
|
)
|
(163
|
)
|
-
|
(15,961
|
)
|
|||||||||||||||
|
Balance at June 30, 2020
|
61,276
|
1,507
|
5,085
|
2,961
|
414
|
-
|
71,243
|
|||||||||||||||||||||
|
Balance at July 1, 2018
|
||||||||||||||||||||||||||||
|
Reclassification from prior finance leases at initial adoption
|
-
|
367
|
2,800
|
376
|
4
|
-
|
3,547
|
|||||||||||||||||||||
|
Recognized at initial adoption
|
52,910
|
-
|
-
|
623
|
200
|
-
|
53,733
|
|||||||||||||||||||||
|
Total
|
52,910
|
367
|
2,800
|
999
|
204
|
-
|
57,280
|
|||||||||||||||||||||
|
Additions
|
30,925
|
98
|
107
|
506
|
224
|
1,488
|
33,348
|
|||||||||||||||||||||
|
Disposal - net of depreciation
|
(8,191
|
)
|
-
|
(225
|
)
|
(65
|
)
|
-
|
-
|
(8,481
|
)
|
|||||||||||||||||
|
Foreign exchange movements
|
(1,572
|
)
|
12
|
70
|
(131
|
)
|
(27
|
)
|
-
|
(1,648
|
)
|
|||||||||||||||||
|
Depreciation charge for the year
|
(10,715
|
)
|
(156
|
)
|
(1,432
|
)
|
(396
|
)
|
(119
|
)
|
-
|
(12,818
|
)
|
|||||||||||||||
|
Balance at June 30, 2019
|
63,357
|
321
|
1,320
|
913
|
282
|
1,488
|
67,681
|
|||||||||||||||||||||
| 6.2. |
Lease liabilities:
|
|
June 30,
2020
|
June 30,
2019
|
|||||||
|
|
(US$’000)
|
(US$’000)
|
||||||
|
Lease liabilities included in statement of financial position as of
|
74,712
|
69,234
|
||||||
|
Current
|
12,668
|
10,632
|
||||||
|
Non Current
|
62,044
|
58,602
|
||||||
|
|
||||||||
| 6.3. |
Description of lease activities:
|
The Group leases buildings for its offices, equipment and vehicles. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. Leases are typically made for a fixed
period of 3-5 years and may include renewal options, which provide operational flexibility and when recognizing right-of-use assets and lease liabilities, the Group includes certain renewal options where the
Group is reasonably assured to exercise the renewal option. The operating leases recognized have reasonably assured lease terms ranging from 2 to 14 years. The Group allocates the consideration in the contract of lease related to the
building to the lease and non-lease components based on their relative stand-alone prices.
| 6.4. |
Other lease disclosures:
|
A maturity analysis of lease liability is shown in Note 22.3. The interest expenses on lease liabilities is $6.5 million (June 30, 2019: $4.4 million). The expense incurred relating to short-term leases, not included
in the measurement of lease liabilities, is $1.0 million (June 30, 2019: $1.0 million) and no other variable lease payments were incurred during the year ended June 30, 2020. The total cash outflow for leases amounted $12.2 million (June 30, 2019:
$10.5 million). The lease payments include the impact of IFRS 16 of $9.1 million and $8.4 million for the year ended June 30, 2020 and June 30, 2019 respectively.
F-28
The Group recognized 94 (June 30, 2019: 87) leases related to right of use assets. During the year ended June 30, 2020, there were 25 new leases (June 30, 2019: 23) and 18 (June 30, 2019: 6) disposal of leases.
| 6.5. |
Security Interest on property and equipment
|
The net book value of property and equipment at June 30, 2020 and 2019 includes $7.0 million and $8.0 million, respectively, of assets that
are pledged as security for borrowings.
| 7. |
INVESTMENT IN JOINT VENTURE
|
On January 1, 2016, one of the subsidiaries of the Group (“the Subsidiary”) made a 47.5% investment in a Joint Venture Lake Ball LLC, doing business as Clear Connect, with Innovative Business
Solutions (‘IBS’) with a purpose to procure and sell commercial leads for the Subsidiary’s customers. The country of incorporation and principle place of business of Lake Ball LLC is the United States of America. The investment is accounted for
under the equity method of accounting. As of June 30, 2020, the market value of the investment amounts to $0.3 million (June 30, 2019: $0.2 million, June 30, 2018: $0.4 million). The details of the investment are as follows:
|
June 30,
2020
|
June 30,
2019
|
June 30,
2018
|
||||||||||
|
(US$’000)
|
||||||||||||
|
Opening balance
|
227
|
392
|
294
|
|||||||||
|
Return on investment during the year
|
-
|
(96
|
)
|
(82
|
)
|
|||||||
|
Dividend received during the year
|
(430
|
)
|
(420
|
)
|
(100
|
)
|
||||||
|
Share of profit for the year
|
534
|
351
|
280
|
|||||||||
|
Ending balance
|
331
|
227
|
392
|
|||||||||
Share of profit for the year ended June 30, 2020, 2019 and 2018 of $0.5 million, $0.4 million and $0.3 million, respectively, is included in the other operating costs in statement of profit or loss
and comprehensive income.
Summarized financial information of equity accounted Joint Venture from the financial statements of Lake Ball LLC is as follows:
|
For the Year Ended
|
||||||||||||
|
June 30,
2020
|
June 30,
2019
|
June 30,
2018
|
||||||||||
|
(US$’000)
|
||||||||||||
|
Revenue
|
3,152
|
2,140
|
1,558
|
|||||||||
|
Profit after tax
|
1,124
|
739
|
589
|
|||||||||
|
Other comprehensive income
|
-
|
-
|
-
|
|||||||||
|
Total comprehensive income
|
1,124
|
739
|
589
|
|||||||||
| 8. |
OTHER ASSETS
|
|
Note
|
June 30,
2020
|
June 30,
2019
|
||||||||||
|
(US$’000)
|
||||||||||||
|
Deposits
|
3,087
|
1,930
|
||||||||||
|
Prepayments
|
8.1
|
918
|
909
|
|||||||||
|
Other
|
829
|
559
|
||||||||||
|
Other Assets
|
4,834
|
3,398
|
||||||||||
| 8.1. |
These include prepayments for call center optimization services which are amortized over 120 months.
|
F-29
| 9. |
TRADE AND OTHER RECEIVABLES
|
|
Note
|
June 30,
2020
|
June 30,
2019
|
||||||||||
|
(US$’000)
|
||||||||||||
|
Trade receivables
|
||||||||||||
|
Trade receivables - gross
|
55,862
|
65,886
|
||||||||||
|
Less: Allowance for credit losses
|
9.1
|
(1,877
|
)
|
(2,209
|
)
|
|||||||
|
Trade receivables - net
|
53,985
|
63,677
|
||||||||||
|
Less: receivables attributable to related parties, net
|
(549
|
)
|
(652
|
)
|
||||||||
|
Trade receivables - net closing balance
|
53,436
|
63,025
|
||||||||||
|
Other receivables
|
||||||||||||
|
Prepayments
|
4,397
|
3,149
|
||||||||||
|
Advance Tax
|
1,832
|
1,457
|
||||||||||
|
VAT/Sales Tax receivables
|
1,651
|
1,039
|
||||||||||
|
Other receivables
|
923
|
1,091
|
||||||||||
|
Deposits
|
340
|
1,373
|
||||||||||
|
9,143
|
8,109
|
|||||||||||
|
62,579
|
71,134
|
|||||||||||
| 9.1. |
Allowance for credit losses
|
|
June 30,
2020
|
June 30,
2019
|
|||||||
|
(US$’000)
|
||||||||
|
Opening balance
|
2,209
|
2,244
|
||||||
|
Foreign exchange movements
|
(228
|
)
|
(273
|
)
|
||||
|
Loss allowance recognized during the year
|
224
|
343
|
||||||
|
Trade receivables written off against allowance
|
(328
|
)
|
(105
|
)
|
||||
|
Closing balance
|
1,877
|
2,209
|
||||||
| 10. |
CASH AND CASH EQUIVALENTS
|
|
June 30,
2020
|
June 30,
2019
|
|||||||
|
(US$’000)
|
||||||||
|
Balances with banks in:
|
||||||||
|
− current accounts
|
19,451
|
7,079
|
||||||
|
− deposit accounts (with a maturity of 3 months or less at inception)
|
2,396
|
1,783
|
||||||
|
21,847
|
8,862
|
|||||||
|
Cash in hand
|
23
|
11
|
||||||
|
21,870
|
8,873
|
|||||||
F-30
| 11. |
DEFERRED REVENUE
|
|
June 30, 2020
|
June 30, 2019
|
|||||||
|
(US$’000)
|
||||||||
|
Deferred revenue
|
3,904
|
5,141
|
||||||
|
Less: current portion of deferred revenue
|
(3,470
|
)
|
(4,388
|
)
|
||||
|
434
|
753
|
|||||||
| 12. |
SHARE CAPITAL AND OTHER RESERVES
|
| 12.1. |
Authorized share capital
|
The Holding Company’s authorized share capital was $12,000 and the authorized share capital was divided into 2,873,045 preference shares and 104,605,167 common shares of par value $0.0001 each.
On March 16, 2018 the Holding Company’s authorized share capital was consolidated and divided into 103,223,990.46 common shares and 4,254,221.39 preference shares of par value $0.000111650536 each,
and the shares held by the existing shareholders at that time duly converted.
On December 21, 2018, the Group issued a revised equity structure converting the Holding Company’s authorized share capital of $12,000 to the following new structure, noting that all shares set out
below have a par value of $0.000111650536 each:
| • |
Series A Convertible Preferred (“Series A”) - The maximum number of Series A Convertible Preference Shares shall be one (1) whose holder is The Resource Group International Limited (“TRGI”).
|
| • |
Series B Convertible Preferred (“Series B”) - The maximum number of Series B Convertible Preference Shares shall be 12,512,994.466500, of which 11,083,691.3814 Series B shares are issued and outstanding as of
June 30, 2020.
|
| • |
Series C Convertible Preferred (“Series C”, and together with the Series A shares and the Series B Shares, the “Preferred Convertible Shares”) - The maximum number of Series C Convertible Preference Shares
shall be 12,639,389.35000 of which 111,986.4786 Series C shares are issued and outstanding as of June 30, 2020.
|
| • |
Class A Common Shares (“Class A”) – The maximum number of Class A shares shall be 79,766,504.249454. There are no Class A shares issued and outstanding as of June 30, 2020.
|
| • |
Class B Common Shares (“Class B”, and together with the Class A shares, the “Common Shares”) - The maximum number Class B shares shall be 2,559,323.13 which are authorized
for issuance for the Restricted Stock Plan, of which 1,841,660 Class B shares have been issued as of June 30, 2020.
|
On May 20, 2020, the Company increased the authorized share capital by increasing the class B common shares by 579,791 shares to 3,139,114.13 shares resulting in the increase in authorized share
capital to $12,064.73 from $12,000. All the other categories of authorized share capital remains unchanged.
F-31
The authorized share capital as of June 30, 2020 is tabulated below:
|
June 30,
2020
|
June 30,
2019
|
|||||||
|
Number of shares
|
||||||||
|
Series A
|
1
|
1
|
||||||
|
Series B
|
12,512,994
|
12,512,994
|
||||||
|
Series C
|
12,639,389
|
12,639,389
|
||||||
|
Class A
|
79,766,504
|
79,766,504
|
||||||
|
Class B
|
3,139,114
|
2,559,323
|
||||||
|
108,058,003
|
107,478,212
|
|||||||
|
(US$’000)
|
||||||||
|
Par value
|
0.000111651
|
0.000111651
|
||||||
|
Share Capital
|
12
|
12
|
||||||
The holders of Preferred Convertible Shares shall be entitled to vote, together with the holders of Class A shares, as a single class on all matters submitted to the shareholders for a vote.
At the time of a consummation of a qualified initial public offering (“IPO”) the following conversions will occur on a mandatory basis:
| • |
Series A will convert to Series C on a 1:1 basis
|
| • |
Series B will convert to Series C on a 1:1 basis
|
| • |
Series C (including those existing as a result of the above conversions) will then convert to Class A on a pro rata basis based on a specified metric which includes factors such as IPO price and number of
preferred shares issued at time of conversion and which will result in each Series C share converting into more than one Class A common share.
|
| • |
Class B will convert to Class A on a 1:1 basis.
|
In the event that the Holding Company declares a dividend, the Company shall not declare nor pay any dividends or make any distribution upon other class of shares of the Company until and unless the
Company has declared and paid aggregate dividends of at least $9.5 million with respect to the individual Series A share.
On any voluntary or involuntary liquidation, dissolution or winding-up of the Holding Company, and assuming non-conversion of any preferred shares, Series A holders will be entitled to receive the
first approximately $9.5 million of proceeds in the event that such event is treated as an asset sale. Series B will then be entitled to receive the next approximately $53.5 million and Series C holders will then be entitled to receive the next
approximately $86.2 million (out of which $47.9 million is waived due to the transfer of shares of Etelequote Limited to the parent Company TRGI see Note 30.2) of proceeds in excess of such $9.5 million, Series C and common holders will then be
entitled to receive those proceeds in excess of such $139.7 million. In the event that the liquidation event is treated as a stock sale, Series B and C Holders will be entitled to receive the first approximately $139.7 million of proceeds. Series
A, Series C and common holders will then be entitled to receive those proceeds in excess of such $139.7 million.
Refer to note 31 for the IPO of the Group on August 7, 2020 where Series A, Series B, Series C and Class B shares were converted to Class A common shares equivalent to 14,119,384 shares. In addition
to that the Group offered 3,571,429 shares therefore the total share capital of the Group at the time of IPO was 17,690,813 shares.
| 12.2. |
Issued, subscribed and paid-in share capital – Pre December 2018
|
The Holding Company’s initial issued, subscribed and paid-in share capital consisted of preference shares of $475 divided into 4,749,861 preference shares of par value $0.0001 each and share capital of $775 divided into 7,750,141 common shares
of par value $0.0001 each. The amount of additional paid-in capital is $96.2 million.
| 12.3. |
During the year ended June 30, 2019, 459,325 of these preferred shares have been redeemed by paying $13.9 per share to 17th Capital (comprising of $5.9 million principal and $0.4m interest) and remaining $14
million is part of the disposal of subsidiary during the year as included in Note 30.2.
|
| 12.4. |
Other Reserves
|
The nature and purpose of other reserves within equity is described below:
F-32
Reorganization reserve
Reorganization reserve consists of differences between the combined net asset values of subsidiaries from their separate financial statements and recognized share capital, under the pooling of
interest method.
Additionally, on December 31, 2017, the Directors of DGS Limited (“DGS Ltd.”) sold DGS Tech, a wholly owned subsidiary that owned intellectual property of DGS Ltd. and licensed the use of this IP to
other entities within DGS Ltd., to The Resource Group International Limited for a consideration of $12 (10 Euros). The Directors of DGS Ltd. committed to a plan to sell this unit following a revision in the overall structure and the integration of
DGS Ltd. into the Holding Company.
The gain on sale of subsidiary is recognized in statement of changes in equity as part of the Reorganization Reserve due to the transaction being between the owners.
Share option plans
Weighted average cost of shares kept under the share option plans that pertain to the Group’s various subsidiaries.
Foreign currency translation reserve
Gain / losses arising on retranslating the net assets of overseas operations into presentation currency.
Actuarial gain on defined benefit scheme
Actuarial gain or losses represents adjustments to actuarial assumptions used to value defined benefit pension scheme obligations.
Accumulated deficit
The accumulated deficit decreased from $(117.2) million per end of June 30, 2019 to $(109.5) million as of June 30, 2020. The decrease is due to the net income of the year ended June 30, 2020.
| 13. |
BORROWINGS
|
|
Note
|
June 30,
2020
|
June 30,
2019
|
||||||||||
|
(US$’000)
|
||||||||||||
|
Long-term other borrowings
|
13.1
|
9,783
|
12,993
|
|||||||||
|
Line of credit
|
13.2
|
21,475
|
36,026
|
|||||||||
|
31,258
|
49,019
|
|||||||||||
|
Less: Current portion of;
|
||||||||||||
|
− long-term other borrowings
|
13.1
|
(6,001
|
)
|
(5,809
|
)
|
|||||||
|
− line of credit
|
13.2
|
(21,475
|
)
|
(36,026
|
)
|
|||||||
|
Less: Current portion of borrowings
|
(27,476
|
)
|
(41,835
|
)
|
||||||||
|
Non-current portion of borrowings
|
3,782
|
7,184
|
||||||||||
F-33
| 13.1. |
Long-term other borrowings
|
|
Note
|
June 30,
2020
|
June 30,
2019
|
||||||||||
|
(US$’000)
|
||||||||||||
|
Financial Institutions
|
||||||||||||
|
IBM Credit LLC
|
13.1.1
|
974
|
1,924
|
|||||||||
|
Hewlett-Packard Financial Services Co.
|
13.1.1
|
923
|
-
|
|||||||||
|
PNC Bank, N.A.
|
13.2.1
|
-
|
188
|
|||||||||
|
IPFS Corporation
|
13.1.2
|
759
|
614
|
|||||||||
|
Heritage Bank of Commerce
|
13.2.3
|
1,833
|
1,000
|
|||||||||
|
PNC Term loan
|
13.2.1
|
2,359
|
7,111
|
|||||||||
|
First Global Bank Limited Demand loan
|
13.1.3
|
2,935
|
2,156
|
|||||||||
|
9,783
|
12,993
|
|||||||||||
|
Less: Current portion of long-term other borrowings
|
(6,001
|
)
|
(5,809
|
)
|
||||||||
|
Non-current portion of long term other borrowings
|
3,782
|
7,184
|
||||||||||
13.1.1. The Group has financed the purchase of various property and equipment and software during the fiscal year 2020 and 2019 with IBM, PNC and FGB. As of June
30, 2020 and 2019, the Group has financed $4.5 million and $3.6 million, respectively, of assets at interest rates ranging from 6% to 9% per annum.
|
13.1.2.
|
The Group has financed the insurance policies with the IPFS Corporation with an interest rate of 4.6%.
|
13.1.3. In January 2018, the Group’s subsidiary IBEX Global Jamaica Limited entered into a $1.4 million non-revolving demand loan with First Global Bank Limited.
The loan bears interest at a fixed rate of 7.0% per annum for the term of the loan, has a maturity date of January 2023, and is required to be repaid in 54 equal monthly installments (commencing six months after the drawdown date). The loan
is guaranteed by IBEX Global Limited and secured by substantially all the assets of IBEX Global Jamaica Limited. The debenture under which IBEX Global Jamaica Limited granted security over its assets contains limitations on liens, the
incurrence of debt and the sale of assets. As of June 30, 2020, the balance of the loan is $0.8 million (June 30, 2019: $1.1 million).
In November 2018, the Group’s subsidiary IBEX Global Jamaica Limited entered into a $1.2 million non-revolving demand loan with First Global Bank Limited. The loan bears a variable
interest at 6-month LIBOR plus a margin of 5.26%, subject to a floor of 7.0% per annum, for the term of the loan. The loan is to be paid in 60 equal monthly installments, triggering a bullet payment after 36 months, with an option to renew
for an additional 24 months, with an overall maturity in January 2023. The loan is guaranteed by IBEX Global Limited and secured by substantially all the assets of IBEX Global Jamaica Limited. The debenture under which IBEX Global Jamaica
Limited granted security over its assets contains limitations on liens, the incurrence of debt and the sale of assets. At June 30, 2020, the balance of the loan is $0.9 million (June 30, 2019: $1.04
million).
In October 2019, the Group’s subsidiary, IBEX Global Jamaica Limited, entered into a $0.8 million non- revolving demand loan with First Global Bank Limited. The loan bears a fixed interest rate of 7%. The loan is
to be paid in 36 equal monthly instalments. The loan is guaranteed by IBEX Global Limited and secured by substantially all the assets of IBEX Global Jamaica Limited. The debenture under which IBEX Global Jamaica Limited granted security over
its assets contains limitations on liens, the incurrence of debt and the sale of assets plus the assignment of peril insurance for the replacement value over the charged assets. As of June 30, 2020, the balance of the loan is $0.6 million.
In March 2020, the Group’s subsidiary, IBEX Global Jamaica Limited, entered into a $0.6 million non-revolving demand loan and a $2.0 million non-revolving demand loan with First Global Bank Limited. Each loan
bears interest at a fixed rate of 7.0% per annum for the term of the loan. Each loan is to be paid in 36 equal monthly instalments, commencing 30 days after the first disbursement of loan funds. The loan is guaranteed by IBEX Global Limited
and secured by substantially all of the assets of IBEX Global Jamaica Limited. The debenture under which IBEX Global Jamaica Limited granted security over its assets contains limitations on liens, the incurrence of debt and the sale of assets.
As of June 30, 2020, the balance of the loan is $0.6 million.
F-34
| 13.2. |
Line of credit
|
|
Note
|
June 30,
2020
|
June 30,
2019
|
||||||||||
|
(US$’000)
|
||||||||||||
|
Financial Institutions
|
||||||||||||
|
PNC Bank, N.A.
|
13.2.1
|
19,830
|
33,521
|
|||||||||
|
Seacoast Business Funding
|
13.2.2
|
220
|
80
|
|||||||||
|
Heritage Bank of Commerce
|
13.2.3
|
1,425
|
2,425
|
|||||||||
|
21,475
|
36,026
|
|||||||||||
13.2.1. In November 2013, the Group’s subsidiary Ibex Global Solutions, Inc. (formerly known as TRG Customer Solutions, Inc.) entered into a three-year $35.0
million revolving credit facility (as amended, the “PNC Credit Facility”) with PNC Bank, N.A. (“PNC”). In June 2015, the maximum revolving advance amount under the PNC Credit Facility was increased to $40.0 million, with an additional $10.0
million of incremental availability (subject to PNC’s approval and satisfaction of conditions precedent) and the maturity date was extended to May 2020. In December 2018, the PNC Credit Facility maximum revolving advance amount was increased
to $45.0 million. In May 2019, the PNC Credit Facility was amended to include the following: the maximum revolving advance amount was increased to $50.0 million, with an additional $10.0 million of availability (in $5.0 million increments)
subject to satisfaction of conditions precedent, and the maturity date was extended to May 2023. Borrowings under the PNC Credit Facility bear interest at LIBOR plus a margin of 1.75% and/or negative 0.5% of the PNC Commercial Lending Rate
for domestic loans. In this agreement, Ibex Global Solutions, Inc. derives value from the choice of interest rates, depending on the rate selected. This value changes in response to the changes in the various interest rates alternatives.
Thus, a derivative is embedded within the loan commitment. The part of the value associated with the loan commitment derivative (the embedded derivative part) is derived from the potential interest rate differential between the alternative
rates. The PNC Credit Facility is guaranteed by IBEX Global Limited and secured by substantially all the assets of Ibex Global Solutions, Inc. The line of credit balance as of June 30, 2020 is $19.8 million (June 30, 2019: $33.5 million), as
presented in Note 13.2.
In June 2016, the PNC Credit Facility was amended to add a Term Loan A of $6.0 million, which was drawn down in full, and a Term Loan B of $4.0 million (subject to satisfaction of conditions
precedent), which was never drawn down and cancelled. In November 2016, the PNC Credit Facility was amended by adding a Term Loan C of $16.0 million which was drawn down in full with $6.0 million applied to repay in full Term Loan A. Term Loan
C bears interest at LIBOR plus a margin of 4.00% and is required to be repaid in 54 equal monthly instalments (commencing January 1, 2017). Term Loan C balance as of June 30, 2020 is $2.3 million (June 30, 2019: $7.1 million).
In addition, the PNC Credit Facility was amended in June 2016 to include a $3.0 million non-revolving line of credit for purchases of equipment, which was drawn down in full, bearing interest at
LIBOR plus a margin of 3.25%. The balance of this line as of June 30, 2020 is nil (June 30, 2019: $0.2 million), as presented in Note 13.1.
13.2.2. In July 2011, a subsidiary of the Group, iSky, Inc. entered into a purchasing agreement (the “Seacoast Receivables Financing
Agreement”) with the predecessor to Seacoast National Bank (“Seacoast”). Pursuant to the Seacoast Receivables Financing Agreement, Seacoast provides payment to iSky, Inc. for up to $1.5 million of accounts receivable owed to iSky, Inc. All
payments from Seacoast to iSky, Inc. are subject to a discount of 1.0% for receivables outstanding 30 days or less and an additional 0.5% for each additional 15 days that such receivable is outstanding. The average discount during the fiscal
year ended June 30, 2020 was approximately 1.2% (June 30, 2019: 1.2%) of net sales. Under the Seacoast Receivables Financing Agreement, Seacoast may also advance an amount up to 85% of iSky, Inc.’s receivables to iSky, Inc. at a rate of LIBOR
plus 7.0%.
The Seacoast Receivables Financing Agreement requires iSky, Inc. to sell $0.2 million of receivables per month to Seacoast, subject to a penalty based on the discount fee if such minimum is not
met. The Seacoast Receivables Financing Agreement is automatically renewed for successive 12-month periods unless terminated in accordance with its terms.
13.2.3. In March 2015, the Group’s subsidiaries, Digital Globe Services, Inc., TelSatOnline, Inc. and DGS EDU, LLC entered into a
one-year $3.0 million loan and security agreement (the “HBC Loan Agreement”) with Heritage Bank of Commerce (“HBC”). In March 2016, the HBC Loan Agreement was amended to increase the credit line capacity to $5.0 million and extend its
maturity date until March 31, 2018, subject to collateral review. In June 2017, the HBC Loan Agreement was amended to add an additional subsidiary, 7 Degrees LLC, as a borrower, along with extending the maturity date until March 31, 2019. In
August 2018, the HBC Loan Agreement was amended to increase the accrued account advance rate and certain other terms along with extending the maturity date until March 31, 2021. In January 2019, HBC Loan Agreement was amended to exclude DGS
EDU, LLC therefrom pursuant to its sale. Refer to Note 30.2. Borrowings under the HBC Loan Agreement bear interest at the Prime Rate plus a margin of 2.50%. The credit line is secured by substantially all the assets of Digital Globe
Services, Inc., TelSatOnline, Inc., and 7 Degrees LLC. The line of credit balance as of June 30, 2020 was $1.4 million (June 30, 2019: $2.4 million), as presented in Note 13.2.
In March 2019, HBC Loan Agreement was amended to add a term loan of up to $2.0 million that bears interest at the Prime Rate plus a margin of 2.5%. The term loan is required to be repaid in 36
equal monthly installments (commencing April 2020) and will mature on March 1, 2023. On the term loan maturity date, all amounts owing shall be immediately due and payable. The term loan balance as of June 30, 2020 is $1.8 million (June 30,
2019: $1.0 million).
F-35
13.3. In June 2015, the Group’s subsidiary, Ibex Global Solutions, Inc., entered into a supplier agreement with
Citibank, N.A. (the “Citibank Receivables Financing Agreement”). Pursuant to the Citibank Receivables Financing Agreement, Citibank provides payment to Ibex Global Solutions, Inc. for accounts receivable owed to Ibex Global Solutions, Inc.
from one of our largest clients and its various subsidiaries and affiliates located in the United States. All payments from Citibank to Ibex Global Solutions, Inc. are subject to a discount charge. The discount rate used to calculate the
discount charge is the product of (i) the LIBOR rate for the period most closely corresponding to the number of days in the period starting from and including the date the proceeds are remitted by Citibank to Ibex Global Solutions, Inc. (the
“Discount Acceptance Period”) plus 0.80% per annum and (ii) the Discount Acceptance Period divided by 360. The discount charge during the fiscal year ended June 30, 2020 and 2019 averaged approximately 0.33% and 0.32% of net sales,
respectively.
| 13.4. |
Changes in liabilities arising from financing activities:
|
|
June 30,
2020
|
June 30,
2019
|
June 30,
2018
|
||||||||||
|
(US$’000)
|
||||||||||||
|
Balance of debt, July 1,
|
118,253
|
62,958
|
57,948
|
|||||||||
|
Changes from operating cash flows
|
(3,379
|
)
|
458
|
-
|
||||||||
|
Changes from financing cash flows
|
(33,746
|
)
|
10,124
|
3,333
|
||||||||
|
New assets (2018: finance leases)
|
24,295
|
89,771
|
1,857
|
|||||||||
|
Non cash item - disposal of subsidiary
|
-
|
(43,431
|
)
|
-
|
||||||||
|
Foreign exchange movement
|
547
|
(1,627
|
)
|
(180
|
)
|
|||||||
|
Balance of debt, June 30,
|
105,970
|
118,253
|
62,958
|
|||||||||
13.5. In June and July 2017, e-Telequote Insurance, Inc. issued $9.1 million and 1.0 million respectively,
aggregate principal amount of 12.0% Senior Secured Notes due June 12, 2018 (the “2017 ETQ Notes”), guaranteed by TRGI, with an option of early settlement by the borrower. In May 2018, the e-TeleQuote Insurance Inc. renewed the facility and
expanded the loan to $15.0 million on the same terms maturing on May 15, 2019. During the year ended June 30, 2019, the loan notes were paid in full.
| 14. |
OTHER NON-CURRENT LIABILITIES
|
|
Note
|
June 30,
2020
|
June 30,
2019
|
||||||||||
|
(US$’000)
|
||||||||||||
|
Defined benefit scheme
|
14.1
|
677
|
356
|
|||||||||
|
Warrant liability
|
28
|
3,889
|
751
|
|||||||||
|
Phantom stock plan
|
19.2
|
411
|
441
|
|||||||||
|
Other
|
14.2
|
2,081
|
59
|
|||||||||
|
7,058
|
1,607
|
|||||||||||
| 14.1. |
Defined benefit scheme
|
Two of the Group subsidiaries (“the Subsidiaries”) operate an unfunded defined benefit plan for qualifying employees. Under this plan, the employees are entitled to one half month’s salary for
every year of service, with six months or more of service considered as one year. One half month’s salary has been defined to include the following:
| • |
15 days salary based on the latest salary rate,
|
| • |
cash equivalent to 5 days service incentive leave, and,
|
| • |
one - twelfth of the 13th month’s pay.
|
F-36
An employee is entitled to retirement benefits only upon attainment of a retirement age of 60 years and completion of at least five years of previously credited service. No other post-retirement
benefits are provided to these employees. The most recent actuarial valuations of the present value of the defined benefit obligation were carried out on June 30, 2020. The present value of the defined benefit obligation, and the related
current service cost and past service cost, were measured using the projected unit credit method.
The principal assumptions used for the purposes of the actuarial valuations are as follows:
|
June 30,
2020
|
June 30,
2019
|
|||||||
|
%
|
%
|
|||||||
|
Discount rates
|
3.98
|
%
|
5.93
|
%
|
||||
|
Expected rate of salary increase
|
2.00
|
%
|
3.00
|
%
|
||||
Amounts recognized in the consolidated statement of profit or loss and other comprehensive income in respect of defined benefit scheme are as follows:
|
June 30,
2020
|
June 30,
2019
|
June 30,
2018
|
||||||||||
|
(US$’000)
|
||||||||||||
|
Current service cost
|
100
|
107
|
274
|
|||||||||
|
Interest on obligation
|
21
|
22
|
36
|
|||||||||
|
Total
|
121
|
129
|
310
|
|||||||||
The amount included in the statement of financial position in other non-current liabilities arising from defined benefit obligations is as follows:
|
June 30,
2020
|
June 30,
2019
|
|||||||
|
(US$’000)
|
||||||||
|
Present value of unfunded defined benefit obligation
|
677
|
356
|
||||||
|
Net liability arising from defined benefit obligation
|
677
|
356
|
||||||
The movement in the present value of the defined benefit obligation in the current year is as follows:
|
June 30,
2020
|
June 30,
2019
|
|||||||
|
(US$’000)
|
||||||||
|
Present value of defined benefit obligation at the beginning of the year
|
356
|
314
|
||||||
|
Foreign exchange movements
|
16
|
22
|
||||||
|
Current service cost
|
100
|
107
|
||||||
|
Interest cost
|
21
|
22
|
||||||
|
Actuarial gains
|
184
|
(109
|
)
|
|||||
|
Present value of defined benefit obligation at the end of the year
|
677
|
356
|
||||||
The subsidiaries are yet to contribute to the plan asset as of June 30, 2020.
F-37
14.2. This includes deferred social security
payment amounting to $1.8 million as of June 30, 2020 (June 30, 2019: nil). For more detail refer note 24.
| 15. |
TRADE AND OTHER PAYABLES
|
|
Note
|
June 30,
2020
|
June 30,
2019
|
||||||||||
|
(US$’000)
|
||||||||||||
|
Trade creditors
|
10,354
|
9,927
|
||||||||||
|
Accrued expenses
|
12,060
|
8,105
|
||||||||||
|
Accrued compensation
|
15.1
|
30,009
|
24,061
|
|||||||||
|
Provision
|
15.2
|
-
|
4,426
|
|||||||||
|
Cash flow hedge
|
15.3
|
518
|
-
|
|||||||||
|
Others
|
272
|
371
|
||||||||||
|
53,213
|
46,890
|
|||||||||||
|
15.1.
|
Accrued compensation includes payroll and related costs as of June 30, 2020.
|
|
15.2.
|
Represents the provision related to the legal settlement during the year ended June 30, 2019. Please refer to Note 16.1.1.
|
| 15.3. |
This includes $0.5 million relating to change in fair value of interest rate swap and recognized in other comprehensive income during the year ended June 30, 2020 (June 30, 2019: nil).
|
| 16. |
CONTINGENCIES AND COMMITMENTS
|
| 16.1. |
Contingencies
|
The Group is subject to claims and lawsuits filed in the ordinary course of business. Although management does not believe that any such proceedings other than those noted below will have material
adverse effect going forward, no assurances to that effect can be given based on the uncertainty of litigation and demands of third parties. Group only records a liability for pending litigation and claims where losses are both probable and
reasonably estimable.
| 16.1.1. |
The significant claims or legal proceedings against subsidiaries of the Group are as follows:
|
A case was filed in November 2014 in the US District Court of Tennessee as a collective action under the US Fair Labor Standards Act (FLSA) and Tennessee law, alleging that plaintiffs were forced to work without being
paid for the “off the clock” time. In December 2014, a similar FLSA collection action case was filed against IBEX Global Solutions in the US District Court for the District of Columbia. In February 2015, the two cases were consolidated in
Tennessee (the “Consolidated Action”) and plaintiffs agreed to submit all claims to binding arbitration before the American Arbitration Association. Presently, there are approximately 3,500 individuals who have opted into the FLSA class action
claims, and there are pending wage and hour class action claims under various state laws (“Rule 23 Claims”) involving approximately 21,000 potential class action claimants. In April 2019, the parties engaged in a Mediation. On June 14, 2019,
the parties entered into a Settlement Agreement, which was approved by the arbitrator on June 19, 2019. Pursuant to the Settlement Agreement, all claimants under both the FLSA and the Rule 23 Claims were required to fill out and send a claim
form to the Third-Party Administrator within the claim period ending on October 15, 2019 in order to receive funds under the settlement. Subsequent to June 30, 2019, Ibex funded $3.4 million toward the settlement fund provided under the
Settlement Agreement. This amount covered 100% of the possible claims under the FLSA, as well as plaintiffs’ attorney fees, administration costs and service awards. These amounts exclude any amounts for the Rule 23 Claims. Any funds not claimed
pursuant to the FLSA portion of the settlement will revert to Ibex. Pursuant to the Settlement Agreement, there is $2.2 million allocated to the settlement of claims for the Rule 23 class members. The exact amount of recovery with respect to
the Rule 23 Claims depends upon the claim forms properly and timely returned to the Third-Party Administrator. The claim period closed on October 15, 2019 and as of that date, claim forms properly and timely returned for the Rule 23 Class
Members accounted for $1.2 million of the $2.2 million allocated funds for the Rule 23 class. On November 7, 2019, the parties appeared before the Arbitrator and the Arbitrator approved the Final Order. On November 20, 2019, payment was made by
the Company to the Qualified Settlement Fund in the amount of $1.2 million for payment in full of all Rule 23 Claims and any Company tax obligations for payments to such individuals, and the matter is effectively closed. On July 15, 2020 this
matter was dismissed with prejudice pursuant to an Agreed Stipulation of Dismissal with Prejudice.
On July 26, 2018, Digital Globe Services, Inc. received an indemnification notice related to AllConnect, Inc. v. Kandela LLC Case No. 2:18-cv-05959SJO (SSx) pending in the U.S. District Court for the Central District
of California, Wester Division, relating to patent infringement for certain call center search for services capabilities provided by Digital Globe Services, Inc. under the Dealer Network Agreement entered into in 2014 between Kandela LLC and
Digital Globe Services, Inc. via its “BundleDealer.com” portal. On June 03, 2020, AllConnect, Inc. and Kandela LLC entered into a settlement agreement, and Digital Globe Services, Inc. agreed to pay $0.03 million of Kandela LLC’s legal fees and
expenses incurred in connection with Kandela LLC’s defense of the matter. On June 5, 2020, pursuant to settlement and joint stipulation, the court dismissed the claims of Allconnect with prejudice.
F-38
In addition, the Company is subject to other routine legal proceedings, claims, and litigation in the ordinary course of its business. Defending lawsuits requires significant management attention and financial resources and the outcome of
any litigation, including the matters described above, is inherently uncertain. The Company does not, however, currently expect that the costs to resolve these routine matters will have a material adverse effect on its consolidated financial
position, results of operations, or cash flows.
| 16.2. |
Commitments
|
16.2.1. IBEX Global Solutions Limited has an annual telecommunication service commitment with two of its carriers. The carrier agreement was signed in May 2017 for a
three-year term with the minimum annual commitment for $0.6 million and it is expected to be renewed on August 1, 2020. The agreement has a provision for an early termination at its one-year anniversary with a sixty day written notice. A second
carrier agreement was signed in August 2017 for a three-year term with minimum annual commitment for $1.1 million.
16.2.2. IBEX Global Solutions Limited is also subject to early termination provisions in certain telecommunications contracts, which if enforced by the telecommunications
providers, would subject IBEX Global Solutions to the obligation to pay early termination fees. To date, these early termination provisions have not been triggered by IBEX Global Solutions and in most cases would be equal to the unfulfilled
terms of the contract.
16.2.3. On November 27, 2017, PNC Bank, NA issued an irrevocable standby letter of credit for the amount of $0.4 million in favor of the Group’s subsidiary Ibex Global Solutions, Inc. to the benefit of Digicel (Jamaica) Limited to guarantee the payment of base rent for the property rented by the Group’s subsidiary IBEX Global Jamaica Limited. With effect from
March 1, 2018, the amount of irrevocable standby letter of credit was increased to $0.5 million. The letter of credit was renewed on December 13, 2019 for one year.
16.2.4. On January 19, 2018, PNC Bank, NA issued an irrevocable standby letter of credit for the amount of $0.3 million in favor of TRG Customer Solutions, Inc. d/b/a
IBEX Global Solutions to the benefit of First Global Bank Limited to guarantee the payment of loan received by the Group’s subsidiary IBEX Global Jamaica Limited. This letter of credit expired on July 19, 2018, as allowed by the agreement with
First Global Bank.
| 17. |
FINANCE EXPENSES
|
|
June 30,
2020
|
June 30,
2019
|
June 30,
2018
|
||||||||||
|
(US$’000)
|
||||||||||||
|
Interest on borrowings
|
2,453
|
2,858
|
1,955
|
|||||||||
|
Factoring Fees
|
186
|
242
|
280
|
|||||||||
|
Finance charges on finance lease assets
|
-
|
-
|
492
|
|||||||||
|
Finance charges - right of use assets
|
6,457
|
4,394
|
-
|
|||||||||
|
Bank charges
|
332
|
215
|
366
|
|||||||||
|
Total
|
9,428
|
7,709
|
3,093
|
|||||||||
|
Finance expenses from discontinued operations
|
-
|
5,674
|
2,243
|
|||||||||
F-39
| 18. |
INCOME TAXES
|
The major components of income tax expense / (benefit) are:
|
June 30,
2020
|
June 30,
2019
|
June 30,
2018
|
||||||||||
|
(US$’000)
|
||||||||||||
|
Current tax:
|
||||||||||||
|
Current year
|
1,850
|
836
|
715
|
|||||||||
|
Change in estimates related to prior year
|
201
|
(21
|
)
|
58
|
||||||||
|
2,051
|
815
|
773
|
||||||||||
|
Deferred tax:
|
||||||||||||
|
Origination and reversal of temporary differences
|
1,923
|
8,427
|
(3,899
|
)
|
||||||||
|
Changes in tax rates
|
270
|
(124
|
)
|
3,072
|
||||||||
|
Recognition of previously unrecognised tax losses
|
(1,907
|
)
|
(702
|
)
|
-
|
|||||||
|
Recognition of previously unrecognised net deductible temporary differences
|
(22
|
)
|
29
|
-
|
||||||||
|
264
|
7,630
|
(827
|
)
|
|||||||||
|
Total expense / (benefit) for the year
|
2,315
|
8,445
|
(54
|
)
|
||||||||
Income tax expense is attributable to:
|
June 30,
2020
|
June 30,
2019
|
June 30,
2018
|
||||||||||
|
(US$’000)
|
||||||||||||
|
Income tax expense / (benefit) from continuing operations
|
2,315
|
3,615
|
(108
|
)
|
||||||||
|
Income tax expense from discontinued operations
|
-
|
4,830
|
54
|
|||||||||
|
Total
|
2,315
|
8,445
|
(54
|
)
|
||||||||
The Group’s U.S. tax provision include the following U.S. entities: Ibex Global Solutions, Inc., Digital Globe Services, Inc., iSky Inc. and e-Telequote Insurance, Inc. which file separate income tax returns in the
US. Group tax provision also include various foreign subsidiaries based in the UK, EU, Canada, Jamaica, Nicaragua, Pakistan, Senegal, and Philippines. These entities file income tax returns in their respective jurisdictions. No income tax
provision has been calculated for holding companies (the Holding Company, IBEX Global Limited, DGS Limited and Etelequote Limited), as they are Bermuda based and there is no corporate income tax in Bermuda.
Deferred tax expense includes a non-recurring benefit of $0.61 million related to change in revenue and related costs recognition under IFRS15 - Revenue from contracts with customers. Furthermore,
deferred tax expense for the year ended June 30, 2019 includes a non-recurring expense of $3.1 million on cancellation of legacy ESOP plan.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well
as net operating losses and tax credit carry forwards. Deferred tax assets and liabilities are measured using the enacted tax rates that will apply to taxable income in the periods the deferred tax item is expected to be settled or realised.
The tax effects of the Group’s temporary differences and carry forwards are as follows:
F-40
Tax effect of deductible / (taxable) temporary differences
|
June 30,
2020
|
June 30,
2019
|
|||||||
|
(US$’000)
|
||||||||
|
Deductible temporary differences:
|
||||||||
|
− Provisions and write-offs against accounts receivable
|
85
|
204
|
||||||
|
− Unpaid accrued expenses / compensation
|
687
|
530
|
||||||
|
− Deferred revenue and credits
|
-
|
31
|
||||||
|
− Net operating losses
|
1,629
|
1,998
|
||||||
|
− Property and equipment
|
348
|
508
|
||||||
|
− Lease liability (right of use assets)
|
5,101
|
6,768
|
||||||
|
− Intangible assets
|
-
|
-
|
||||||
|
7,850
|
10,039
|
|||||||
|
Taxable temporary differences:
|
||||||||
|
− Property and equipment
|
(105
|
)
|
(49
|
)
|
||||
|
− Right of use assets
|
(4,661
|
)
|
(6,581
|
)
|
||||
|
− Intangible assets
|
(978
|
)
|
(1,039
|
)
|
||||
|
(5,744
|
)
|
(7,669
|
)
|
|||||
|
Net deferred tax assets
|
2,106
|
2,370
|
||||||
Movement in deferred tax assets / (liability):
|
June 30,
2020
|
June 30,
2019
|
|||||||
|
(US$’000)
|
||||||||
|
Opening deferred tax assets
|
2,370
|
5,219
|
||||||
|
Deferred tax benefits / (expense)
|
(264
|
)
|
(7,630
|
)
|
||||
|
Foreign exchange and other rate differences
|
-
|
(49
|
)
|
|||||
|
Sale of subsidiary
|
-
|
4,830
|
||||||
|
Net deferred tax assets
|
2,106
|
2,370
|
||||||
A deferred tax asset has not been recognized for the following gross amounts:
|
June 30,
2020
|
June 30,
2019
|
|||||||
|
(US$’000)
|
||||||||
|
Unused tax losses
|
25,320
|
29,285
|
||||||
|
Deductible temporary differences
|
253
|
2,188
|
||||||
|
Unused tax losses and deductible differences - unrecognized
|
25,573
|
31,473
|
||||||
Deferred tax asset arising on the above amounts has not been recognized in these consolidated financial statements, as the management is of the prudent view that it is not probable that sufficient
taxable profit will be available in the foreseeable future against which these temporary differences and unused tax losses can be utilized. Other factors considered include cumulative losses in recent years and non-existence of future reversals
of existing taxable temporary differences. The unused tax losses will begin to expire in 2027.
At June 30 2020, the Group’s US federal and state net operating loss carry forward for income tax purposes are $20.6 million (June 30, 2019: $26.7 million) and $26.6 million (June 30, 2019: $31.9
million) respectively which will begin to expire in 2029. The Group’s Canadian subsidiary has net operating loss carry forward of $2.2 million (June 30, 2019: $2.2 million), expiring over the period 2027 through 2037. The Group’s UK and
European subsidiaries have net operating loss carry forward of $3.9 million (June 30, 2019: $6.9 million) which can be carried forward indefinitely. The Group’s Luxembourg subsidiary has net operating loss of $1.2 million (June 30, 2019: Nil)
which will begin to expire in 2037. The Group’s subsidiary in Senegal has net operating loss carry forward of $2.9 million (June 30, 2019: $1.7 million) expiring over the period 2021 through 2024. These amounts are based on the income tax
returns filed for the year ended June 30, 2019 and estimated amounts for the year ended June 30, 2020.
During the fiscal year ended June 30, 2019, the Group’s subsidiary in Luxembourg was challenged by the tax authorities on a certain tax exemption. Luxembourg tax authorities issued an assessment
for tax year 2014, denying the exemption. The Group filed a petition to Luxembourg tax office to challenge this position. In response to formal petition, the Group received a revised tax assessment from Luxembourg tax authorities on June 17,
2020. Luxembourg tax authorities have accepted Group’s tax position and allowed the tax exemption. Hence, this tax dispute has been resolved.
F-41
On December 22, 2017, the United States signed into law H.R.1 Bill, originally known as the “Tax Cuts and Jobs Act”. The Tax Cuts and Jobs Act (TCJA) has reduced the US federal corporate income
tax rate from the existing rate of 35% to 21% with effect from January 1, 2018. Other significant changes introduced by TCJA include limitations on the deductibility of interest expense and executive compensation, a base erosion focused minimum
tax (the Base Erosion and Anti-Abuse tax), transitional tax, tangible property expensing, current tax on global intangible low-taxed income (GILTI) and carry forward of net operating losses (“NOLs”).
The Group is subject to income tax in several jurisdictions and significant judgement is required in determining the provision for income taxes. During the ordinary course of
business, there are transactions and calculations for which the ultimate tax determination is uncertain. As a result, the Group recognizes tax liabilities based on estimates of whether additional taxes and interest will be due. The
Group has adopted IFRIC 23 effective from July 1, 2019 and reassessed its judgements and estimates related to income tax treatments in various jurisdictions. There are no material uncertain tax treatments that would require adjustment to the
income tax expense.
There are no income tax consequences attached to the payment of dividends by the Group to its shareholders.
Reconciliation of effective tax rate
Below is a reconciliation of tax expense and the accounting profit. As the Group’s key income generating operations are based in the US, United States blended federal income tax rate
of 21% is used for the purpose of this reconciliation:
|
June 30,
2020
|
June 30,
2019
|
June 30,
2018
|
||||||||||
|
(US$’000)
|
||||||||||||
|
Profit / (loss) for the year
|
7,770
|
10,965
|
(15,881
|
)
|
||||||||
|
Income tax expense / (benefit)
|
2,315
|
8,445
|
(54
|
)
|
||||||||
|
Net profit / (loss) before income tax
|
10,085
|
19,410
|
(15,935
|
)
|
||||||||
|
June 30,
2020 |
June 30,
2020
|
June 30,
2019
|
June 30,
2019
|
June 30,
2018
|
June 30,
2018
|
|||||||||||||||||||
|
(%)
|
(US$’000)
|
(%)
|
(US$’000)
|
(%)
|
(US$’000)
|
|||||||||||||||||||
|
Income tax (benefit) using the applicable tax rate
|
21.0
|
%
|
2,118
|
21.0
|
%
|
4,230
|
28.0
|
%
|
(4,470
|
)
|
||||||||||||||
|
State taxes (net of federal tax effect)
|
12.9
|
%
|
1,303
|
5.3
|
%
|
1,073
|
3.6
|
%
|
(583
|
)
|
||||||||||||||
|
Effect of tax and exchange rates in foreign jurisdictions
|
-7.7
|
%
|
(776
|
)
|
5.1
|
%
|
1,043
|
-19.0
|
%
|
3,033
|
||||||||||||||
|
Foreign subsidiaries taxed at lower rate or tax exempt
|
1.9
|
%
|
191
|
-1.9
|
%
|
(380
|
)
|
-28.0
|
%
|
4,525
|
||||||||||||||
|
Non-deductible expenses / exempt income
|
3.3
|
%
|
328
|
2.3
|
%
|
470
|
-1.0
|
%
|
93
|
|||||||||||||||
|
Cancellation of legacy ESOP plan
|
-
|
%
|
-
|
15.2
|
%
|
3,104
|
-
|
%
|
-
|
|||||||||||||||
|
Effect of disposal of subsidiaries
|
-
|
%
|
-
|
-2.0
|
%
|
(403
|
)
|
-3.2
|
%
|
505
|
||||||||||||||
|
Prior year provision / other items
|
-3.2
|
%
|
(320
|
)
|
0.4
|
%
|
73
|
-1.0
|
%
|
128
|
||||||||||||||
|
Unrecognized losses utilized during the year
|
10.1
|
%
|
1,018
|
-
|
%
|
-
|
-
|
%
|
-
|
|||||||||||||||
|
Change in unrecognized temporary differences
|
-15.3
|
%
|
(1,547
|
)
|
-3.7
|
%
|
(765
|
)
|
21.0
|
%
|
(3,285
|
)
|
||||||||||||
|
23.0
|
%
|
2,315
|
41.7
|
%
|
8,445
|
0.4
|
%
|
(54
|
)
|
|||||||||||||||
F-42
| 19. |
SHARE OPTION PLANS
|
The share based payments expenses in the consolidated statements of profit or loss and other comprehensive income consist of the following:
|
June 30,
2020
|
June 30,
2019
|
June 30,
2018
|
||||||||||
|
(US$’000)
|
||||||||||||
|
Predecessor Stock Plan
|
-
|
-
|
154
|
|||||||||
|
2017 IBEX Stock Plan
|
-
|
4,132
|
7,475
|
|||||||||
|
Phantom Stock Plan
|
(31
|
)
|
(300
|
)
|
757
|
|||||||
|
2018 Restricted Stock Awards (RSA)
|
95
|
255
|
-
|
|||||||||
|
2020 Long term Incentive Plan
|
295
|
-
|
-
|
|||||||||
|
Total
|
359
|
4,087
|
8,386
|
|||||||||
|
Share-based payments from discontinued operations
|
-
|
875
|
1,299
|
|||||||||
| 19.1. |
2017 IBEX Stock Plan
|
On June 20, 2017, our board of directors and shareholders approved and adopted the Holding Company’s 2017 Stock Plan, as amended and restated on October 6, 2017 (the ‘‘2017 IBEX
Plan’’). On February 21, 2018, the Company amended and restated its 2017 Stock Plan, increasing the maximum number of common shares of the Company that may be issued from 1,798,019 to 2,559,323.
On March 16, 2018, we effectuated a 1.11650536356898-to-1 reverse share split.
Purpose
We believe that the 2017 IBEX Plan will enable us to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to our employees,
consultants and directors, and to promote the success of our business.
Types of Awards
The 2017 IBEX Plan provides for grants of stock options and restricted stock awards.
Eligibility
Selected employees, consultants or directors of our company or our affiliates will be eligible to receive non-statutory stock options and restricted stock awards under the 2017 IBEX Plan, but only
employees of our company will be eligible to receive incentive stock options.
Administration
The 2017 IBEX Plan is administered by our board of directors, a committee (or subcommittee) appointed by our board of directors, or any combination, as determined by our board of directors.
Subject to the provisions of the 2017 IBEX Plan and, in the case of a committee (or subcommittee), the specific duties delegated by our board of directors to such committee (or subcommittee), the administrator has the authority to, among other
things, determine the per share fair market value of our common shares, select the individuals to whom awards may be granted; determine the number of shares covered by each award, approve the form(s) of agreement(s) and other related documents
used under the 2017 IBEX Plan, determine the terms and conditions of awards, amend outstanding awards, establish the terms of and implement an option exchange program, and construe and interpret the terms of the 2017 IBEX Plan and any
agreements
related to awards granted under the 2017 IBEX Plan. Our board of directors may also delegate authority to one of more of our officers to make awards under the 2017 IBEX Plan.
Available Shares
The number of common shares that we may issue with respect to awards granted under the 2017 IBEX Plan will not exceed an aggregate of 2,559,323. This limit may be adjusted to reflect certain
changes in our capitalization, such as share splits, reverse share splits, share dividends, recapitalizations, rights offerings, reorganizations, mergers, consolidations, spin-offs, split-ups and similar transactions. If an award expires or
becomes unexercisable for any reason without having been exercised in full, or is surrendered pursuant to an option exchange program, the common shares subject to such award will be available for further awards under the 2017 IBEX Plan. Common
shares used to pay the exercise or purchase price of an award or tax obligations will be treated as not issued and will continue to be available under the 2017 IBEX Plan. Common shares issued under the 2017 IBEX Plan and later forfeited to us
due to the failure to vest or repurchased by us at the original purchase price paid to us for such common shares will again be available for future grant under the 2017 IBEX Plan.
F-43
Award Agreements
Awards granted under the 2017 IBEX Plan will be evidenced by award agreements, which need not be identical and which will be modified to the extent necessary to comply with applicable law in the
relevant jurisdiction of the respective participant, that provide additional terms of the award, as determined by the administrator.
Stock Options
The 2017 IBEX Plan allows the administrator to grant incentive stock options, as that term is defined in section 422 of the Internal Revenue Code, or non-statutory stock options. Only our
employees may receive incentive stock option awards. The term of each option may not exceed ten years, or five years in the case of an incentive stock option granted to a ten percent shareholder. No incentive stock option or non-qualified stock
option may have an exercise price less than the fair market value of a common share at the time of grant or, in the case of an incentive stock option granted to a ten percent shareholder, 110% of such share’s fair market value. Options will be
exercisable at such time or times and subject to such terms and conditions as determined by the administrator at grant and the exercisability of such options may be accelerated by the administrator.
Restricted Stock
The 2017 IBEX Plan allows the administrator to grant restricted stock awards. Once the restricted stock is purchased or received, the participant will have the rights equivalent to those of a
holder of our common shares, and will be a record holder when his or her purchase and the issuance of the common shares is entered upon the records of our duly authorized transfer agent. Unless otherwise determined by the administrator, we will
have a right to repurchase any grants of restricted stock upon a recipient’s voluntary or involuntary termination of employment for any reason at a price equal to the original purchase price of such restricted stock.
Stockholder Rights
Except as otherwise provided in the applicable award agreement, and with respect to an award of restricted stock, a participant will have no rights as a shareholder with respect to common shares
covered by any award until the participant becomes the record holder of such common shares.
Amendment and Termination
Our board of directors may, at any time, amend or terminate the 2017 IBEX Plan but no amendment or termination may be made that would materially and adversely affect the rights of any participant
under any outstanding award, without his or her consent.
Transferability
Subject to certain limited exceptions, awards granted under the 2017 IBEX Plan may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by
the laws of descent or distribution.
Effective Date; Term
The 2017 IBEX Plan became effective on June 20, 2017 and will expire on June 20, 2027 unless terminated earlier by the board of directors.
In December 2017, the Group granted 1,778,569 stock options to its employees of which 480,128 were vested. The remaining options will vest over periods of three to four years. There were no
restricted stock awards granted in the same period. The weighted average exercise price of stock options granted was $6.81.
The fair value of share options granted was determined to be $8.428 per option.
The Group estimates the fair value of its stock options on the date of the grant using the Black Scholes option pricing model, which requires the use of certain estimates and assumptions that
affect the reported amount of share-based compensation cost recognized in the profit or loss. These include estimates of the fair value of common shares, the expected term of stock options, expected volatility of the Holding Company’s common
shares, expected dividends and the risk-free interest rate:
Fair value of common shares
The estimated fair value of the common shares underlying the share options has been determined to be $14.00 per share.
Expected term
The expected term of options granted is 4.92 years. The Group assumes all options will be exercised at the contractual term of the option.
Volatility
Management used an average volatility of comparable listed companies of 35.6% at the time of grant calculations.
F-44
Expected dividends
The Holding Company does not expect to pay any dividends in the future.
Risk-free rate
The risk-free rate is the continuously compounded United States nominal treasury rate corresponding to the term of the option. The average risk-free rate used for options granted was 2.26%.
A summary of the stock options outstanding and exercisable as of June 30, 2020 and 2019 are as follows:
| 2020 |
2019 |
|||||||||||||||
|
Weighted average
exercise price
|
Share
Options (Number)
|
Weighted average exercise price
|
Share Options (Number)
|
|||||||||||||
|
(US$)
|
(US$)
|
|||||||||||||||
|
Options outstanding as of beginning of the period
|
-
|
-
|
6.81
|
1,633,170
|
||||||||||||
|
Options granted during the period
|
-
|
-
|
-
|
-
|
||||||||||||
|
Options exercised during the period
|
-
|
-
|
-
|
-
|
||||||||||||
|
Options forfeited / cancelled / expired during the period
|
-
|
-
|
(6.81
|
)
|
(1,633,170
|
)
|
||||||||||
|
Options outstanding as of end of the period
|
-
|
-
|
-
|
-
|
||||||||||||
|
Options exercisable as of end of the period
|
-
|
-
|
||||||||||||||
On December 28, 2018, the 2017 IBEX Plan was terminated pursuant to Section 11 of the 2017 IBEX Plan. Pursuant to the termination of the Plan, all stock options under the 2017 IBEX Plan were
cancelled. The Group recognized $4.9 million expense during the year ended June 30, 2019 including $3.2 million of additional expense to fully write off the plan
| 19.2. |
Phantom Stock Plans
|
In February of 2018, each of IBEX Global Solutions (Private) Limited, DGS (Private) Limited, eTelequote(Private) Limited, IBEX Global Solutions (Philippines) Inc., IBEX Global ROHQ, IBEX Global
Solutions Senegal S.A., and Virtual World (Private) Limited, and in March of 2018, each of IBEX Global Jamaica Limited, and IBEX Global Solutions Nicaragua SA adopted phantom stock plans (collectively, the ‘‘Phantom Stock Plans’’), which
provide for grants of ‘‘phantom stock options’’ to certain of their executive officers and employees. Each Phantom stock option provides the participant with a contractual right to receive an amount equal to the difference between the fair
market value of a vested common share of the Holding Company at the time of exercise and the exercise price of the option per share. In the event that the payment due to a grantee who has exercised an option exceeds $10,000, the relevant
company may elect in its sole discretion to make payments in equal installments (without interest) over a period not exceeding three years, provided that each installment shall be no less than $10,000 (unless the residual amount is less than
$10,000).
Fair value of common shares
The estimated fair value of the common shares underlying the share options has been determined to be $14.00 per share.
Expected term
The expected term of options granted is 4.65 - 4.67 years. In estimating the expected term, the subsidiary assumes all options will be exercised at the contractual term of the option.
Volatility
Management used an average volatility of comparable listed companies of 47.7%.
Expected dividends
The Holding Company does not expect to pay any dividends in the future.
F-45
Risk-free rate
The risk free rate is the continuously compounded United States nominal treasury rate corresponding to the term of the option. The risk free rate used for computation of fair value of options as
of June 30, 2020 was 1.2%.
Those issued in February 2018 and March 2018 have a fair value of $8.458 and $8.464 per option respectively. A roll forward of the Phantom Shares are as follows:
|
2020
|
2019
|
|||||||||||||||
|
Weighted average exercise price
|
Share Options (Number)
|
Weighted average exercise price
|
Share Options (Number)
|
|||||||||||||
|
(US$)
|
(US$)
|
|||||||||||||||
|
Options outstanding as of beginning of the period
|
6.81
|
54,575
|
6.81
|
182,675
|
||||||||||||
|
Options granted during the period
|
-
|
-
|
-
|
-
|
||||||||||||
|
Options exercised during the period
|
-
|
-
|
-
|
-
|
||||||||||||
|
Options forfeited / cancelled / expired during the period
|
-
|
-
|
-
|
(128,100
|
)
|
|||||||||||
|
Options outstanding as of end of the period
|
6.81
|
54,575
|
6.81
|
54,575
|
||||||||||||
|
Options exercisable as of end of the period
|
6.81
|
45,684
|
6.81
|
41,993
|
||||||||||||
A summary of the stock options outstanding and exercisable as of June 30, 2020 is as follows:
|
Exercise price or range
US$
|
Number
|
Options outstanding Weighted average
remaining life
(years)
|
Weighted average exercise price US$
|
Number
|
Options
exercisable
Weighted average
remaining life
(years)
|
Weighted average exercise price US$
|
|||||||||||||||||||
|
6.81
|
54,575
|
2.66
|
6.81
|
48,212
|
1.58
|
6.81
|
|||||||||||||||||||
The weighted average fair value of the Phantom stock options as of June 30, 2020 is $6.81 (June 30, 2019: $8.46). For the year ended June 30, 2020, the Subsidiaries recognized an expense of share-based payment
amounting to ($0.03 million) (June 30, 2019: $0.6 million). There were no Phantom Stock options with intrinsic value as of June 30, 2020. The liability under the Phantom stock option plan as of June 30, 2020 was $0.4 million included as other
non-current liabilities in Note 14.
As of June 30, 2020, the unrecognized compensation expense associated with the phantom stock plan was $0.0 million and it will be recognized over the period of 19 months from the end of June 30, 2020.
On December 28, 2018, the Board of Directors, pursuant to a provision in the Phantom Stock Plans terminated the Phantom Stock Plans for IBEX Global Solutions (Private) Limited, DGS (Private)
Limited, eTelequote (Private) Limited, IBEX Global Solutions Senegal S.A., Virtual World (Private) Limited, and IBEX Global Solutions Nicaragua SA. All phantom stock options under these specific Phantom Stock Plans were cancelled upon
termination of the identified Phantom Stock Plans. The Phantom Stock Plans for IBEX Global Solutions (Philippines) Inc., IBEX Global ROHQ, and IBEX Global Jamaica Limited remain in effect. The Group reversed the expense of $0.9 million of
phantom stock in connection to forfeiture for vesting conditions not being met during the year ended June 30, 2019.
| 19.3. |
2018 Restricted Stock Award Program
|
On December 21, 2018, our board of directors and shareholders approved and adopted the Holding Company’s 2018 Restricted Share Plan (the “2018 RSA Plan”). The following description of the 2018 RSA
Plan is as follows.
Purpose
We believe that the 2018 RSA Plan will enable us to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to our employees,
consultants and directors, and to promote the success of our business.
F-46
Types of Awards
The 2018 RSA Plan provides for grants of Restricted Share awards entitling recipients to acquire Class B Common Shares (“Restricted Shares”), subject to the right of the Holding Company to
repurchase all or part of such Restricted Shares at their issue price or other stated or formula price (or to require forfeiture of such shares if issued at no cost) from the recipient in the event that conditions specified by our board of
directors in the applicable Restricted Share award are not satisfied prior to the end of the applicable restriction period or periods established by our board of directors for such Restricted Share award.
Eligibility
Selected employees, consultants or directors of our company or our affiliates will be eligible to receive non-statutory Restricted Share awards under the 2018 RSA Plan, but only employees of our
company will be eligible to receive incentive stock awards
Administration
The 2018 RSA Plan is administered by our board of directors, a committee (or subcommittee) appointed by our board of directors, or any combination, as determined by our board of directors. Subject
to the provisions of the 2018 RSA Plan and, in the case of a committee (or subcommittee), the specific duties delegated by our board of directors to such committee (or subcommittee), the administrator has the authority to, among other things,
determine the per share fair market value of our common shares, select the individuals to whom awards may be granted; determine the number of shares covered by each award, approve the form(s) of agreement(s) and other related documents used
under the 2018 RSA Plan, determine the terms and conditions of awards, amend outstanding awards, establish the terms of and implement an option exchange program, and construe and interpret the terms of the 2018 RSA Plan and any agreements
related to awards granted under the 2018 RSA Plan. Our board of directors may also delegate authority to one of more of our officers to make awards under the 2018 RSA Plan.
Available Shares
Subject to adjustment, Restricted Share awards may be granted under the Plan for up to 2,559,323.13 Class B common shares, $0.000111650536 par value per Class B common share, of the Group (the
“Class B Common Shares”). Restricted Shares issued under the 2018 RSA Plan may consist in whole or in part of authorized but unissued shares or treasury shares.
This limit may be adjusted to reflect certain changes in our capitalization, such as share splits, reverse share splits, share dividends, recapitalizations, rights offerings, reorganizations,
mergers, consolidations, spin-offs, split-ups and similar transactions.
If any Restricted Share award expires or is forfeited in whole or in part (including as the result of Class B Common Shares subject to such Restricted Share award being repurchased by the Company
pursuant to a contractual repurchase right or being forfeited back to the Company), the unused Class B Common Shares covered by such Restricted Share award shall again be available for the grant of Restricted Shares. Additionally, any Class B
Common Shares delivered to the Company by a participant to either used to purchase additional Restricted Shares or to satisfy the applicable tax withholding obligations with respect to Restricted Shares (including shares retained from the
Restricted Share award creating the tax obligation) shall be added back to the number of shares available for the future grant of Restricted Shares.
Restricted Shares
The board of directors may grant Restricted Share awards entitling recipients to acquire Class B Common Shares (“Restricted Shares”), subject to the right of the Company to repurchase all or part
of such Restricted Shares at their issue price or other stated or formula price (or to require forfeiture of such shares if issued at no cost) from the recipient in the event that conditions specified by the board of directors in the applicable
Restricted Share award are not satisfied prior to the end of the applicable restriction period or periods established by the board of directors for such Restricted Share award.
The board of directors shall determine the terms and conditions of a Restricted Share award, including the conditions for vesting and repurchase (or forfeiture) and the issue price, if any.
Stockholder Rights
Except as otherwise provided in the applicable award agreement, and with respect to an award of Restricted Shares, a participant will have no rights as a shareholder with respect to common shares
covered by any award until the participant becomes the record holder of such common shares.
F-47
Amendment and Termination
Our board of directors may, at any time, amend or terminate the 2018 RSA Plan but no amendment or termination may be made that would materially and adversely affect the rights of any participant
under any outstanding award, without his or her consent.
Transferability
Subject to certain limited exceptions, awards granted under the 2018 RSA Plan may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by
the laws of descent or distribution.
Effective Date; Term
The 2018 RSA Plan in December 2018 granted 2,373,374 shares, of which 721,596 shares vested on December 31, 2018. The remaining awards will vest between 13 months to 4 years, depending on the
individual.
Fair value of common shares
The fair market value per share at the time of issuance was $0.61 which was derived from using the Monte Carlo simulation.
Expected term
The expected term of options granted is 3.84 years. The Group assumes all options will be exercised at the contractual term of the option.
Volatility
Management used an average volatility of comparable companies of 26.0%.
Expected dividends
The Holding Company does not expect to pay any dividends in the future.
Risk-free rate
The risk free rate is the continuously compounded United States nominal treasury rate corresponding to the term of the option. The risk free rate used for computation of fair value of options as
of June 30, 2020 was 2.87%.
The Company has bifurcated the 2018 RSA Plan into three categories based on the vesting conditions and vesting period of the Restricted Share awards:
|
•
|
2018 RSA Plan – Non-Executive Management
|
|
•
|
2018 RSA Plan Non-Performance – Executive Leadership Team
|
|
•
|
2018 RSA Plan Performance – Executive Leadership Team
|
F-48
2018 RSA Plan – Non-Executive Management
A summary of the Restricted Share awards (“RSAs”) outstanding and exercisable as of June 30, 2020 and June 30, 2019 are as follows:
|
2020
|
2019
|
|||||||||||||||
|
Grant Date Fair Market Value
|
RSA (Number)
|
Grant Date Fair Market Value
|
RSA (Number)
|
|||||||||||||
|
(US$)
|
(US$)
|
|||||||||||||||
|
RSAs outstanding as of beginning of the period
|
0.61
|
916,929
|
-
|
-
|
||||||||||||
|
RSAs granted during the period
|
-
|
-
|
0.61
|
916,929
|
||||||||||||
|
RSAs exercised during the period
|
-
|
-
|
-
|
-
|
||||||||||||
|
RSAs forfeited / cancelled / expired during the period
|
(0.61
|
)
|
(266,736
|
)
|
-
|
-
|
||||||||||
|
RSAs outstanding as of end of the period
|
0.61
|
650,193
|
0.61
|
916,929
|
||||||||||||
|
RSAs vested as of end of the period
|
0.61
|
481,859
|
0.61
|
438,638
|
||||||||||||
The 928,124 Restricted Share awards were granted under the 2018 RSA Plan in December 31, 2018 that vest over time, with an initial portion vesting at December 31, 2018 and the remainder vesting
equally on a monthly basis for a period of 13 months to four years.
As of June 30, 2020 and June 30, 2019, 481,859, or 74.1% and 438,638, or 47.8% respectively, of the outstanding Restricted Share awards have vested. The Company recognized the amount of stock compensation expense
for Restricted Share awards initially vesting on the first vesting date. The total expense recognized during the year ended June 30, 2020 and June 30, 2019 was $0.1 million and $0.3 million, respectively.
As of June 30, 2020, the unrecognized compensation expense associated with the Restricted Share awards was $0.1 million, and it will be recognized over the period of 19 months from the end of June 30, 2020.
2018 RSA Plan Non-Performance – Executive Leadership Team
Members of executive management are primarily based in the United States. All U.S.-based members of executive management have filed an 83(b) election, which provides that such equity be taxed by
the Internal Revenue Service (the “IRS”) at the time of grant, rather than at the time of vesting and shall result in such Restricted Share awards being taxed as capital gains rather than ordinary income. All U.S. members of executive
leadership team have purchased the Restricted Shares through a promissory note, which is subject to 3% interest (the “Notes”). The Notes are considered to be a related party loan (see Related Party Transactions, Note 23). The Notes are a 50% /
50% split between recourse and non–recourse, with the non-recourse portion being secured by those Restricted Shares issued to the borrower. The Group did not record the expense of the both recourse and non–recourse components.
A summary of the Restricted Share awards outstanding and exercisable as of June 30, 2020 and June 30, 2019 are as follows:
|
2020
|
2019
|
|||||||||||||||
|
Grant Date Fair Market Value
|
RSA (Number)
|
Grant Date Fair Market Value
|
RSA (Number)
|
|||||||||||||
|
(US$)
|
(US$)
|
|||||||||||||||
|
RSAs outstanding as of beginning of the period
|
0.61
|
1,006,519
|
-
|
-
|
||||||||||||
|
RSAs granted during the period
|
-
|
-
|
0.61
|
1,006,519
|
||||||||||||
|
RSAs exercised during the period
|
-
|
-
|
-
|
-
|
||||||||||||
|
RSAs forfeited / cancelled / expired during the period
|
0.61
|
(87,800
|
)
|
-
|
-
|
|||||||||||
|
RSAs outstanding as of end of the period
|
0.61
|
918,719
|
0.61
|
1,006,519
|
||||||||||||
|
RSAs vested as of end of the period
|
0.61
|
647,702
|
0.61
|
518,197
|
||||||||||||
F-49
The 970,893 Restricted Share awards were granted under the 2018 RSA Plan in December 31, 2018 that vest over time, with an initial portion vesting at December 31, 2018 and the remainder vesting equally on a
monthly basis for a period of 24 months to four years.
As of June 30, 2020 and June 30, 2019, 647,702, or 70.5% and 518,197, or 51.5%, respectively, of the outstanding Restricted Share awards have vested.
2018 RSA Plan Performance – Executive Leadership Team
Performance-based Restricted Share awards vest based on certain performance criteria, which are:
| • |
the consummation of a successful initial public offering on or before December 31, 2019: The restricted shares allotted to this criteria are 170,680.
|
| • |
an initial public offering of the Group’s class A common shares, and thereafter, the average price per share traded in such public market equals or exceeds $17.42 per share at any point in time: The restricted shares allotted to this criteria are 103,264.
|
| • |
meeting specific revenue and EBITDA targets during the period from January 1, 2019 to December 31, 2019: The restricted shares allotted to this criteria are 10,000.
|
|
2020
|
2019
|
|||||||||||||||
|
Grant Date Fair Market Value
|
RSA (Number)
|
Grant Date Fair Market Value
|
RSA (Number)
|
|||||||||||||
|
(US$)
|
(US$)
|
|||||||||||||||
|
RSAs outstanding as of beginning of the period
|
0.61
|
449,926
|
-
|
-
|
||||||||||||
|
RSAs granted during the period
|
-
|
-
|
0.61
|
449,926
|
||||||||||||
|
RSAs exercised during the period
|
-
|
-
|
-
|
-
|
||||||||||||
|
RSAs forfeited / cancelled / expired during the period
|
0.61
|
(177,178
|
)
|
-
|
-
|
|||||||||||
|
RSAs outstanding as of end of the period
|
0.61
|
272,748
|
0.61
|
449,926
|
||||||||||||
|
RSAs vested as of end of the period
|
0.61
|
46,809
|
0.61
|
-
|
||||||||||||
As of June 30, 2020 and June 30, 2019, 46,809, or 17.2% and nil, or nil%, respectively, of the outstanding Restricted Share awards have vested.
On December 23, 2019, the Company entered into amendments to the restricted share awards with certain members of management and directors (the ‘2019 RSA Amendments’) covering an aggregate of 103,264 restricted common shares. The terms of the
original restricted share awards provided for vesting upon an initial public offering on a public exchange in the United States by December 31, 2019. The 2019 RSA Amendments provide for an extension of the date by which such initial public
offering must occur to June 30, 2020. There would be no change in the fair value per share due to the modification. These RSA agreements were further amended on June 30, 2020 as referred below:
On January 28, 2020, the board of directors of the Company deemed certain performance triggers to be achieved with respect to restricted share awards with certain members of management and directors (the ‘2020 RSA Amendments’) covering an
aggregate of 67,176 restricted common shares. The terms of the valuation trigger associated with such RSAs were not modified. The fair value of certain of the common shares subject to the RSAs were not changed due to the modification.
On May 20, 2020, the Board of Directors approved extraordinary payment to the members of executive management, in the amount set forth for each individual, to be paid directly to the Company in satisfaction in full of the Promissory Note
entered into by each individual at the time of issuance of Restricted Stock Award Plan, including a tax gross up to cover any tax implications that may result from repayment of such loan on behalf of the individual which shall be withheld and
paid directly to the IRS and that such Promissory Note shall be effectively cancelled upon payment.
On June 30, 2020, the Company entered into further amendments to the restricted share awards with certain members of management and directors (the ‘2020 RSA Amendments’) covering an aggregate of 78,264 restricted common shares. The terms of
the original restricted share awards (amended by 2019 RSA amendments) provided for vesting upon an initial public offering on a public exchange in the United States by June 30, 2020. The 2020 RSA Amendments provide for an extension of the date
by which such initial public offering must occur to December 31, 2020. The fair value per share were not changed due to this modification.
F-50
The Group will not issue further shares under this 2018 RSA plan and that the remaining shares of 707,535 were transferred to the 2020 Long Term Incentive Plan (Note 19.4) on May 20, 2020.
Please refer to Note 30.2 for the Restricted Share awards repurchased from Etelequote Limited employees during the year ended June 30, 2020.
| 19.4. |
2020 Long term incentive plan
|
On June 30, 2020, our board of directors and shareholders approved and adopted the Holding Company’s 2020 Long term incentive plan (the “2020 LTIP”). The following description of the 2020 LTIP is
as follows.
Purpose
We believe that the 2020 LTIP will enable us to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to our employees,
consultants and directors, and to promote the success of our business.
Types of Awards
The 2020 LTIP provides for grants of stock options.
Eligibility
Selected employees, consultants or directors of our company or our subsidiaries will be eligible to receive non-statutory Restricted Share awards under the 2020 LTIP, but only employees of our
company will be eligible to receive incentive stock awards
Administration
The 2020 LTIP is administered by our administrator appointed by our board of directors, or any combination, as determined by our board of directors. Subject to the provisions of the 2020 LTIP and,
in the case of a committee (or subcommittee), the specific duties delegated by our board of directors to such committee (or subcommittee), the administrator has the authority to, among other things, determine the per share fair market value of
our common shares, select the individuals to whom awards may be granted; determine the number of shares covered by each award, approve the form(s) of agreement(s) and other related documents used under the 2020 LTIP, determine the terms and
conditions of awards, amend outstanding awards, establish the terms of and implement an option exchange program, and construe and interpret the terms of the 2020 LTIP and any agreements related to awards granted under the 2020 LTIP. Our board
of directors may also delegate authority to one of more of our officers to make awards under the 2020 LTIP.
Available Shares
The number of common shares that we may issue with respect to awards granted under the 2020 LTIP will not exceed an aggregate of 1,287,326.13. This limit may be adjusted to reflect certain changes
in our capitalization, such as share splits, reverse share splits, share dividends, recapitalizations, rights offerings, reorganizations, mergers, consolidations, spin-offs, split-ups and similar transactions. If an award expires or becomes
unexercisable for any reason without having been exercised in full, or is surrendered pursuant to an option exchange program, the common shares subject to such award will be available for further awards under the 2020 LTIP. Common shares used
to pay the exercise or purchase price of an award or tax obligations will be treated as not issued and will continue to be available under the 2020 LTIP. Common shares issued under the 2020 LTIP and later forfeited to us due to the failure to
vest or repurchased by us at the original purchase price paid to us for such common shares will again be available for future grant under the 2020 LTIP.
Stock Options
The 2020 LTIP allows the administrator to grant incentive stock options, as that term is defined in section 422 of the Internal Revenue Code, or non-statutory stock options. Only our employees may
receive incentive stock option awards. The term of each option may not exceed ten years. No incentive stock option or non-qualified stock option may have an exercise price less than the fair market value of a common share at the time of grant.
Options will be exercisable at such time or times and subject to such terms and conditions as determined by the administrator at grant and the exercisability of such options may be accelerated by the administrator.
Restricted Stock
The 2020 LTIP allows the administrator to grant restricted stock awards. Once the restricted stock is purchased or received, the participant will have the rights equivalent to those of a holder of
our common shares, and will be a record holder when his or her purchase and the issuance of the common shares is entered upon the records of our duly authorized transfer agent. Unless otherwise determined by the administrator, we will have a
right to repurchase any grants of restricted stock upon a recipient’s voluntary or involuntary termination of employment for any reason at a price equal to the original purchase price of such restricted stock.
F-51
Stockholder Rights
Except as otherwise provided in the applicable award agreement, and with respect to an award of Restricted Shares, a participant will have no rights as a shareholder with respect to common shares
covered by any award until the participant becomes the record holder of such common shares.
Amendment and Termination
Our board of directors may, at any time, amend or terminate the 2020 LTIP but no amendment or termination may be made that would materially and adversely affect the rights of any participant under
any outstanding award, without his or her consent.
Transferability
Subject to certain limited exceptions, awards granted under the 2020 LTIP may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the
laws of descent or distribution.
Effective Date; Term
On June 30, 2020 the Company’s board of directors approved the issuance of 338,432 options, of which 40,500 options were vested on June 30, 2020. The remaining awards will vest between 13 months
to 4 years, depending on the individual.
Fair value of common shares
The fair market value per share at the time of issuance was $12.66 which was derived from using the Monte Carlo simulation.
Expected term
The expected term of options granted is 10 years. The Group assumes all options will be exercised at the contractual term of the option.
Volatility
Management used an average volatility of comparable companies of 47.7%.
Expected dividends
The Holding Company does not expect to pay any dividends in the future.
F-52
Risk-free rate
The risk free rate is the continuously compounded United States nominal treasury rate corresponding to the term of the option. The risk free rate used for computation of fair value of options as
of June 30, 2020 was 1.2%.
|
2020
|
||||||||
|
Weighted average exercise price
|
Share Options (Number)
|
|||||||
|
(US$)
|
||||||||
|
Options outstanding as of beginning of the period
|
12.75
|
338,432
|
||||||
|
Options granted during the period
|
-
|
-
|
||||||
|
Options exercised during the period
|
-
|
-
|
||||||
|
Options forfeited / cancelled / expired during the period
|
-
|
-
|
||||||
|
Options outstanding as of end of the period
|
12.75
|
338,432
|
||||||
|
Options exercisable as of end of the period
|
12.75
|
40,500
|
||||||
The 338,432 options granted under the 2020 LTIP on June 30, 2020 vest over time, with an initial portion vesting at June 30, 2020 and the remainder vesting equally on a monthly basis for a period
of 13 months to four years.
The total expense recognized during the fiscal year ended June 30, 2020 was $0.3 million.
As of June 30, 2020, the unrecognized compensation expense associated with the Long term Incentive Plan was $2.2 million, and it will be recognized over the period of 48 months from the end of
June 30, 2020.
The Group recognized $1.3 million and $4.9 million of stock based compensation expense (including 2017 IBEX stock plan, Phantom stock plan and 2018 RSA Plan) for the year ended June 30, 2020 and
2019 respectively including nil and $0.9 million for the year ended June 30, 2020 and 2019 respectively related to disposal of subsidiary (see Note 30.2).
| 20. |
EARNINGS PER SHARE
|
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Holding Company by the weighted average number of ordinary shares in issue during the year.
Diluted earnings per share is calculated by dividing the profit attributable to equity holders of the Holding Company by the weighted average number of ordinary shares in issue and the potential ordinary shares.
On December 21, 2018, the Group cancelled the 2017 IBEX Plan (see Note 19) and issued Restricted Stock Awards (the RSA Plan). At June 30, 2020 there were 1,176,370 vested out of the 1,841,660
awards that have vested. The unvested shares of 665,291 have a small dilutive impact to the Earnings / (Loss) Per Share. On June 30, 2020, the Group issued LTIP (see Note 19), there were 40,500 options vested out of 338,432 options issued. The
remaining unvested options have an anti-dilutive impact. Additionally, 288,748 warrant shares have vested and are a component of the basic per share calculation. The remaining unvested warrant shares have an anti – dilutive impact.
As required under IAS 33:26, where changes in a company’s share capital structure result in changes to the number of ordinary shares in issue without a corresponding change in resources, it is
necessary to adjust the number of ordinary shares disclosed for comparative periods to reflect these changes. The changes in the Company’s equity structure in December 2018, had the effect of re – designating all of the shares in issue at June
30, 2018 into Series A, B, and C preferred convertible shares.
The Series A, B and C preferred convertible shares, do not meet the definition of ordinary shares under IAS 33 because of their preferred participation rights, under which Series B and C are
entitled to receive total dividends of $91.8 million subsequent to Series A receiving the first $9.5 million in dividends before dividends may be paid on the Class A and B Common Shares. No dividends have been paid on these shares to date.
Accordingly the company’s Class A and Class B common shares are deemed to be the only ordinary shares for purposes of calculating earnings per share.
As the income for the year ended June 30, 2020 and June 30, 2019, and the loss for the year ended June 30, 2018, did not exceed the value of the preferred participation rights attaching to the Series A, B and C
preferred convertible shares, the income/loss attributable to the ordinary shareholders of the company has been assessed as $0.
For the year ended June 30, 2020, a voluntary conversion of the Series A, B and C preferred convertible shares would be antidilutive, because all shares of the company would become ordinary shares
and the income for the period would be attributable to all such shares. For the year ended June 30, 2020 the effect of conversion would be dilutive as the company recorded a loss for that year from continuing operations.
F-53
|
June 30,
2020
|
June 30,
2019
|
June 30,
2018
|
||||||||||
|
(US$’000)
|
||||||||||||
|
Total - Income attributable to shareholders of the Holding Company
|
7,770
|
10,965
|
(15,881
|
)
|
||||||||
|
Continuing operations - Income / (loss) attributable to shareholders of the Holding Company
|
7,770
|
(4,519
|
)
|
(20,762
|
)
|
|||||||
|
Total – Income attributable to ordinary shareholders of the company
|
-
|
-
|
-
|
|||||||||
|
Continuing operations – Income attributable to ordinary shareholders of the company
|
-
|
-
|
-
|
|||||||||
|
|
(Shares)
|
|||||||||||
|
Weighted average number of ordinary shares - basic
|
1,176,370
|
956,835
|
-
|
|||||||||
|
|
(US$)
|
|||||||||||
|
Total - Basic earnings per share
|
-
|
-
|
-
|
|||||||||
|
Continuing operations - Basic per share
|
-
|
-
|
-
|
|||||||||
|
|
(Shares)
|
|||||||||||
|
Weighted average number of ordinary shares - diluted
|
12,936,962
|
12,461,182
|
11,195,649
|
|||||||||
|
|
(US$)
|
|||||||||||
|
Total - Diluted earnings per share
|
-
|
-
|
(1.42
|
)
|
||||||||
|
Continuing operations - Diluted loss per share
|
-
|
(0.36
|
)
|
(1.85
|
)
|
|||||||
As of June 30, 2020 (prior to IPO) the Series A, B and C preferred convertible shares as defined in Note 12, do not meet the definition of ordinary shares under IAS 33 because of their preferred participation
rights, under which Series B and C are entitled to receive total dividends of $91.8 million subsequent to Series A receiving the first $9.5 million in dividends before dividends may be paid on the Class A and B Common Shares. No dividends have
been paid on these shares as of June 30, 2020.
Earnings per share amounts are not adjusted for the transactions included in note 31 related to IPO, occurring after the June 30, 2020 because such transactions do not affect the amount of share
capital used to produce profit or loss for the year.
| 21. |
DIVIDEND DISTRIBUTION
|
One of the subsidiaries of IBEX Limited has declared and paid $ 0.1 million during the year ended June 30, 2020. No dividends were declared or paid during the year ended June 30, 2019. One of the
subsidiaries of the Group paid a dividend liability of $1.6 million during the year ended June 30, 2019 which was declared in year ended June 30, 2017.
| 22. |
FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES
|
Financial risk management
The Group’s activities expose it to a variety of financial risks: market risk (including interest rate risk and currency risk), credit risk and liquidity risk. The Board of Directors has the
overall responsibility for the establishment and oversight of the Group’s risk management framework.
The Group’s risk management policies are established to identify and analyze the risks faced by the Group, to set appropriate risk limits and to monitor risks and adherence to limits. Risk
management policies are reviewed regularly to reflect changes in the market conditions and the Group’s activities. The Group’s Board of Directors oversees how management monitors compliance with the Group’s risk management policies and
procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Group.
F-54
A summary of the financial instruments held by category is provided below:
|
June 30,
2020
|
June 30,
2019
|
|||||||
|
(US$’000)
|
||||||||
|
Financial assets - amortized cost
|
||||||||
|
Deposits
|
3,427
|
3,303
|
||||||
|
Trade receivables
|
53,436
|
63,025
|
||||||
|
Other receivables
|
4,406
|
3,587
|
||||||
|
Due from related parties
|
1,587
|
1,768
|
||||||
|
Cash and cash equivalents
|
21,870
|
8,873
|
||||||
|
84,726
|
80,556
|
|||||||
|
Financial liabilities - amortized cost
|
||||||||
|
Lease liabilities
|
74,712
|
69,234
|
||||||
|
Borrowings
|
31,258
|
49,019
|
||||||
|
Trade and other payables
|
25,773
|
19,870
|
||||||
|
Due to related parties
|
5,739
|
6,169
|
||||||
|
137,482
|
144,292
|
|||||||
|
Financial liabilities – fair value through profit and loss
|
||||||||
|
Warrant liabilities (Note 28)
|
3,889
|
751
|
||||||
|
3,889
|
751
|
|||||||
|
Financial liabilities – fair value through other comprehensive income
|
||||||||
|
Cash flow hedge (Note 15)
|
518
|
-
|
||||||
|
518
|
-
|
|||||||
Movement of Warrant liabilities as of June 30, 2020 and 2019:
|
June 30,
2020
|
June 30,
2019
|
|||||||
|
(US$’000)
|
||||||||
|
Opening balance
|
751
|
965
|
||||||
|
Fair Value Adjustment
|
2,305
|
(364
|
)
|
|||||
|
Warrants vested during the year
|
833
|
150
|
||||||
|
Closing balance
|
3,889
|
751
|
||||||
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
| • |
Level 1: quoted (unadjusted) prices in active markets for identical assets and liabilities;
|
| • |
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and
|
| • |
Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data.
|
F-55
The fair value of the Group’s financial liability is measured at fair value on a recurring basis. The following table gives information about how the fair value of this financial liability is
determined.
|
June 30,
2020
|
June 30, 2019
|
||||||||
|
(US$’000)
|
|||||||||
|
Financial liabilities – fair value through profit and loss
|
Fair value hierarchy
|
||||||||
|
Warrant liabilities (Note 28)
|
Level 3
|
3,889
|
751
|
||||||
|
Financial liabilities – fair value through other comprehensive income
|
Fair value hierarchy
|
||||||||
|
Cash flow hedge (Note 15)
|
Level 2
|
518
|
-
|
||||||
|
4,407
|
751
|
||||||||
During the year June 30, 2020, there was no reclassification to profit and loss from other comprehensive income as a result of cash flow hedge. There were no transfers between the different hierarchy levels in
the year ended June 30, 2020.
|
22.1
|
Market risk
|
|
22.1.1
|
Interest rate risk
|
The Group’s exposure to market risk for changes in interest rates relates primarily to the cash and bank balances and credit facilities. Borrowings under the PNC Credit Facility bear interest at LIBOR plus
1.75% and/or negative 0.5% of the PNC Commercial Lending Rate for domestic loans and, in the case of Term Loan C, LIBOR plus a margin of 4.0%. Borrowings under the HBC Loan Facility bear interest at the Prime Rate plus 2.50%.
Ibex Global Solutions, Inc., entered into a floating to fixed interest-rate swaps in August 2016, June 2019, and March 2020 to hedge the interest rate risk on Term Loan C and PNC Credit Facility, at a notional
value of $16.8 million as of June 30, 2020. Aside from that the Group does not use derivative financial instruments to hedge its risk of interest rate volatility.
Based on the Group’s debt position as of June 30, 2020 and taking into account the impact of the interest-rate swap referred above; a 1% change in interest rates would impact the finance costs by $0.8 million
(June 30, 2019: $0.8 million).
|
22.1.2
|
Foreign currency exchange risk
|
The Group serves many of our U.S.-based clients using contact center capacity in various countries such as Philippines, Pakistan, Nicaragua and Jamaica. Although contracts with these clients are typically
priced in U.S. dollars a substantial portion of related costs is denominated in the local currency of the country where services are provided, resulting in foreign currency exposure which could have an impact on our results of operations. Our
primary foreign currency exposures are in Philippine Peso, Jamaican Dollar, and Pakistan Rupee; to a lesser extent, we have exposures in Euro, Pound Sterling, CFA Franc (XOF), Nicaraguan Cordoba, Canadian Dollar and Emirati Dirham. There can
be no assurance that we can take actions to mitigate such exposure in the future, and if taken, that such actions will be successful or that future changes in currency exchange rates will not have a material adverse impact on our future
operating results. A significant change in the value of the U.S. Dollar against the currency of one or more countries where we operate may have a material adverse effect on our financial condition and results of operations.
Foreign currency exchange risk arises mainly where receivables and payables exist due to transactions entered into in foreign currencies. As such, the management believe that, the Group is exposed to the
following foreign currency exchange risks:
|
•
|
Transaction foreign currency risk is the exchange risk associated with the time delay between entering into a contract and settling it. Greater time differences
exacerbate transaction foreign currency risk, as there is more time for the two exchange rates to fluctuate.
|
|
•
|
Translation foreign currency risk is the risk that the Group’s non-U.S. Dollar assets and liabilities will change in value as a result of exchange rate changes.
Monetary assets and liabilities are valued and translated into U.S. Dollars at the applicable exchange rate prevailing at the applicable date. Any adverse valuation moves due to exchange rate changes at such time are charged
directly and could impact our financial position and results of operations. For the purposes of preparing the consolidated financial statements, the Group convert subsidiaries’ financial statements as follows:
|
Statements of financial position are translated into U.S. Dollars from local currencies at the period-end exchange rate, shareholders’ equity is translated at historical exchange rates prevailing on the
transaction date and income and cash flow statements are translated at average exchange rates for the period.
With all other variables held constant, a 5.0% depreciation in the Philippine Peso against the U.S. dollar would have decreased net loss after taxation in the fiscal year ended June 30, 2020 by approximately
$1.4 million (June 30, 2019: $1.1 million). Conversely, a 5.0% appreciation in the Philippine Peso against the U.S. dollar would have increased net loss after taxation in the fiscal year ended June 30, 2020 by approximately $1.4 million (June
30, 2019: $1.1 million). A 5.0% depreciation in Euro against the U.S. dollar would have decreased net loss after taxation in the fiscal year ended June 30, 2020 by approximately $0.1 million (June 30, 2019: $0.06 million). Conversely, a 5.0%
appreciation in the Euro against the U.S. dollar would have increased net loss after taxation in the fiscal year ended June 30, 2020 by approximately $0.1 million (June 30, 2019: $0.06 million). Similarly, a 5.0% depreciation in the Pakistan
Rupee against the U.S. dollar would have decreased our net loss after taxation in the fiscal year ended June 30, 2020 by approximately $0.3 million (June 30, 2019: $0.2 million). Conversely, a 5.0% appreciation in the Pakistan Rupee against
the U.S. dollar would have increased our net loss after taxation in the fiscal year ended June 30, 2020 by approximately $0.3 million (June 30, 2019: $0.02 million).
F-56
| 22.2 |
Credit risk
|
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and causes the other party to incur a financial loss. The Group is exposed to credit risk on its accounts
receivable mainly in the communications services, technology, consumer, and industrials sectors. The Group mitigates the risk by diversifying its client base in these sectors.
Financial instruments which potentially expose the Group to concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable, loans and advances and notes receivable. The
Group’s cash and cash equivalents are held with US and foreign commercial banks. The balance at times may exceed insured limits.
Credit rating wise breakup of bank balances:
|
June 30,
2020
|
June 30,
2019
|
||||||||
|
(US$’000)
|
|||||||||
|
AA
|
-
|
670
|
|||||||
|
AA-
|
-
|
3,081
|
|||||||
|
A-1+
|
|
1,553
|
212
|
||||||
|
A-1
|
94
|
123
|
|||||||
|
A+
|
4,295
|
847
|
|||||||
|
A
|
2,803
|
265
|
|||||||
|
A-
|
1
|
102
|
|||||||
|
A2
|
-
|
-
|
|||||||
|
A3
|
-
|
-
|
|||||||
|
B-
|
2,693
|
-
|
|||||||
|
B+
|
819
|
-
|
|||||||
|
BA3
|
165
|
-
|
|||||||
|
BB+
|
62
|
-
|
|||||||
|
BBB+
|
7,834
|
2,201
|
|||||||
|
BBB
|
1,528
|
1,361
|
|||||||
|
BBB-
|
-
|
-
|
|||||||
|
Non - Rated
|
23
|
11
|
|||||||
|
Total
|
21,870
|
8,873
|
|||||||
The maximum exposure to credit risk is as follows:
|
|
June 30,
2020
|
June 30,
2019
|
||||||
|
|
(US$’000)
|
|||||||
|
Financial assets - amortized cost
|
||||||||
|
Deposits
|
3,427
|
3,303
|
||||||
|
Trade receivables
|
53,436
|
63,025
|
||||||
|
Other receivables
|
4,406
|
3,587
|
||||||
|
Due from related parties
|
1,587
|
1,768
|
||||||
|
Cash and cash equivalents
|
21,870
|
8,873
|
||||||
|
|
84,726
|
80,556
|
||||||
Majority of the Group’s financial assets are represented by trade receivables, due from related parties and cash and cash equivalents which are not impacted by the Pandemic.
F-57
The Group has the following exposure to concentration of credit risk with clients representing greater than 5% of the consolidated revenue or receivable balances:
|
|
2020
|
|||||||||||||||
|
Revenue
|
Trade debts gross
|
|||||||||||||||
|
|
Amount
(US$ ‘000) |
% of total
|
Amount
(US$ ‘000) |
% of total
|
||||||||||||
|
Client 1
|
64,937
|
16
|
%
|
7,425
|
13
|
%
|
||||||||||
|
Client 2
|
73,743
|
18
|
%
|
114
|
0
|
%
|
||||||||||
|
Client 3
|
38,528
|
10
|
%
|
9,012
|
16
|
%
|
||||||||||
|
Subtotal
|
177,208
|
44
|
%
|
16,551
|
30
|
%
|
||||||||||
|
Others
|
227,927
|
56
|
%
|
39,311
|
70
|
%
|
||||||||||
|
Revenue from external customers
|
405,135
|
100
|
%
|
55,862
|
100
|
%
|
||||||||||
|
|
||||||||||||||||
|
|
2019
|
|||||||||||||||
|
Revenue
|
Trade debts gross
|
|||||||||||||||
|
|
Amount
(US$ ‘000) |
% of total
|
Amount
(US$ ‘000) |
% of total
|
||||||||||||
|
Client 1
|
74,835
|
20
|
%
|
10,770
|
16
|
%
|
||||||||||
|
Client 2
|
67,094
|
18
|
%
|
13,716
|
21
|
%
|
||||||||||
|
Client 3
|
44,509
|
12
|
%
|
9,042
|
14
|
%
|
||||||||||
|
Subtotal
|
186,438
|
51
|
%
|
33,528
|
51
|
%
|
||||||||||
|
Others
|
181,942
|
49
|
%
|
32,358
|
49
|
%
|
||||||||||
|
Revenue from external customers
|
368,380
|
100
|
%
|
65,886
|
100
|
%
|
||||||||||
|
|
||||||||||||||||
|
Revenue from discontinued operations
|
64,740
|
-
|
-
|
-
|
||||||||||||
|
|
||||||||||||||||
|
|
2018
|
|||||||||||||||
|
Revenue
|
Trade debts gross
|
|||||||||||||||
|
|
Amount
(US$ ‘000) |
% of total
|
Amount
(US$ ‘000) |
% of total
|
||||||||||||
|
Client 1
|
78,663
|
23
|
%
|
10,432
|
20
|
%
|
||||||||||
|
Client 2
|
63,233
|
18
|
%
|
11,250
|
22
|
%
|
||||||||||
|
Client 3
|
52,837
|
15
|
%
|
6,586
|
13
|
%
|
||||||||||
|
Subtotal
|
194,733
|
57
|
%
|
28,268
|
54
|
%
|
||||||||||
|
Others
|
147,467
|
43
|
%
|
23,770
|
46
|
%
|
||||||||||
|
Revenue from external customers
|
342,200
|
100
|
%
|
52,038
|
100
|
%
|
||||||||||
|
|
||||||||||||||||
|
Revenue from discontinued operations
|
34,871
|
-
|
-
|
-
|
||||||||||||
|
|
||||||||||||||||
The Group continuously monitors defaults of customers and other counterparties, identified either individually or by group, and incorporate this information into its credit risk controls.
The consolidated entities recognizes a loss allowance for expected credit losses on financial assets which are either measured at amortized cost. The measurement of the loss allowance depends upon the
assessment at the end of each reporting period as to whether the financial instrument’s credit risk has increased significantly since initial recognition, based on reasonable and supportable information that is available, without undue cost
or effort to obtain. Based on the historic trend and expected performance of the customers, the Group believes that the below expected credit loss allowance sufficiently covers the risk of default. Trade receivable balances are reviewed
closely for changes in creditworthiness, including those related to COVID-19, are integrated into assessment of credit risk and expected credit losses. Forward-looking information about the expected economic effects of the Pandemic has been
confirmed. Based on the current knowledge of COVID-19 developments, the Company assumes that there will be no material deterioration on the trade receivable balances.
F-58
On the above basis the expected credit loss for trade receivables as at June 30, 2020 and June 30, 2019 was determined as follows:
|
|
June 30, 2020
|
|||||||||||||||||||||||||||
|
|
(US$’000)
|
|||||||||||||||||||||||||||
|
Not overdue
|
Due: 0 to 30 days
|
Due: 31 -
60 days
|
Due: 61 to
90 days
|
Due: 91 -
180 days
|
Due: over
180 days
|
Total
|
||||||||||||||||||||||
|
Expected credit loss rate
|
0
|
%
|
4
|
%
|
2
|
%
|
19
|
%
|
55
|
%
|
99
|
%
|
-
|
|||||||||||||||
|
Gross carrying amount
|
50,630
|
2,513
|
918
|
138
|
83
|
1,580
|
55,862
|
|||||||||||||||||||||
|
Lifetime expected credit loss
|
141
|
89
|
14
|
26
|
46
|
1,561
|
1,877
|
|||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
|
|
June 30, 2019
|
|||||||||||||||||||||||||||
|
|
(US$’000)
|
|||||||||||||||||||||||||||
|
Not overdue
|
Due: 0 to 30 days
|
Due: 31 - 60 days
|
Due: 61 to 90 days
|
Due: 91 - 180 days
|
Due: over 180 days
|
Total
|
||||||||||||||||||||||
|
Expected credit loss rate
|
-
|
4
|
%
|
3
|
%
|
22
|
%
|
51
|
%
|
98
|
%
|
-
|
||||||||||||||||
|
Gross carrying amount
|
59,994
|
2,316
|
1,187
|
110
|
387
|
1,892
|
65,886
|
|||||||||||||||||||||
|
Lifetime expected credit loss
|
-
|
96
|
39
|
24
|
196
|
1,854
|
2,209
|
|||||||||||||||||||||
|
|
||||||||||||||||||||||||||||
Below are the details of individually credit impaired balances as of June 30, 2020:
|
|
June 30,
2020
|
June 30,
2019
|
||||||
|
|
(US$’000)
|
|||||||
|
Credit impaired trade receivables - Gross carrying amount
|
1,801
|
1,451
|
||||||
|
Expected credit loss allowance
|
(1,785
|
)
|
(1,433
|
)
|
||||
|
|
16
|
18
|
||||||
|
|
||||||||
The Group does not hold any collateral against these assets. Financial assets other than trade debts have no material ECL allowances on those balances as of June 30, 2020.
| 22.3 |
Liquidity risk
|
The Group’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. To achieve this aim, it seeks to maintain cash balances (or agreed facilities)
to meet expected requirements for a period of at least 45 days. The Board receives cash flow projections on a quarterly basis as well as information regarding cash balances and investments. The liquidity risk of each group entity is managed
at the entity level. Where facilities of group entities need to be increased, approval must be sought by the entity’s CFO. Where the amount of the facility is above a certain level, agreement of the Group CFO and the board is needed.
The Group’s capital and financial resources have not been significantly negatively impacted by COVID-19 as Group’s cash generated from operations for the year ended June 30, 2020 was $63.3 million. In addition,
the Group does not have a significant net negative liquidity impact, revenue / margin impact was de-minimis in the last quarter of the year ended June 30, 2020. Further, refer Note 31 for IPO.
F-59
The following table presents the contractual maturities (liquidity analysis) as of June 30, 2020 and 2019:
|
|
June 30, 2020
|
|||||||||||||||
|
|
Less than 1
year
|
1 - 3 years
|
4 - 5 years
|
Total
|
||||||||||||
|
|
(US$’000)
|
|||||||||||||||
|
Deposits
|
340
|
3,087
|
-
|
3,427
|
||||||||||||
|
Trade receivables
|
53,436
|
-
|
-
|
53,436
|
||||||||||||
|
Other receivables
|
4,406
|
-
|
-
|
4,406
|
||||||||||||
|
Due from related parties
|
1,587
|
-
|
-
|
1,587
|
||||||||||||
|
Cash and cash equivalents
|
21,870
|
-
|
-
|
21,870
|
||||||||||||
|
Subtotal
|
81,639
|
3,087
|
-
|
84,726
|
||||||||||||
|
Lease liability
|
18,717
|
29,762
|
54,830
|
103,309
|
||||||||||||
|
Long - term other borrowings
|
6,468
|
3,994
|
-
|
10,462
|
||||||||||||
|
Line of credit
|
21,475
|
-
|
-
|
21,475
|
||||||||||||
|
Trade and other payables
|
26,291
|
-
|
-
|
26,291 | ||||||||||||
|
Due to related parties
|
5,739
|
-
|
-
|
5,739
|
||||||||||||
|
Subtotal
|
78,690
|
33,756
|
54,830
|
167,276
|
||||||||||||
|
Net liquidity position
|
2,949 |
(30,669
|
)
|
(54,830
|
)
|
(82,550
|
)
|
|||||||||
|
|
||||||||||||||||
|
|
June 30, 2019
|
|||||||||||||||
|
|
Less than 1 year
|
1 - 3 years
|
4 - 5 years
|
Total
|
||||||||||||
|
|
(US$’000)
|
|||||||||||||||
|
Deposits
|
1,373
|
1,930
|
-
|
3,303
|
||||||||||||
|
Trade receivables
|
63,025
|
-
|
-
|
63,025
|
||||||||||||
|
Other receivables
|
3,587
|
-
|
-
|
3,587
|
||||||||||||
|
Due from related parties
|
1,768
|
-
|
-
|
1,768
|
||||||||||||
|
Cash and cash equivalents
|
8,873
|
-
|
-
|
8,873
|
||||||||||||
|
Subtotal
|
78,626
|
1,930
|
-
|
80,556
|
||||||||||||
|
Lease liability
|
15,954
|
27,136
|
52,526
|
95,616
|
||||||||||||
|
Long - term other borrowings
|
5,933
|
6,694
|
964
|
13,591
|
||||||||||||
|
Line of credit
|
36,026
|
-
|
-
|
36,026
|
||||||||||||
|
Trade and other payables
|
19,870
|
-
|
-
|
19,870
|
||||||||||||
|
Due to related parties
|
6,169
|
-
|
-
|
6,169
|
||||||||||||
|
Subtotal
|
83,952
|
33,830
|
53,490
|
171,272
|
||||||||||||
|
Net liquidity position
|
(5,326
|
)
|
(31,900
|
)
|
(53,490
|
)
|
(90,716
|
)
|
||||||||
|
|
||||||||||||||||
F-60
| 23. |
TRANSACTION WITH RELATED PARTIES
|
Related parties of the Group comprise of related entities, staff retirement funds, directors and key management personnel. A “related entity” is an entity that TRGI has control or significant
influence over.
Material related party balances and transactions other than reorganization transaction and those disclosed elsewhere in these consolidated financial statements, are given below:
|
June 30, 2020
|
|||||||||||||||||||||
|
Note
|
Relationship with related party
|
Service delivery revenue
|
Service delivery expense
|
Due from related
parties
|
Due to
related
parties
|
||||||||||||||||
|
(US$’000)
|
|||||||||||||||||||||
|
BPO Solutions, Inc.
|
23.1
|
Related entity
|
-
|
-
|
-
|
3,611
|
|||||||||||||||
|
Alert Communications, Inc.
|
23.1
|
Related entity
|
164
|
-
|
534
|
-
|
|||||||||||||||
|
TRG Marketing Services, Inc.
|
23.1
|
Related entity
|
-
|
-
|
19
|
-
|
|||||||||||||||
|
Afiniti International Holdings Limited
|
23.1
|
Related entity
|
53
|
48
|
-
|
198
|
|||||||||||||||
|
TRG Holdings, LLC
|
23.1 & 23.4
|
Related entity
|
-
|
-
|
-
|
1,708
|
|||||||||||||||
|
The Resource Group International Limited
|
23.1& 23.7
|
Parent
|
-
|
-
|
163
|
-
|
|||||||||||||||
|
Third Party Lessor
|
23.2 & 23.5
|
Related entity
|
310
|
489
|
147
|
9
|
|||||||||||||||
|
3rd Party Client and Internet Services Provider
|
23.3
|
Related entity
|
764
|
73
|
402
|
179
|
|||||||||||||||
|
IBEX Limited Executive Leadership
|
23.6
|
Officers
|
-
|
-
|
12
|
-
|
|||||||||||||||
|
TRG (Private) Limited
|
23.1
|
Related entity
|
-
|
-
|
-
|
34
|
|||||||||||||||
|
Etelequote
|
23.1
|
Related entity
|
34
|
-
|
310
|
-
|
|||||||||||||||
|
1,325
|
610
|
1,587
|
5,739
|
||||||||||||||||||
|
June 30, 2019
|
|||||||||||||||||||||
|
Note
|
Relationship with related party
|
Service delivery revenue
|
Service delivery expense
|
Due from related
parties
|
Due to
related
parties
|
||||||||||||||||
|
(US$’000)
|
|||||||||||||||||||||
|
BPO Solutions, Inc.
|
23.1
|
Related entity
|
-
|
-
|
-
|
3,611
|
|||||||||||||||
|
Alert Communications, Inc.
|
23.1
|
Related entity
|
150
|
-
|
370
|
-
|
|||||||||||||||
|
TRG Marketing Services, Inc.
|
23.1
|
Related entity
|
-
|
-
|
19
|
-
|
|||||||||||||||
|
Afiniti International Holdings Limited
|
23.1
|
Related entity
|
54
|
70
|
-
|
503
|
|||||||||||||||
|
TRG Holdings, LLC
|
23.1 & 23.4
|
Related entity
|
-
|
-
|
-
|
1,913
|
|||||||||||||||
|
The Resource Group International Limited
|
23.1& 23.7
|
Parent
|
-
|
-
|
162
|
-
|
|||||||||||||||
|
Third Party Lessor
|
23.2 & 23.5
|
Related entity
|
342
|
77
|
201
|
-
|
|||||||||||||||
|
3rd Party Client and Internet Services Provider
|
23.3
|
Related entity
|
883
|
73
|
451
|
93
|
|||||||||||||||
|
IBEX Holdings Executive Leadership
|
23.6
|
Officers
|
-
|
-
|
307
|
-
|
|||||||||||||||
|
TRG (Private) Limited
|
23.1
|
Related entity
|
-
|
-
|
-
|
49
|
|||||||||||||||
|
Etelequote
|
23.1
|
Related entity
|
-
|
-
|
258
|
-
|
|||||||||||||||
|
1,429
|
220
|
1,768
|
6,169
|
||||||||||||||||||
|
June 30, 2018
|
|||||||||||||
|
Note
|
Relationship with
related party
|
Service delivery revenue
|
Service delivery expense
|
||||||||||
|
(US$’000)
|
|||||||||||||
|
BPO Solutions, Inc.
|
23.1
|
Related entity
|
-
|
1,287
|
|||||||||
|
Alert Communications, Inc.
|
23.1
|
Related entity
|
66
|
-
|
|||||||||
|
TRG Marketing Services, Inc.
|
23.1
|
Related entity
|
-
|
-
|
|||||||||
|
Afiniti International Holdings Limited
|
23.1
|
Related entity
|
109
|
68
|
|||||||||
|
TRG Holdings, LLC
|
23.1 & 23.4
|
Related entity
|
-
|
-
|
|||||||||
|
The Resource Group International Limited
|
23.1& 23.7
|
Parent
|
-
|
-
|
|||||||||
|
Third Party Lessor
|
23.2 & 23.5
|
Related entity
|
291
|
485
|
|||||||||
|
3rd Party Client and Internet Services Provider
|
23.3
|
Related entity
|
1,100
|
65
|
|||||||||
|
TRG (Private) Limited
|
23.1
|
Related entity
|
-
|
-
|
|||||||||
|
1,566
|
1,905
|
||||||||||||
F-61
23.1. Service delivery revenue and expenses are incurred by the Group in the ordinary course of business. These
transactions were executed on mutually agreed terms. These represent call center and back office support services provided to subsidiaries of the Group.
23.2. A Senior executive within one of our vendors serves on the Board of our Controlling Shareholder. The Group
maintains a lease on office space along with having a client relationship between Virtual World and the aforementioned company.
23.3. A Senior executive within one of our customers serves as a Board member of our IBEX Senegal subsidiary. The
Group maintains both a vendor and a client relationship with this company.
23.4. The balance due to TRG Holdings, LLC includes loan principal and interest at June 30, 2020 is $1.5 million ($1.3 million at June 30, 2019) with an interest rate
of 15% per annum and shall mature on August 7, 2020. The Loan shall be payable on demand upon the earlier of TRG Holdings, LLC’s demand or an initial public offering of the Company.
23.5. A Senior executive within one of our vendors serves as a board of our DGS Group. The Group maintains a
lease on office space with this Company.
23.6. Receivable from executive leadership represents the purchase of the shares through RSA (See Note 19.3).
23.7. RELATED PARTY LOANS
Under a convertible loan note agreement between a subsidiary of the Group and TRGI, these loan notes may convert into ordinary shares at the option of TRGI if there is external funding in the subsidiary in excess of $3 million. Out of total
loan amount, there were no disbursements during the current year and June 30, 2018. The loan of $1.2 million was paid in full during the year June 30, 2019.
In June 2017, an officer of the Controlling Shareholder, as part of e-Telequote Insurance, Inc. issuance of the Senior Secured Notes, entered in an agreement with e – Telequote Insurance, Inc.
with whom he also serves as a member of their board. The terms of the agreement are:
| • |
Principal: $0.5 million
|
| • |
Maturity: May, 2019
|
| • |
Interest: 12%
|
| 24. |
CAPITAL RISK MANAGEMENT
|
Capital risk management is carried out by the Group’s management. The Group’s board of directors sets Capital risk management policies and procedures to which our management is required to adhere.
The Group’s management identifies and evaluates Capital risks and enters into agreements and explore avenues to mitigate these risk exposures in accordance with the policies and procedures outlined by the Group’s board of directors.
The Group manages its capital to safeguard that the Group will be able to continue as a going concern. The capital structure of the Group consists of cash at bank and in hand and cash equivalents,
borrowings, and preferred shares. In addition the Group’s capital structure includes equity attributed to the holders of equity instruments of the Holding Company, such as capital, reserves and results carried forward, as mentioned in the
consolidated statement of changes in equity.
The Group has filed for government assistance in response to the Pandemic in US and Pakistan:
In the US, one of the subsidiary of the Group has deferred the payment of Social Security (employer portion) from March 2020 - December 2020. Repayment is to be made at 50% in December 2021
(financial year 2022) and 50% in December 2022 (financial year 2023). The total amount deferred as of June 30, 2020 was $1.8 million.
In Pakistan, the Group (through its subsidiaries) applied for and received loans totaling approximately $1.7 million in July 2020 through programs offered by commercial banks at the directive of
the State Bank of Pakistan. These funds are to be used to fund three months of employee wages and salaries. The funds are to be repaid within two years.
The Group manages its capital structure and makes the necessary adjustments in the light of changes of economic circumstances, the risk characteristics of underlying assets and the projected cash
needs of the current and prospective operational / financing / investment activities. The adequacy of the Group’s capital structure will depend on many factors, including capital expenditures, market developments and any future acquisition.
F-62
The Group and its subsidiaries are not subject to any externally imposed capital requirements, other than those imposed by generally applicable company law requirements.
In order to maintain or adjust the capital structure, the Holding Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets
to reduce debt.
| 25. |
SEGMENT INFORMATION
|
The Group had been operating with two operating segments through financial year 2019, namely, customer management and customer acquisition.
As of the end of financial year 2019, the Group spun off its health insurance acquisition business, which was a significant portion of its customer acquisition reporting segment. In addition, the
Group fully integrated the operations corresponding to its customer management reporting segment and the remaining operations within our customer acquisition reporting segment. As a result, from the beginning of fiscal year 2020, the Group will
report its financial statements on a single segment basis as Business Process Outsource (BPO).
From July 2019, the Chief Executive Officer (CEO), also the Chief Operating Decision Maker, reviews and analyses monthly / quarterly Group as one operating segment ‘Business Process Outsource
(BPO) because of both has similar nature of business and integration of business.
| 25.1. |
Revenue from contracts with customers
|
The Group generates more than 97% of its revenue in the United States of America and more than 50% of its revenue generates from three major customers.
|
June 30,
2020
|
June 30,
2019
|
June 30,
2018
|
||||||||||
|
(US$’000)
|
||||||||||||
|
Revenue from continuing operations
|
||||||||||||
|
United States of America
|
396,158
|
367,541
|
339,054
|
|||||||||
|
Others
|
20,174
|
7,302
|
7,849
|
|||||||||
|
Total
|
416,332
|
374,843
|
346,903
|
|||||||||
|
Inter-group revenue
|
||||||||||||
|
United States of America
|
(4,225
|
)
|
(6,463
|
)
|
(4,703
|
)
|
||||||
|
Others
|
(6,972
|
)
|
-
|
-
|
||||||||
|
Revenue from external customers
|
405,135
|
368,380
|
342,200
|
|||||||||
|
Revenue from discontinued operations:
|
||||||||||||
|
United States of America
|
-
|
64,740
|
34,871
|
|||||||||
The Group’s revenue disaggregated by pattern of revenue recognition is as follows:
|
June 30,
2020
|
June 30,
2019
|
June 30,
2018
|
||||||||||
|
(US$’000)
|
||||||||||||
|
Pattern of Revenue recognition
|
||||||||||||
|
− Services transferred at a point in time
|
48,486
|
52,897
|
57,080
|
|||||||||
|
− Services transferred over time
|
356,650
|
315,483
|
285,120
|
|||||||||
|
405,135
|
368,380
|
342,200
|
||||||||||
F-63
The movement in the deferred revenue is as follows:
|
June 30,
2020
|
June 30,
2019
|
|||||||
|
(US$’000)
|
||||||||
|
Opening balance
|
5,141
|
6,365
|
||||||
|
Revenue recognized during the year
|
(6,128
|
)
|
(3,763
|
)
|
||||
|
Revenue deferred during the year
|
4,891
|
2,539
|
||||||
|
Closing balance
|
3,904
|
5,141
|
||||||
The following aggregated amounts of deferred revenue from existing contracts that are to be recognized in revenue in the following fiscal years:
|
FY2021
|
FY2022
|
FY2023
|
Total
|
|||||||||||||
|
(US$’000)
|
||||||||||||||||
|
Deferred Revenue expected to be recognized
|
3,470
|
407
|
27
|
3,904
|
||||||||||||
|
25.2.
|
Non-current assets by location
|
|
June 30,
2020
|
June 30,
2019
|
|||||||
|
(US$’000)
|
||||||||
|
United States of America
|
32,482
|
38,830
|
||||||
|
Others
|
74,495
|
65,180
|
||||||
|
Total1
|
106,977
|
104,010
|
||||||
|
1Exludes deferred tax asset
|
||||||||
| 26. |
PAYROLL AND RELATED COSTS
|
Expenses recognized for employee benefits are analyzed below:
|
June 30,
2020
|
June 30,
2019
|
June 30,
2018
|
||||||||||
|
(US$’000)
|
||||||||||||
|
Salaries and other employee costs
|
228,818
|
216,617
|
213,252
|
|||||||||
|
Social security and other taxes
|
46,480
|
37,333
|
38,457
|
|||||||||
|
Retirement - contribution plan
|
823
|
513
|
906
|
|||||||||
|
Pensions - defined benefit scheme
|
134
|
129
|
310
|
|||||||||
|
Total payroll and related costs
|
276,255
|
254,592
|
252,925
|
|||||||||
|
Payroll and related costs from discontinued operations
|
-
|
22,182
|
14,380
|
|||||||||
F-64
| 26.1. |
Remuneration of Key Management Personnel
|
The key management personnel include the directors.
|
June 30,
2020
|
June 30,
2019
|
June 30,
2018
|
||||||||||
|
(US$’000)
|
||||||||||||
|
Salaries and other employee costs
|
242
|
566
|
1,684
|
|||||||||
|
Share - based payments
|
14
|
760
|
3,099
|
|||||||||
|
Total remuneration of key management personnel
|
256
|
1,326
|
4,783
|
|||||||||
| 27. |
OTHER OPERATING COSTS
|
|
Note
|
June 30,
2020
|
June 30,
2019
|
June 30,
2018
|
|||||||||||||
|
(US$’000)
|
||||||||||||||||
|
Rent and utilities
|
7,802
|
6,272
|
16,868
|
|||||||||||||
|
Communication
|
7,519
|
7,546
|
8,175
|
|||||||||||||
|
Maintenance, repairs and improvements
|
18,107
|
11,956
|
9,534
|
|||||||||||||
|
Traveling and entertainment
|
11,949
|
10,378
|
9,690
|
|||||||||||||
|
Insurance
|
1,516
|
1,731
|
1,556
|
|||||||||||||
|
Legal and professional expenses
|
27.1
|
6,652
|
9,241
|
7,274
|
||||||||||||
|
Allowance for expected credit loss
|
224
|
237
|
575
|
|||||||||||||
|
Fair value adjustment
|
3,138
|
(364
|
)
|
(3,326
|
)
|
|||||||||||
|
Others
|
10,301
|
7,127
|
8,079
|
|||||||||||||
|
Other Operating Costs
|
67,208
|
54,124
|
58,425
|
|||||||||||||
|
Other Operating costs from discontinued operations
|
-
|
3,241
|
3,581
|
|||||||||||||
27.1. This includes non-recurring legal expenses (including settlements) of $4.2 million for the year ended June 30, 2019 and $1.6 million and listing costs of $1.4
million for the year ended June 30, 2018.
| 28. |
WARRANT
|
On November 13, 2017, as amended on April 30, 2018, December 28, 2018 and December 27, 2019, the Group issued to Amazon.com NV Investment Holdings LLC, a subsidiary of Amazon.com, Inc. (“Amazon”), a 10-year
warrant to acquire approximately 1,429,303 of our Series B Preference Shares and approximately 14,437.4049 of our Series C Preference Shares, totaling 1,443,740 shares, representing 10.0% of our equity on a fully diluted and as-converted basis
as of the date of issuance of the warrant. The warrant is exercisable, either for cash or on a net issuance basis, at a price per share equal to the initial public offering per share in this offering.
The Series B and C Preference shares subject to the warrant vest on an incremental basis upon the satisfaction of specified milestones that are tied to payments made by Amazon or its affiliates in connection with
the purchase of services from us during a seven and a half year period ending on June 30, 2024, and the warrant will become fully vested when a cumulative total of $600 million is paid by Amazon or its affiliates to us during this period. The
vesting is partially accelerated in the event of a reorganization transaction (as defined in the warrant).The warrant is exercisable, either for cash or on a net issuance basis, at a price per share equal to:
| • |
If, prior to June 30, 2018, no qualified IPO or qualified valuation event (each as defined in the warrant) occurs, the price will be $15.00,
|
| • |
If neither a qualified IPO nor a qualified valuation event has occurred on or prior to June 30, 2018, but a qualified IPO or an M&A event occurs after June 30, 2018 but on or prior to December 31, 2019, the exercise price was the
lower of (i) $15.00 and (ii) as applicable: (x) the price established in respect of such IPO; or (y) 85% of the price per warrant share implied by the M&A event.
|
On December 27, 2019, the Warrant agreement was amended to change the exercise price to $11.20.
F-65
The common shares subject to the warrant vest on an incremental basis upon the satisfaction of specified milestones that are tied to payments made by Amazon or its affiliates in connection with the purchase of
services from us during a seven and a half year period ending on June 30, 2024, and the warrant will become fully vested when a cumulative total of $600 million is paid by Amazon or its affiliates to us during this period. The vesting is
partially accelerated in the event of a reorganization transaction (as defined in the warrant).
On March 16, 2018, the Company effected a reverse stock split which had an impact on employee stock option plans as well as the warrants associated with the Amazon warrant. As a result of the stock split, the
number of common shares subject to the warrant was reduced based on the original agreement from 1,611,944 to 1,443,740 as per the amended agreement.
The exercise price and the number of shares issuable upon exercise of the warrant are subject to customary anti-dilution adjustments.
Amazon is entitled to customary shelf and piggy-back registration rights with respect to the shares issued upon exercise of the warrant. Amazon may not transfer the warrant except to a wholly-owned subsidiary of
Amazon.
The Group opted to use the Monte Carlo simulation for calculating the value of the warrants at June 2020 and June 2019. The use of the Monte Carlo Simulation is appropriate for stock warrants where the complexity
of the option may lend itself to outcomes based upon multiple different scenarios.
The Company estimated the fair value of warrants on the date of the grant (December 2017) at $6.935 using the Black Scholes valuation model. The model also requires the use of certain other estimates and
assumptions that affect the reported amount of share-based payments cost recognized in the profit or loss:
Expected term
The expected term of options granted is ten years starting November 13, 2017 and ending November 12, 2027.
Volatility
Management used average volatility of comparable listed companies as 47.7%.
Expected dividends
The expected average dividend yield is 0% for the year ended June 30, 2020. The Holding Company does not expect to pay any dividends in the foreseeable future.
Risk-free rate
The risk-free rate is the continuously compounded United States nominal treasury rate corresponding to the term of the option. The average risk-free rate used for options granted
during the year ended June 30, 2020, was 1.20%.
There were no warrants cancelled or expired as of June 30, 2020 and June 30, 2019. At June 30, 2020, 288,748 warrants were vested based on the agreed upon revenue criteria. The Company recorded an
additional warrant liability of $0.8 million during the year ended, June 30, 2020.
Based on the number of warrants expected to vest, the total fair value of the warrant liability included in other non-current liabilities at date of issue is $4.0 million.
In June 2019, the Company revalued the warrant liability to account for the change in the fair market value of the organization. The updated fair value of warrants on June 30, 2019 of $1.04 is
based on the Monte Carlo simulation. Based on the number of warrants expected to vest, the total fair value of the warrant liability included in other non-current liabilities at June 30, 2019 is approximately $0.8 million.
In June 2020, the Company revalued the warrant liability to account for the change in the fair market value of the organization. The updated fair value of warrants on June 30, 2020 of $3.85 is
based on the Monte Carlo simulation. Based on the number of warrants expected to vest, the total fair value of the warrant liability included in other non-current liabilities at June 30, 2020 is approximately $3.9 million (see Note 14).
Warrant asset
Upon inception of this partnership with Amazon, the Company recorded both the warrant asset and liability. The Warrant Asset was initially recorded as $4.3 million. The asset will amortize on a
pro rata basis, based on the revenues actually recognized. The Company recorded a reduction to revenue of approximately $0.7 million and $0.6 million during the year ended June 30, 2020 and June 30, 2019 respectively. The current balance of the
warrant asset at June 30, 2020 is $2.6 million (June 30, 2019: $3.3 million).
F-66
Fair value hierarchy
The financial instruments carried at fair value have been categorized under the three levels of the IFRS fair value hierarchy as follows:
| • |
Level 1 - Instruments valued using quoted prices in active markets are instruments where the fair value can be determined directly from prices which are quoted in active, liquid markets and where the instrument observed in the market
is representative
|
| • |
Level 2 - Instruments valued with valuation techniques using observable market data are instruments where the fair value can be determined by reference to similar instruments trading in active markets, or where a technique is used to
derive the valuation but where all inputs to that technique are observable.
|
| • |
Level 3 - Instruments valued using valuation techniques using market data which is not directly observable are instruments where the fair value cannot be determined directly by reference to market observable information, and some
other pricing technique must be employed. Instruments classified in this category have an element which is unobservable and which has a significant impact on the fair value.
|
Given these guidelines, the warrant liability associated with Amazon would be classified as a Level 3 liability.
| 29. |
RECONCILIATION OF PROFIT / LOSS BEFORE TAXATION
|
|
Note
|
June 30,
2020
|
June 30,
2019
|
June 30,
2018
|
|||||||||||||
|
(US$’000)
|
||||||||||||||||
|
Net income / (loss) after taxation
|
7,770
|
10,965
|
(15,881
|
)
|
||||||||||||
|
Income tax expense from continuing operations
|
18
|
2,315
|
3,615
|
(108
|
)
|
|||||||||||
|
Income tax expense from discontinued operations
|
30.2
|
-
|
4,830
|
54
|
||||||||||||
|
Total income / (loss) before taxation
|
10,085
|
19,410
|
(15,935
|
)
|
||||||||||||
| 30. |
HOLDING COMPANY INDIRECT SUBSIDIARIES
|
The following entities are indirect subsidiaries of the Holding Company through IBEX Global Limited:
|
Ownership %
|
||||||||||
|
Description
|
Location
|
Nature of Business
|
2020
|
2019
|
||||||
|
IBEX Global Solutions Limited
|
England
|
Holding company
|
100
|
%
|
100
|
%
|
||||
|
IBEX Global Bermuda Limited
|
Bermuda
|
Holding company
|
100
|
%
|
100
|
%
|
||||
|
Lovercius Consultants Limited
|
Cyprus
|
Call center
|
100
|
%
|
100
|
%
|
||||
|
IBEX Global Europe
|
Luxembourg
|
Tech support services
|
100
|
%
|
100
|
%
|
||||
|
IBEX Global ROHQ
|
Philippines
|
Regional HQ
|
100
|
%
|
100
|
%
|
||||
|
IBEX Global Solutions, Inc. (formerly TRG Customer Solutions, Inc.)
|
USA
|
Call center
|
100
|
%
|
100
|
%
|
||||
|
TRG Customer Solutions (Canada), Inc.
|
Canada
|
Call center
|
100
|
%
|
100
|
%
|
||||
|
TRG Marketing Solutions Limited
|
England
|
Call center
|
100
|
%
|
100
|
%
|
||||
|
Virtual World (Private) Limited
|
Pakistan
|
Call center
|
100
|
%
|
100
|
%
|
||||
|
IBEX Philippines, Inc.
|
Philippines
|
Call center
|
100
|
%
|
100
|
%
|
||||
|
IBEX Global Solutions (Philippines) Inc.
|
Philippines
|
Call center
|
100
|
%
|
100
|
%
|
||||
|
TRG Customer Solutions (Philippines) Inc.
|
Philippines
|
Call center
|
100
|
%
|
100
|
%
|
||||
|
IBEX Customer Solutions Senegal S.A. (formerly TRG Senegal SA.
|
Senegal
|
Call center
|
100
|
%
|
100
|
%
|
||||
|
IBEX Global Solutions (Private) Limited
|
Pakistan
|
Call center
|
100
|
%
|
100
|
%
|
||||
|
IBEX Global MENA FZE
|
Dubai
|
Call center
|
100
|
%
|
100
|
%
|
||||
|
IBEX I.P. Holdings Ireland Limited
|
Ireland
|
Holding company
|
-
|
%
|
100
|
%
|
||||
|
IBEX Global Bermuda Ltd
|
Bermuda
|
Call center
|
100
|
%
|
100
|
%
|
||||
|
IBEX Global Solutions Nicaragua SA
|
Nicaragua
|
Call center
|
100
|
%
|
100
|
%
|
||||
|
IBEX Global St. Lucia Limited
|
St. Lucia
|
Holding company
|
100
|
%
|
100
|
%
|
||||
|
IBEX Global Jamaica Limited
|
Jamaica
|
Call center
|
100
|
%
|
100
|
%
|
||||
|
IBEX Receivable Solutions, Inc.
|
USA
|
Call center
|
100
|
%
|
-
|
%
|
||||
|
IBEX Global Solutions France SARL
|
France
|
Call center
|
100
|
%
|
100
|
%
|
||||
F-67
The following entities are indirect subsidiaries of the Holding Company through DGS Limited:
|
Ownership %
|
|||||||||||||
|
Description
|
Location
|
Nature of Business
|
2020
|
-
|
2019
|
||||||||
|
Digital Globe Services, Inc.
|
USA
|
Internet marketing for residential cable services
|
100
|
%
|
100
|
%
|
|||||||
|
Telsat Online, Inc.
|
USA
|
Internet marketing for non - cable telco services
|
100
|
%
|
100
|
%
|
|||||||
|
DGS Worldwide Marketing Limited
|
Cyprus
|
Holding company and global marketing
|
100
|
%
|
100
|
%
|
|||||||
|
DGS (Pvt.) Limited
|
Pakistan
|
Call center and support services
|
100
|
%
|
100
|
%
|
|||||||
|
DGS EDU LLC
|
USA
|
Internet marketing for the education industry
|
100
|
%
|
100
|
%
|
|||||||
|
7 Degrees LLC
|
USA
|
Digital marketing agency
|
100
|
%
|
100
|
%
|
|||||||
The following entity is a Joint venture of the Holding Company:
|
Ownership %
|
|||||||||||||
|
Description
|
Location
|
Nature of Business
|
2020
|
-
|
2019
|
||||||||
|
Lakeball LLC (Note 7)
|
USA
|
Internet Marketing for commercial cable services
|
47.5
|
%
|
47.5
|
%
|
|||||||
| 30.1. |
On February 1, 2019, a subsidiary, Digital Globe Services, Inc.(“DGS Inc.”), agreed with a third party purchaser to sell the assets of DGS EDU, LLC for $0.4 million of which 50% of the proceeds, or $0.2
million, was paid in cash and the remainder was established as a promissory note between the purchaser and DGS Inc.
|
The Group did not consider the sale of assets of DGS EDU, LLC as discontinued operation for the year ended June 30, 2019 as it does not represent a separate major line of business or geographical
area of operations to the Group.
The gain on the sale of assets is recognized in the amount of $0.2 million.
The terms of promissory note are as follows:
| • | Maturity Date: | February 2020 |
| • | Interest Rate: | 8% compounded monthly |
| • | Payment: |
No less than the greater of: |
| o |
the accrued but unpaid interest as of the monthly payment date; or
|
| o |
75% of the total receivables actually collected by the purchaser on all accounts arising from DGS Edu, LLC in the month prior to the due date of the monthly payment.
|
In addition, DGS Inc. agreed to a transition services agreement commencing on February 2019 for 12 months thereafter.
30.2. On June 26, 2019, the Group transferred 7,813,493 ordinary shares par value $0.0001 per share of Etelequote
Limited to its majority shareholder, The Resource Group International Limited. In consideration of the share transfer, TRGI has agreed to waive $47.9 million of the $86.2 million in aggregate preference amount to which the Series C Preference
Shares held by it are entitled upon a voluntary or involuntary liquidation, dissolution or winding up, being an amount equal to the purchase price for the share transfer. Such Series C Preference Shares are therefore entitled to receive in
preference $38.3 million of any proceeds from a voluntary or involuntary liquidation, dissolution or winding up after Series A holders and Series B holders receive their respective entitlements.
F-68
The Group considered Etelequote Limited to be a discontinued operation for the period ended June 30, 2019 as it represents a separate major line of business to the Group. The following table shows
the major classes of assets and liabilities of the Group’s discontinued operation at June 26, 2019.
|
As of June
26, 2019
|
||||
|
(US$’000)
|
||||
|
Assets
|
||||
|
Property and equipment and Intangibles
|
9,463
|
|||
|
Renewal receivables
|
72,183
|
|||
|
Trade and other receivables
|
1,129
|
|||
|
Cash and cash equivalents
|
3,554
|
|||
|
Total assets
|
86,329
|
|||
|
Liabilities
|
||||
|
Borrowings & Financing
|
43,431
|
|||
|
Trade and other payables
|
9,977
|
|||
|
Related party loans
|
-
|
|||
|
Other Liabilities
|
5,327
|
|||
|
Total liabilities
|
58,735
|
|||
|
Net Assets
|
27,594
|
|||
Result of discontinued operations:
|
June 30, 2019
|
June 30, 2018
|
|||||||
|
(US$’000)
|
||||||||
|
Revenue
|
64,740
|
34,871
|
||||||
|
Other operating income
|
2,923
|
1,487
|
||||||
|
Payroll and related costs
|
22,182
|
14,380
|
||||||
|
Share-based payments
|
875
|
1,299
|
||||||
|
Reseller commission and lead expenses
|
14,467
|
9,683
|
||||||
|
Depreciation and amortization
|
910
|
237
|
||||||
|
Other operating costs
|
3,241
|
3,581
|
||||||
|
Income from operations
|
25,988
|
7,178
|
||||||
|
Finance expenses
|
(5,674
|
)
|
(2,243
|
)
|
||||
|
Income before taxation
|
20,314
|
4,935
|
||||||
|
Income tax expense
|
(4,830
|
)
|
(54
|
)
|
||||
|
Net income for the period from discontinued operations, net of tax
|
15,484
|
4,881
|
||||||
Statement of cash flows
The statement of cash flows includes the following amounts relating to discontinued operations:
|
June 30, 2019
|
June 30, 2018
|
|||||||
|
(US$’000)
|
||||||||
|
Operating activities
|
(13,396
|
)
|
(7,208
|
)
|
||||
|
Investing activities
|
(867
|
)
|
(158
|
)
|
||||
|
Financing activities
|
12,720
|
4,709
|
||||||
|
Net cash flow from discontinued operations
|
(1,543
|
)
|
(2,657
|
)
|
||||
Earnings per share of discontinued operations:
As the income from discontinued operations for the year ended June 30, 2019, and June 30, 2018, did not exceed the value of the preferred participation rights attaching to the Series A, B and C
preferred convertible shares, the income/loss attributable to the ordinary shareholders of the Company has been assessed as $0.
F-69
Share-based payments:
During the year ended June 30, 2020, the Company repurchased RSAs related to non-executive leadership team (ELT) members of ETQ of $0.1 million. The Company disposed of its investment related to
RSAs of non-ELT members of ETQ thus reducing share options reserves.
The promissory note of ELT members of ETQ of $13,000 was cancelled therefore the Company also reduced share options reserves and related party loan receivables.
| 31. |
SUBSEQUENT EVENTS
|
On July 21, 2020, our board of directors approved a one-time dividend of $4.0 million to our shareholders reflecting a portion of the cash generation from the business during fiscal year 2020. The dividend was
paid on July 24, 2020 to TRGI, the holder of our Series A preferred share, which is entitled to a dividend preference that expires upon conversion of the Series A preferred share to common shares upon the completion of IPO.
On August 7, 2020, the Group closed the initial public offering of 4,761,905 common shares at $19 per share. The Group offered 3,571,429 shares and TRGI offered 1,190,476 shares. The net offering proceeds to us,
before expenses, and after deducting underwriting discounts and commissions were approximately $63.1 million. $1.6 million of the net proceeds from our initial public offering has been used to pay deal related expenses. The balance is held
in cash and cash equivalents and is intended to be used to build out additional facilities as well as expand existing facilities, invest in upgraded support systems that improve our internal employee management and real time financial
reporting, and/or to repay high interest debt. None of the net proceeds of our initial public offering were paid directly or indirectly to any director, officer, or persons owning ten percent or more of our common shares, or to any of our
related parties. The Group did not receive any proceeds from the sale of the shares by TRGI. The shares were admitted for trading on the Nasdaq Global Market on the same date under the ticker symbol “IBEX”.
At the consummation of IPO of the Group on August 7, 2020, Series A, Series B, Series C and Class B shares were converted to Class A common shares equivalent to 14,119,384 shares. In addition to
that the Group offered 3,571,429 shares therefore the total share capital of the Group at the time of IPO was 17,690,813 shares.
On August 17, 2020, we detected a ransomware attack that briefly impacted a portion of our information technology systems. At no time did the attack impact our business operations
or accounting systems, but the unauthorized access included the exfiltration of certain non-production data files from a file server in our backup data center. In conjunction with our containment activities, we launched an investigation,
notified our insurance broker and carrier, and engaged an incident response team and cybersecurity forensics firm. Through the date of issuance of these financial statements, this incident has not had a material financial impact on our
business. However, the investigation of the incident is ongoing, and we may incur losses associated with claims by third parties, as well as fines, penalties and other sanctions imposed by regulators relating to or arising from the
incident, which could have a material adverse impact on our business, financial condition or results of operations in future periods.
| 31.1. |
These consolidated financial statements were authorized for issue by the Chairman of IBEX Limited on behalf of the Board of Directors of IBEX Limited, on October 22, 2020.
|
F-70
EXHIBIT 1.2
B Y E - L A W S
of
IBEX Limited
(Adopted on August 7, 2020)
TABLE OF CONTENTS
|
DEFINITIONS AND INTERPRETATION
|
|
|
1.
|
Definitions and Interpretation
|
|
SHARES
|
|
|
2.
|
Power to Issue Shares
|
|
3.
|
Power of the Company to Purchase its Shares
|
|
4.
|
Rights Attaching to Shares
|
|
5.
|
Calls on Shares
|
|
6.
|
Forfeiture of Shares
|
|
7.
|
Share Certificates
|
|
8.
|
Fractional Shares
|
|
REGISTRATION OF SHARES
|
|
|
9.
|
Register of Members
|
|
10.
|
Registered Holder Absolute Owner
|
|
11.
|
Transfer of Registered Shares
|
|
12.
|
Transmission of Registered Shares
|
|
ALTERATION OF SHARE CAPITAL
|
|
|
13.
|
Power to Alter Capital
|
|
14.
|
Variation of Rights Attaching to Shares
|
|
MEETINGS OF MEMBERS
|
|
|
15.
|
Annual General Meetings
|
|
16.
|
Special General Meetings
|
|
17.
|
Requisitioned General Meetings
|
|
18.
|
Notice
|
|
19.
|
Giving Notice and Access
|
|
20.
|
Postponement of General Meeting
|
|
21.
|
Telephonic or Electronic Participation in Meetings
|
|
22.
|
Quorum at General Meetings
|
|
23.
|
Chairman to Preside at General Meetings
|
|
24.
|
Voting on Resolutions
|
|
25.
|
Power to Demand a Vote on a Poll
|
|
26.
|
Voting by Joint Holders of Shares
|
|
27.
|
Instrument of Proxy
|
|
28.
|
Representation of Corporate Member
|
|
29.
|
Adjournment of General Meeting
|
|
30.
|
Written Resolutions
|
|
31.
|
Directors Attendance at General Meetings
|
|
DIVIDENDS AND CAPITALISATION
|
|
|
32.
|
Dividends
|
|
33.
|
Power to Set Aside Profits
|
|
34.
|
Method of Payment
|
|
35.
|
Capitalisation
|
|
DIRECTORS AND OFFICERS
|
|
|
36.
|
Election of Directors
|
|
37.
|
Number of Directors
|
|
38.
|
Term of Office of Directors
|
|
39.
|
Alternate Directors
|
|
40.
|
Removal of Directors
|
|
41.
|
Vacancy in the Office of Director
|
|
42.
|
Remuneration of Directors
|
|
43.
|
Defect in Appointment
|
|
44.
|
Directors to Manage Business
|
|
45.
|
Powers of the Board of Directors
|
|
46.
|
Register of Directors and Officers
|
|
47.
|
Appointment of Officers
|
|
48.
|
Appointment of Secretary
|
|
49.
|
Duties of Officers
|
|
50.
|
Remuneration of Officers
|
|
51.
|
Conflicts of Interest
|
|
52.
|
Indemnification and Exculpation of Directors and Officers
|
|
MEETINGS OF THE BOARD OF DIRECTORS
|
|
|
53.
|
Board Meetings
|
|
54.
|
Notice of Board Meetings
|
|
55.
|
Telephonic or Electronic Participation in Meetings
|
|
56.
|
Quorum at Board Meetings
|
|
57.
|
Board to Continue in the Event of Vacancy
|
|
58.
|
Chairman to Preside
|
|
59.
|
Written Resolutions
|
|
60.
|
Validity of Prior Acts of the Board
|
|
ACCOUNTS
|
|
|
61.
|
Books of Account
|
|
62.
|
Financial Year End
|
|
AUDITS
|
|
|
63.
|
Annual Audit
|
|
64.
|
Appointment of Auditor
|
|
65.
|
Remuneration of Auditor
|
|
66.
|
Duties of Auditor
|
|
67.
|
Access to Records
|
|
68.
|
Financial Statements
|
|
69.
|
Distribution of Auditor’s Report
|
|
70.
|
Vacancy in the Officer of Auditor
|
|
CORPORATE RECORDS
|
|
|
71.
|
Minutes
|
|
72.
|
Place Where Corporate Records Kept
|
|
73.
|
Form and Use of Seal
|
|
CHANGES TO CONSTITUTION
|
|
|
74.
|
Alteration or amendment of Bye-laws
|
|
75.
|
Alteration or amendment of Memorandum of Association
|
|
76.
|
Discontinuance
|
|
MISCELLANEOUS
|
|
|
77.
|
Registered Office
|
|
78.
|
Amalgamation and Merger
|
|
79.
|
Conversion
|
|
VOLUNTARY WINDING-UP AND DISSOLUTION
|
|
|
80.
|
Winding-Up
|
|
81.
|
Forum for Adjudication of Certain Actions
|
INTERPRETATION
|
1.
|
Definitions and Interpretation
|
| 1.1 |
In these Bye-laws, the following words and expressions shall, where not inconsistent with the context, have the following respective meanings:
|
| “25% Member” |
has the meaning given in Bye-law 36.2;
|
| “50% Member” |
has the meaning given in Bye-law 36.2;
|
| “Alternate Director” |
an alternate director appointed in accordance with these Bye-laws;
|
| “Auditor” |
includes any individual auditor or partnership of auditors;
|
| “Board” |
the board of directors of the Company appointed or elected pursuant to these Bye-laws and acting by resolution in accordance with the Companies Act and these Bye-laws or the directors present at a meeting of directors at which there is a
quorum;
|
| “Business Day” |
means any day except Saturday, Sunday or public holiday when banks in Hamilton, Bermuda are open for business;
|
| “Bye-laws” |
means these Bye-laws in their present form or as from time to time amended;
|
| “Companies Act” |
the Companies Act 1981, as amended from time to time;
|
| “Company” |
the company incorporated in Bermuda under the name of Forward March Limited on 28 February 2017, which changed its name to IBEX Holdings Limited on September 15, 2017 and which changed its name to IBEX Limited on 11 September 2019;
|
| “Director” |
any person duly elected or appointed as a director of the Company and shall include an Alternate Director or any person occupying the position of director by whatever name called;
|
| “Director Appointment and |
has the meaning given in Bye-law 36.2;
|
Removal Right”
| “Exchange” |
Nasdaq Global Market, the U.S. Stock Exchange on which the Company’s shares are listed;
|
| “First 25% Member” |
has the meaning given in Bye-law 36.2;
|
| “KYC Documents” |
has the meaning given in Bye-law 36.2;
|
| “Member” |
the person registered in the Register of Members as the holder of shares in the Company and, when two or more persons are so registered as joint holders of shares, means the person whose name stands first in the Register of Members as
one of such joint holders or all of such persons, as the context so requires;
|
| “Memorandum” |
means the Memorandum of Association of the Company, as from time to time amended;
|
| “notice” |
written notice as further provided in these Bye-laws unless otherwise specifically stated;
|
| “Officer” |
any person appointed by the Board to hold an office in the Company;
|
| “Register of Directors and Officers” |
the register of directors and officers referred to in these Bye-laws;
|
| “Register of Members” |
the register of members referred to in these Bye-laws;
|
| “Registered Office” |
the registered office for the time being of the Company;
|
| “Resident Representative” |
any person appointed to act as resident representative of the Company and includes any deputy or assistant resident representative;
|
| “Secretary” |
the person appointed to perform any or all of the duties of secretary of the Company and includes any deputy or assistant secretary and any person appointed by the Board to perform any of the duties of the Secretary;
|
| “share” |
means a share in the capital of the Company and includes a fraction of a share;
|
| “Treasury Share” |
a share of the Company that was or is treated as having been acquired and held by the Company and has been held continuously by the Company since it was so acquired and has not been cancelled; and
|
| “Untied States” and “U.S.” |
the United States of America and any territory and political subdivision thereof.
|
In these Bye-laws, where not inconsistent with the context:
| (a) |
words denoting the plural number include the singular number and vice versa;
|
| (b) |
words denoting the masculine gender include the feminine and neuter genders;
|
| (c) |
words importing persons include companies, associations or bodies of persons whether corporate or not;
|
| (d) |
the words:
|
| (i) |
“may” shall be construed as permissive; and
|
| (ii) |
“shall” shall be construed as imperative; and
|
| (e) |
unless otherwise provided in these Bye-laws, words or expressions defined in the Companies Act shall bear the same meaning in these Bye-laws.
|
| 1.3 |
In these Bye-laws expressions referring to writing or its cognates shall, unless the contrary intention appears, include facsimile, printing, lithography, photography, electronic mail and other modes of representing words in visible
form.
|
| 1.4 |
Headings used in these Bye-laws are for convenience only and are not to be used or relied upon in the construction hereof.
|
SHARES
|
2.
|
Power to Issue Shares
|
| 2.1 |
Subject to these Bye-laws and to any resolution of the Members to the contrary, and without prejudice to any special rights previously conferred on the holders of any existing shares or class of shares, the Board shall have the power to
issue any unissued shares on such terms and conditions as it may determine and any shares or class of shares may be issued with such preferred, deferred or other special rights or such restrictions, whether in regard to dividend, voting,
return of capital, or otherwise as the Company may by resolution of the Members prescribe.
|
| 2.2 |
Subject to the provisions of these provisions of these Bye-laws and any limitations prescribed by law, and without prejudice to any special rights previously conferred on the holders of any existing class or series of shares, any class
or series of shares may be issued with such preferred or other special rights as the Board may determine (including such preferred or other special rights or restrictions with respect to dividend, voting, liquidation or other rights of the
shares as may be determined by the Board). The Board may establish from time to time the number of shares to be included in each such class or series, which number may be increased (except as otherwise provided by the Board in creating such
class or series) or decreased (but not below the number of shares thereof then in issue) from time to time by resolution of the Board, and to fix the designation, powers, preferences, redemption provisions, restrictions and rights to such
class or series and the qualifications, limitations or restrictions thereof. The terms of any class or series of shares shall be set forth in a Certificate of Designation in the minutes of the Board authorising the issuance of such shares
but shall not form part of these Bye-laws, and may be examined by any Member on request.
|
| 2.3 |
Without limiting the foregoing and subject to the Companies Act, the Company may issue preference shares which (i) are liable to be redeemed on the happening of a specified event or events or on a given date or dates and/or (ii) are
liable to be redeemed at the option of the Company and/or the holder. The terms and manner of redemption of any redeemable shares shall be as the Board may by resolution determine before the allotment of such shares and the terms and manner
of redemption of any other redeemable preference shares shall be either (i) as the Company may by resolution determine or (ii) insofar as the Board is so authorised by any resolution, as the Board may by resolution determine, in either
case, before the allotment of such shares.
|
| 3. |
Power of the Company to Purchase its Shares
|
| 3.1 |
The Company may purchase its own shares for cancellation or to acquire them as Treasury Shares in accordance with the Companies Act on such terms as the Board shall think fit. No such purchase shall be made if there are reasonable
grounds for believing that the Company is, or after the purchase would be, unable to pay its liabilities as they become due.
|
| 3.2 |
The Board may exercise all the powers of the Company to purchase or acquire all or any part of its own shares in accordance with the Companies Act.
|
| 3.3 |
Shares so purchased by the Company under this Bye-law shall be treated as cancelled and the amount of the Company’s issued capital shall be reduced by the nominal value of those shares accordingly but the purchase of shares under this
Bye-law shall not be taken as reducing the amount of the Company’s authorised share capital.
|
| 4. |
Rights Attaching to Shares
|
| 4.1 |
Subject to any resolution of the Members to the contrary (and without prejudice to any special rights conferred thereby on the holders of any other shares or class of shares), the share capital shall be divided into shares of a single
class the holders of which shall, subject to these Bye-laws;
|
| (a) |
be entitled to one vote per share;
|
| (b) |
be entitled to such dividends as the Board may from time to time declare;
|
| (c) |
in the event of a winding-up or dissolution of the Company, whether voluntary or involuntary or for the purpose of a reorganisation or otherwise or upon any distribution of capital, be entitled to the surplus assets of the Company; and
|
| (d) |
generally be entitled to enjoy all of the rights attaching to shares.
|
| 4.2 |
All the rights attaching to a Treasury Share shall be suspended and shall not be exercised by the Company while it holds such Treasury Share and, except where required by the Companies Act, all Treasury Shares shall be excluded from the
calculation of any percentage or fraction of the share capital, or shares, of the Company.
|
| 4.3 |
At the discretion of the Board, whether or not in connection with the issuance and sale of any shares or other securities of the Company, the Company may issue securities, contracts, warrants or other instruments evidencing any shares,
option rights, securities having conversion or option rights, or obligations on such terms, conditions and other provisions as are fixed by the Board including, without limiting the generality of this authority, conditions that preclude or
limit any person or persons owning or offering to acquire a specified number or percentage of the issued common shares, other shares, option rights, securities having conversion or option rights, or obligations of the Company or transferee
of the person or persons from exercising, converting, transferring or receiving the shares, option rights, securities having conversion or option rights, or obligations.
|
|
5.
|
Calls on Shares
|
| 5.1 |
The Board may make such calls as it thinks fit upon the Members in respect of any moneys (whether in respect of nominal value or premium) unpaid on the shares allotted to or held by such Members and, if a call is not paid on or before
the day appointed for payment thereof, the Member may at the discretion of the Board be liable to pay the Company interest on the amount of such call at such rate as the Board may determine, from the date when such call was payable up to
the actual date of payment. The Board may differentiate between the holders as to the amount of calls to be paid and the times of payment of such calls.
|
| 5.2 |
The joint holders of a share shall be jointly and severally liable to pay all calls and any interest, costs and expenses in respect thereof.
|
| 5.3 |
The Company may accept from any Member the whole or a part of the amount remaining unpaid on any shares held by him, although no part of that amount has been called up.
|
| 5.4 |
The Company shall have a first and paramount lien and charge on all shares (whether fully paid−up or not or whether subject to a condition or contingency) registered in the name of a Member (whether solely or jointly with others) for all
debts, liabilities or engagements to or with the Company (whether presently payable or not or whether subject to a condition or contingency) by such Member or his or her estate, either alone or jointly with any other person, whether a
Member or not, but the Board may at any time declare any share to be wholly or in part exempt from the provisions of this Bye−law. The registration of a transfer of any such share shall operate as a waiver of the Company's lien (if any)
thereon. The Company's lien (if any) on a share shall extend to all dividends or other monies payable in respect thereof.
|
| 5.5 |
The Company may sell or purchase, in such manner and on such terms (including price) as the Board think fit, any shares on which the Company has a lien, but no sale or purchase shall be made unless a sum in respect of which the lien
exists is then presently payable, nor until the expiration of fourteen days after a notice in writing stating and demanding payment of such part of the amount in respect of which the lien exists as is presently payable, has been given to
the relevant Member, or the person, of which the Company has notice, entitled thereto by reason of such Member's death or bankruptcy. Effective upon such sale or purchase, any certificate representing such shares prior to such sale shall
become null and void, whether or not it was actually delivered to the Company.
|
| 5.6 |
To give effect to any such sale the Board may authorise some person to transfer the shares sold to the purchaser thereof. The purchaser shall be registered as the holder of the shares comprised in any such transfer, and he shall not be
bound to see to the application of the purchase money, nor shall his or her title to the shares be affected by any irregularity or invalidity in the proceedings in reference to the sale.
|
| 5.7 |
The proceeds of such sale or purchase shall be received by the Company and applied in payment of such part of the amount in respect of which the lien exists as is presently payable and the residue, if any, shall (subject to a like lien
for sums not presently payable as existed upon the shares before the sale) be paid to the relevant Member or the person entitled to the shares at the date of the sale.
|
|
6.
|
Forfeiture of Shares
|
| 6.1 |
If any Member fails to pay, on the day appointed for payment thereof, any call in respect of any share allotted to or held by such Member, the Board may, at any time thereafter during such time as the call remains unpaid, direct the
Secretary to forward such Member a notice in writing in the form or as near to such form as circumstances admit of the following:
|
Notice of Liability for Forfeiture for Non-Payment of Call
IBEX Limited (the “Company”)
You have failed to pay the call of [amount of call] made on the [ ] day of [ ], 20[ ], in respect of the [number] share(s) [number in figures] standing in your name in the Register of Members of
the Company, on the [ ] day of [ ], 20[ ], the day appointed for payment of such call. You are hereby notified that unless you pay such call together with interest on such call at the rate of [ ] per annum calculated from the said [ ] day of [ ],
20[ ] at the registered office of the Company the share(s) will be liable to be forfeited.
|
|
Dated this [ ] day of [ ], 20[ ]
|
|
|
|
|
|
|
|
|
|
|
|
[Signature of Secretary] By Order of Board
|
|
| 6.2 |
If the requirements of such notice are not complied with, any such share may at any time thereafter before the payment of such call and the interest due in respect thereof be forfeited by a resolution of the Board to that effect, and
such share shall thereupon become the property of the Company and may be disposed of as the Board shall determine. Without limiting the generality of the foregoing, the disposal may take place by sale, repurchase, redemption or any other
method of disposal permitted by and consistent with these Bye-laws and the Companies Act.
|
| 6.3 |
A Member whose share or shares have been so forfeited shall, notwithstanding such forfeiture, be liable to pay to the Company all calls owing on such share or shares at the time of the forfeiture, together with all interest due on such
share or shares and any costs and expenses incurred by the Company in connection with such share or shares.
|
| 6.4 |
The Board may accept the surrender of any shares which it is in a position to forfeit on such terms and conditions as may be agreed. Subject to those terms and conditions, a surrendered share shall be treated as if it had been forfeited.
|
|
7.
|
Share Certificates
|
| 7.1 |
Subject to Bye-law 7.4, every Member shall be entitled to a certificate under the common seal of the Company (or facsimile or other electronic copy thereof) or bearing the signature (or a facsimile or other electronic copy thereof) of a
Director or the Secretary or a person expressly authorised to sign specifying the number and, where appropriate, the class of shares held by such Member and whether the same are fully paid up and, if not, specifying the amount paid on such
shares. The Board may by resolution determine, either generally or in a particular case, that any or all signatures on certificates may be printed thereon or affixed by mechanical means.
|
| 7.2 |
The Company shall be under no obligation to complete and deliver a share certificate unless specifically called upon to do so by the person to whom the shares have been allotted.
|
| 7.3 |
If any share certificate shall be proved to the satisfaction of the Board to have been worn out, lost, mislaid, or destroyed the Board may cause a new certificate to be issued and request indemnity for the lost certificate if it sees
fit.
|
| 7.4 |
Notwithstanding any provisions of these Bye-laws:
|
|
(a)
|
the Board shall, subject always to the Companies Act and any other applicable laws and regulations and the facilities and requirements of any relevant system concerned, have power to implement any
arrangements it may, in its absolute discretion, think fit in relation to the evidencing of title to and transfer of uncertificated shares and to the extent such arrangements are so implemented, no provision of these Bye-laws shall apply
or have effect to the extent that it is in any respect inconsistent with the holding or transfer of shares in uncertificated form; and
|
|
(b)
|
unless otherwise determined by the Board and as permitted by the Companies Act and any other applicable laws and regulations, no person shall be entitled to receive a certificate in respect of any share for
so long as the title to that share is evidenced otherwise than by a certificate and for so long as transfers of that share may be made otherwise than by a written instrument.
|
|
8.
|
Fractional Shares
|
The Company may issue its shares in fractional denominations and deal with such fractions to the same extent as its whole shares and shares in fractional denominations shall have in proportion to
the respective fractions represented thereby all of the rights of whole shares including (but without limiting the generality of the foregoing) the right to vote, to receive dividends and distributions and to participate in a winding-up.
REGISTRATION OF SHARES
|
9.
|
Register of Members
|
| 9.1 |
The Board shall cause to be kept in one or more books a Register of Members and shall enter in such Register of Members the particulars required by the Companies Act.
|
| 9.2 |
The Register of Members shall be open to inspection without charge at the registered office of the Company on every Business Day, subject to such reasonable restrictions as the Board may impose, so that not less than two hours in each
Business Day be allowed for inspection. The Register of Members may, after notice has been given in accordance with the Companies Act, be closed for any time or times not exceeding in the whole thirty days in each year.
|
| 9.3 |
Notwithstanding any other provision of these Bye−laws, the Board may fix any date as the record date for:
|
|
(a)
|
determining the Members entitled to receive any dividend;
|
|
(b)
|
determining the Members entitled to receive notice of and to vote at any general meeting of the Company (and the Board may determine a different record date for any adjournment or postponement thereof);
|
|
(c)
|
determining the Members entitled to execute a resolution in writing; and
|
|
(d)
|
determining the number of issued and outstanding shares for or in connection with any purpose.
|
|
10.
|
Registered Holder Absolute Owner
|
The Company shall be entitled to treat the registered holder of any share as the absolute owner thereof and accordingly shall not be bound to recognise any equitable claim or other claim to, or
interest in, such share on the part of any other person.
|
11.
|
Transfer of Registered Shares
|
| 11.1 |
Shares may be transferred without a written instrument if transferred by an appointed agent or otherwise in accordance with the Companies Act.
|
| 11.2 |
Notwithstanding anything to the contrary in these Bye-laws, shares that are listed or admitted to trading on an appointed stock exchange may be transferred in accordance with the rules of such exchange.
|
| 11.3 |
An instrument of transfer for shares which may not be transferred pursuant to either Bye-law 11.1 or 11.2 shall be in writing in the form of the following, or as near to such form as circumstances admit, or in such other form as the
Board may accept:
|
Transfer of a Share or Shares
IBEX Limited (the “Company”)
FOR VALUE RECEIVED ……………………..[amount], I/We, [name of transferor] hereby sell, assign and transfer unto [transferee] of [address], [number] of shares of the Company.
DATED this [ ] day of [ ], 20[ ]
|
Signed by:
|
In the presence of:
|
|||
|
Transferor
|
Witness
|
|||
|
Transferee
|
Witness
|
| 11.4 |
Such instrument of transfer shall be signed by or on behalf of the transferor and transferee, provided that, in the case of a fully paid share, the Board may accept the instrument signed by or on behalf of the transferor alone. The
transferor shall be deemed to remain the holder of such share until the same has been registered as having been transferred to the transferee in the Register of Members.
|
| 11.5 |
The Board may refuse to recognise any instrument of transfer unless it is accompanied by the certificate in respect of the shares to which it relates (if any) and by such other evidence as the Board may reasonably require to show the
right of the transferor to make the transfer.
|
| 11.6 |
The joint holders of any share may transfer such share to one or more of such joint holders, and the surviving holder or holders of any share previously held by them jointly with a deceased Member may transfer any such share to the
executors or administrators of such deceased Member.
|
| 11.7 |
The Board may in its absolute discretion and without assigning any reason therefor refuse to register the transfer of a share. The Board shall refuse to register a transfer unless all applicable consents, authorisations and permissions
of any governmental body or agency in Bermuda and in the United States have been obtained. The Board shall have the authority to request from any Member, and such Member shall provide, such information as the Board may reasonably request
for the purpose of determining whether the transfer of any share requires such consent, authorisation or permission and whether the same has been obtained. If the Board refuses to register a transfer of any share the Secretary shall,
within three months after the date on which the transfer was lodged with the Company, send to the transferor and transferee notice of the refusal.
|
| 11.8 |
The registration of transfers may be suspended at such time and for such periods as the Board may from time to time determine; provided, that such registration shall not be suspended for more than forty−five (45)
days in any period of three hundred and sixty five (365) consecutive days.
|
|
12.
|
Transmission of Registered Shares
|
| 12.1 |
In the case of the death of a Member, the survivor or survivors where the deceased Member was a joint holder, and the legal personal representatives of the deceased Member where the deceased Member was a sole holder, shall be the only
persons recognised by the Company as having any title to the deceased Member’s interest in the shares. Nothing herein contained shall release the estate of a deceased joint holder from any liability in respect of any share which had been
jointly held by such deceased Member with other persons. Subject to the Companies Act, for the purpose of this Bye-law, legal personal representative means the executor or administrator of a deceased Member of such other person as the Board
may, in its absolute discretion, decide as being properly authorised to deal with the shares of a deceased Member.
|
| 12.2 |
Any person becoming entitled to a share in consequence of the death or bankruptcy of any Member or otherwise by operation of law may be registered as a Member upon such evidence as the Board may deem sufficient or may elect to nominate
some person to be registered as a transferee of such share, and in such case the person becoming entitled shall execute in favour of such nominee an instrument of transfer in writing in the form, or as near to such form as circumstances
admit, of the following:
|
Transfer by a Person Becoming Entitled on Death/Bankruptcy of a Member
IBEX Limited (the “Company”)
I/We, having become entitled in consequence of the [death/bankruptcy] of [name and address of deceased/bankrupt Member] to [number] share(s) standing in the Register of Members of the Company in
the name of the said [name of deceased/bankrupt Member] instead of being registered myself/ourselves, elect to have [name of transferee] (the “Transferee”) registered as a transferee of such share(s) and I/we do hereby accordingly transfer the said
share(s) to the Transferee to hold the same unto the Transferee, his or her executors, administrators and assigns, subject to the conditions on which the same were held at the time of the execution hereof; and the Transferee does hereby agree to
take the said share(s) subject to the same conditions.
DATED this [ ] day of [ ], 20[ ]
|
|
Signed by:
|
In the presence of:
|
||
|
Transferor
|
Witness
|
|||
|
Transferee
|
Witness
|
| 12.3 |
On the presentation of the foregoing materials to the Board, accompanied by such evidence as the Board may require to prove the title of the transferor, the transferee shall be registered as a Member. Notwithstanding the foregoing, the
Board shall, in any case, have the same right to decline or suspend registration as it would have had in the case if a transferor of the share by that Member before such Member’s death or bankruptcy, as the case may be.
|
| 12.4 |
Where two or more persons are registered as joint holders of a share or shares, then in the event of the death of any joint holder or holders the remaining joint holder or holders shall be absolutely entitled to such share or shares and
the Company shall recognise no claim in respect of the estate of any joint holder except in the case of the last survivor of such joint holders.
|
ALTERATION OF SHARE CAPITAL
|
13.
|
Power to Alter Capital
|
| 13.1 |
The Company may if authorised by resolution of the Members increase, divide, consolidate, subdivide, change the currency denomination of, diminish or otherwise alter or reduce its share capital in any manner permitted by the Companies
Act.
|
| 13.2 |
Where, on any alteration or reduction of share capital, fractions of shares or some other difficulty would arise, the Board may deal with or resolve the same in such manner as it thinks fit.
|
|
14.
|
Variation of Rights Attaching to Shares
|
If, at any time, the share capital is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of
that class) may, whether or not the Company is being wound-up, be varied with the consent in writing of the holders of a majority of the issued shares of that class or with the sanction of a resolution passed by a majority of the votes cast at a
separate general meeting of the holders of the shares of the class at which the necessary quorum shall be one or more persons holding or representing by proxy 25% or more of the issued shares of the class. The rights conferred upon the holders of
the shares of any class issued with preferred or other rights shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu
therewith.
MEETINGS OF MEMBERS
|
15.
|
Annual General Meetings
|
The annual general meeting shall be held in each year at such time and place as the President or the Chairman or any two Directors or any
Director and the Secretary or the Board shall appoint.
| 16. |
Special General Meetings
|
The President or the Chairman or any two Directors or any Director and the Secretary or the Board may convene a special general meeting whenever in their judgment such a meeting
is necessary.
| 17. |
Requisitioned General Meetings
|
The Board shall, on the requisition of Members holding at the date of the deposit of the requisition not less than one-tenth of such of the paid-up share capital of the Company as
at the date of the deposit carries the right to vote at general meetings, forthwith proceed to convene a special general meeting and the provisions of the Companies Act shall apply.
| 18. |
Notice
|
| 18.1 |
At least five days’ notice of an annual general meeting shall be given to each Member entitled to attend and vote at such meeting, stating the date, place and time at which the meeting is to be held, that, subject to Bye-law 36.2, the
election of Directors will take place thereat, and as far as practicable, the other business to be conducted at the meeting.
|
| 18.2 |
At least five days’ notice of a special general meeting shall be given to each Member entitled to attend and vote at such meeting, stating the date, time, place and the general nature of the business to be considered at the meeting.
|
| 18.3 |
The Board may fix any date as the record date for determining the Members entitled to receive notice of and to vote at any general meeting.
|
| 18.4 |
A general meeting shall, notwithstanding that it is called on shorter notice than that specified in these Bye-laws, be deemed to have been properly called if it is so agreed by (i) all the Members entitled to attend and vote thereat in
the case of an annual general meeting; or (ii) by a majority in number of the Members having the right to attend and vote at the meeting, being a majority together holding not less than 95% in nominal value of the shares giving a right to
attend and vote at such meeting in the case of a special general meeting.
|
| 18.5 |
The accidental omission to give notice of a general meeting to, or the non-receipt of a notice of a general meeting by, any person entitled to receive notice shall not invalidate the proceedings at that meeting.
|
|
19.
|
Giving Notice and Access
|
| 19.1 |
A notice may be given by the Company to a Member:
|
| (a) |
by delivering it to such Member in person; or
|
| (b) |
by sending it by letter mail or courier to such Member’s address in the Register of Members; or
|
| (c) |
by transmitting it by electronic means (including facsimile and electronic mail, but not telephone) in accordance with such directions as may be given by such Member to that Company for such purpose; or
|
| (d) |
in accordance with Bye-law 19.4.
|
| 19.2 |
Any notice required to be given to a Member shall, with respect to any shares held jointly by two or more persons, be given to whichever of such persons is named first in the Register of Members and notice so given shall be sufficient
notice to all the holders of such shares.
|
| 19.3 |
Any notice (save for one delivered in accordance with Bye-law 19.4) shall be deemed to have been served at the time when the same would be delivered in the ordinary course of transmission and, in providing such service, it shall be
sufficient to prove that the notice was properly addressed and prepaid, if posted, and the time when it was posted, delivered to the courier or transmitted by electronic means.
|
| 19.4 |
Where a Member indicates his consent (in a form and manner satisfactory to the Board) to receive information or documents by accessing them on a website rather than by other means, the Board may deliver such information or documents by
notifying the Member of their availability and including therein the address of the website, the place on the website where the information or document may be found, and instructions as to how the information or document may be accessed on
the website.
|
| 19.5 |
In the case of information or documents delivered in accordance with Bye-law 19.4, service shall be deemed to have occurred when (i) the Member is notified in accordance with that Bye-law; and (ii) the information or document is
published on the website.
|
|
20.
|
Postponement of General Meeting
|
The Secretary may postpone any general meeting called in accordance with these Bye-laws if such postponement is given to the Members before the time of such meeting. Fresh notice of the date, time
and place for the postponed meeting shall be given to each Member in accordance with these Bye-laws.
|
21.
|
Telephonic or Electronic Participation in Meetings and Security in General Meetings
|
| 21.1 |
The Board may, but shall not be required to, make arrangements permitting Members to participate in any general meeting by telephonic or such other electronic means as permit all persons participating in the meeting to communicate with
each other simultaneously and instantaneously, and participation in such a meeting shall constitute presence in person at such meeting.
|
| 21.2 |
The Board may, and at any general meeting, the chairman of such meeting may, make any arrangement and impose any requirement or restriction the Board or such chairman considers appropriate to ensure the security of a general meeting
including, without limitation, requirements for evidence of identity to be produced by those attending the meeting, the searching of their personal property and the restriction of items that may be taken into the meeting place. The Board
and, at any general meeting, the chairman of such meeting are entitled to refuse entry to a person who refuses to comply with any such arrangements, requirements or restrictions.
|
|
22.
|
Quorum at General Meetings
|
| 22.1 |
Subject to the rules of the Exchange, at any general meeting one or more Members present in person or by proxy and representing in excess of 25% of the total issued voting shares in the Company throughout the meeting shall form a quorum
for the transaction of business.
|
| 22.2 |
If within thirty minutes from the time appointed for the meeting a quorum is not present, then, in the case of a meeting convened on a requisition, the meeting shall be deemed cancelled and, in any other case, the meeting shall stand
adjourned to the same day one week later, at the same time and place or to such other day, time or place as the Secretary may determine. Unless the meeting is adjourned to a specific date, time and place announced at the meeting being
adjourned, fresh notice of the resumption of the meeting shall be given to each Member entitled to attend and vote at such meeting in accordance with these Bye-laws.
|
|
23.
|
Chairman to Preside at General Meetings
|
Unless otherwise agreed by a majority of those attending and entitled to vote thereat, the Chairman, if there be one, and if not the President, if there be one, shall act as chairman at all general
meetings at which such person is present. In their absence a chairman shall be appointed or elected by those present at the meeting and entitled to vote.
|
24.
|
Voting on Resolutions
|
| 24.1 |
Subject to the Companies Act and these Bye-laws and the rules of the Exchange, any question proposed for the consideration of the Members at any general meeting shall be decided by the affirmative votes of a majority of the votes cast in
accordance with these Bye-laws and in the case of an equality of votes the Chairman shall have a casting vote.
|
| 24.2 |
No member shall be entitled to vote at a general meeting unless such Member has paid all the calls on all shares held by such Member.
|
| 24.3 |
At any general meeting a resolution put to the vote of the meeting shall, in the first instance, be voted upon by a show of hands and, subject to any rights or restrictions for the time being lawfully attached to any class of shares and
subject to these Bye-laws, every Member present in person and every person holding a valid proxy at such meeting shall be entitled to one vote and shall cast such vote by raising his hand.
|
| 24.4 |
In the event that a Member participates in a general meeting by telephone or electronic means, the chairman of the meeting shall direct the manner in which such Member may cast his vote on a show of hands.
|
| 24.5 |
At any general meeting if an amendment is proposed to any resolution under consideration and the chairman of the meeting rules on whether or not the proposed amendment is out of order, the proceedings on the substantive resolution shall
not be invalidated by any error in such ruling.
|
| 24.6 |
At any general meeting a declaration by the chairman of the meeting that a question proposed for consideration has, on a show of hands, been carried, or carried unanimously, or by a particular majority, or lost, and an entry to that
effect in a book containing the minutes of the proceedings of the Company shall, subject to these Bye-laws, be conclusive evidence of that fact.
|
| 25. |
Power to Demand a Vote on a Poll
|
| 25.1 |
Notwithstanding the foregoing, a poll may be demanded by any of the following persons:
|
| (a) |
the chairman of the meeting; or
|
| (b) |
at least three Members present in person or represented by proxy; or
|
| (c) |
any Member or Members present in person or represented by proxy and holding between them not less than one-tenth of the total voting rights of all the Members having the right to vote at such meeting; or
|
| (d) |
any Member or Members present in person or represented by proxy holding shares in the Company conferring the right to vote at such meeting, being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the
total amount paid up on all such shares conferring such right.
|
| 25.2 |
Where a poll is demanded, subject to any rights or restrictions for the time being lawfully attached to any class of shares, every person present at such meeting shall have one vote for each share of which such person is the holder or
for which such person holds a proxy and such vote shall be counted by ballot as described herein, or in the case of a general meeting at which one or more Members are present by telephone or electronic means, in such manner as the chairman
of the meeting may direct and the result of such poll shall be deemed to be the resolution of the meeting at which the poll was demanded and shall replace any previous resolution upon the same matter which has been the subject of a show of
hands. A person entitled to more than one vote need not use all his votes or cast all the votes he uses in the same way.
|
| 25.3 |
A poll demanded for the purpose of electing a chairman of the meeting or on a question of adjournment shall be taken forthwith. A poll demanded on any other question shall be taken at such time and in such manner during such meeting as
the chairman (or acting chairman) of the meeting may direct. Any business other than that upon which a poll has been demanded may be conducted pending the taking of the poll.
|
| 25.4 |
Where a vote is taken by poll, each person physically present and entitled to vote shall be furnished with a ballot paper on which such person shall record his vote in such manner as shall be determined at the meeting having regard to
the nature of the question on which the vote is taken, and each ballot paper shall be signed or initialled or otherwise marked so as to identify the voter and the registered holder in the case of a proxy. Each person present by telephone or
electronic means shall cast his vote in such manner as the chairman shall direct. At the conclusion of the poll, the ballot papers and votes cast in accordance with such directions shall be examined and counted by a committee of not less
than two Members or proxy holders appointed by the chairman for the purpose and the result of the poll shall be declared by the chairman.
|
|
26.
|
Voting by Joint Holders of Shares
|
In the case of joint holders, the vote of the senior who tenders a vote (whether in person or by proxy) shall be accepted to the exclusion of the votes of the other joint holders,
and for this purpose seniority shall be determined by the order in which the names stand in the Register of Members.
| 27. |
Instrument of Proxy
|
| 27.1 |
An instrument appointing a proxy shall be in writing in substantially the following form or such other form as the Board may determine from time to time:
|
Proxy
IBEX Limited (the “Company”)
I/We, [insert names here], being a Member of the Company with [number] shares, HEREBY APPOINT [name] of [address] or failing him, [name] of [address] to be my/our proxy to vote
for me/us at the meeting of the Members to be held on the [ ] day of [ ], 20[ ] and at any adjournment of such meeting. (Any restrictions on voting to be inserted here.)
|
Signed this [ ] day of [ ], [ ]
|
||
|
Member(s)
|
The instrument of proxy shall be deemed to confer authority to demand or join in demanding a poll, be heard at the meeting and to vote on any amendment of a written resolution or
amendment of a resolution put to the meeting for which it is given as the proxy thinks fit. The instrument of proxy shall, unless it otherwise provides, be valid as well for any adjournment of the meeting to which it relates.
| 27.2 |
The instrument appointing a proxy must be received by the Company at the Registered Office or at such other place or in such manner as is specified in the notice convening the meeting or in any instrument of proxy sent out by the Company
in relation to the meeting at which the person named in the instrument appointing a proxy proposes to vote, and an instrument appointing a proxy which is not received in the manner so prescribed shall be invalid.
|
| 27.3 |
A Member who is the holder of two or more shares may appoint more than one proxy to represent him and vote on his behalf in respect of different shares.
|
| 27.4 |
The decision of the chairman of any general meeting as to the validity of any appointment of a proxy shall be final.
|
| 28. |
Representation of Corporate Member
|
| 28.1 |
A corporation which is a Member may, by written instrument, authorise such person or persons as it thinks fit to act as its representative at any meeting and any person so authorised shall be entitled to exercise the same powers on
behalf of the corporation which such person represents as that corporation could exercise if it were an individual Member, and that Member shall be deemed to be present in person at any such meeting attended by its authorised representative
or representatives.
|
| 28.2 |
Notwithstanding Bye-law 28.1, the chairman of the meeting may accept such assurances as he thinks fit as to the right of any person to attend and vote at general meetings on behalf of a corporation which is a Member.
|
| 29. |
Adjournment of General Meeting
|
| 29.1 |
The chairman of a general meeting may, with the consent of the Members at any general meeting at which a quorum is present, and shall if so directed by the meeting, adjourn the meeting. Unless the meeting is adjourned to a specific date,
place and time announced at the meeting being adjourned, fresh notice of the date, place and time for the resumption of the adjourned meeting shall be given to each Member entitled to attend and vote at such meeting in accordance with these
Bye-laws.
|
| 29.2 |
The chairman of a general meeting may adjourn a meeting to another time and place without the consent or direction of the Members if it appears to him that:
|
| (a) |
it is likely to be impracticable to hold or continue that meeting because of the number of Members wishing to attend who are not present; or
|
| (b) |
the unruly conduct of persons attending the meeting prevents, or is likely to prevent, the orderly continuation of the business of the meeting; or
|
| (c) |
an adjournment is otherwise necessary so that the business of the meeting may be properly conducted.
|
| 30. |
Written Resolutions
|
| 30.1 |
Subject to these Bye-laws, anything which may be done by resolution of the Company in general meeting or by resolution of a meeting of any class of the Members may, without a meeting may be done by written resolution in accordance with
this Bye-law.
|
| 30.2 |
Notice of a written resolution shall be given, and a copy of the resolution shall be circulated to all Members who would be entitled to attend a meeting and vote thereon. The accidental omission to give notice to, or the non-receipt of a
notice by, any Member does not invalidate the passing of a resolution.
|
| 30.3 |
A written resolution is passed when it is signed by, or in the case of a Member that is a corporation, on behalf of, the Members who at the date that the notice is given represent such majority of votes as would be required if the
resolution was voted on at a meeting of Members at which all Members entitled to attend and vote thereat were present and voting.
|
| 30.4 |
A resolution in writing may be signed in any number of counterparts.
|
| 30.5 |
A resolution in writing made in accordance with this Bye-law is as valid as if it had been passed by the Company in general meeting or by a meeting of the relevant class of Members, as the case may be, and any reference in any Bye-law to
a meeting at which a resolution is passed or to Members voting in favour of a resolution shall be construed accordingly.
|
| 30.6 |
A resolution in writing made in accordance with this Bye-law shall constitute minutes for the purposes of the Companies Act.
|
| 30.7 |
This Bye-law shall not apply to:
|
| (a) |
a resolution passed to remove an Auditor from office before the expiration of his term of office; or
|
| (b) |
a resolution passed for the purpose of removing a Director before the expiration of his term of office.
|
| 30.8 |
For the purposes of this Bye-law, the effective date of the resolution is the date when the resolution is signed by, or in the case of a Member that is a corporation whether or not a company within the meaning of the Companies Act, on
behalf of, the last Member whose signature results in the necessary voting majority being achieved and any reference in any Bye-law to the date of passing of a resolution is, in relation to a resolution made in accordance with this Bye-law,
a reference to such date.
|
| 31. |
Directors Attendance at General Meetings
|
The Directors shall be entitled to receive notice of, attend and be heard at any general meeting.
DIVIDENDS AND CAPITALISATION
|
32.
|
Dividends
|
| 32.1 |
The Board may, subject to any rights or restrictions lawfully attached to any class or series of share and subject to these Bye-laws and in accordance with the Companies Act, declare a dividend to be paid to the Members, in proportion to
the number of shares held by them, and such dividend may be paid in cash or wholly or partly in specie in which case the Board may fix the value for distribution in specie of any assets. No unpaid dividend shall bear interest as against the
Company.
|
| 32.2 |
The Board may fix any date as the record date for determining the Members entitled to receive any dividend.
|
| 32.3 |
The Company may pay dividends in proportion to the amount paid up on each share where a larger amount is paid up on some shares than on others.
|
| 32.4 |
The Board may declare and make such other distributions (in cash or in specie) to the Members as may be lawfully made out of assets of the Company. No unpaid distribution shall bear interest as against the Company.
|
|
33.
|
Power to Set Aside Profits
|
The Board may, before declaring a dividend, set aside out of the surplus or profits of the Company, such amount as it thinks proper as a reserve to be used to meet contingencies or for equalising
dividends or for any other purpose.
|
34.
|
Method of Payment
|
| 34.1 |
Any dividend, interest, or other moneys payable in cash in respect of the shares may be paid by such means as the Board shall determine, including by cheque or draft sent through the post directed to the Member and such Member’s address
in the register of Members or as the holder may in writing direct.
|
| 34.2 |
In the case of joint holders, any dividend, interest or other moneys payable in cash in respect of shares may be paid by cheque or draft sent through the post directed to the address of the holder first named in the Register of Members,
or to such person and to such address as the joint holders may in writing direct. If two or more persons are registered as joint holders of any shares any one can give an effectual receipt for any dividend paid in respect of such shares.
|
| 34.3 |
The Board may deduct from the dividends or distributions payable to any Member all moneys due from such Member to the Company on account of calls or otherwise.
|
| 34.4 |
Any dividend, distribution and/or other monies payable in respect of a share which has remained unclaimed for a period of six years from the date when it became due for payment shall, if the Board so resolves, be forfeited and cease to
remain owing by the Company. The payment of any unclaimed dividend, distribution or other monies payable in respect of a share may (but need not) be paid by the Company into an account separate from the Company’s own account. Such payment
shall not constitute the Company a trustee in respect thereof.
|
| 34.5 |
The Company shall be entitled to cease sending dividend cheques and drafts by post or otherwise to a Member if those instruments have been returned undelivered to, or left uncashed by, that Member on at least two consecutive occasions
or, following one such occasion, reasonable enquiries have failed to establish the Member’s new address. The entitlement conferred on the Company by this Bye-law in respect of any Member shall cease if the Member claims a dividend or cashes
a dividend cheque or draft.
|
|
35.
|
Capitalisation
|
| 35.1 |
The Board may capitalise any amount for the time being standing to the credit of any of the Company’s share premium or reserve accounts or to the credit of the profit and loss account or otherwise available for distribution by applying
such amount in paying up unissued shares to be allotted as fully paid bonus shares pro rata to the Members.
|
| 35.2 |
The Board may capitalise any amount for the time being standing to the credit of a reserve account or amounts otherwise available for dividend distribution by applying such amounts in paying up in full, partly or nil paid shares of those
Members who would have been entitled to such amounts if they were distributed by way of dividend or distribution.
|
DIRECTORS AND OFFICERS
|
36.
|
Election of Directors
|
| 36.1 |
Subject to Bye-law 36.2, the Board shall be elected or appointed in the first place at the statutory meeting of the Company and thereafter, except in the case of a casual vacancy, at the annual general meeting or at any special general
meeting called for that purpose. The Company may in general meeting set a shareholding requirement for Directors but unless so set there shall be no such requirement.
|
| 36.2 |
A Member holding 50% or more by nominal value of the voting shares of the Company (a “50% Member”) shall from time to time have the right to appoint, by notice in writing addressed to the Company
(accompanied by any necessary know your client documentation in respect of the appointee in order to satisfy any legal or regulatory requirements to which the Company is subject (“KYC Documents”)),
and to maintain in office, up to five Directors (including the Chairman) and to remove the Directors so appointed in accordance with Bye-law 40.3 (the “Director Appointment and Removal Right”). Any
Director appointed pursuant to this Bye-law shall not be required to be re-elected at each annual general meeting of the Company but shall continue in office until removed by the appointing Member in accordance with the Director Appointment
and Removal Right. If there is no 50% member but there is one or more members holding 25% or more by nominal value of the voting shares of the Company (a “25% Member”), the Director Appointment and
Removal Right shall automatically transfer to the member who became a 25% Member first in time as compared to any other 25% Member(s) as evidenced by the Register of Members (the “First 25% Member”).
In the event that the First 25% Member ceases to be a 25% Member, the Director Appointment and Removal Right shall automatically transfer to the 25% Member who became a 25% Member first in time compared to the other 25% Member(s) as
evidenced by the Register of Members (or to the First 25% Member, if applicable).
|
| 36.3 |
Where the Director Appointment and Removal Right is automatically transferred pursuant to Bye-law 36.2, the Company shall promptly give notice in writing to the transferor Member and to the transferee Member informing them that the
Director Appointment and Removal Right has been transferred. Within three (3) Business Days of receipt of such notice, the transferor Member shall give notice to the Company to resign his Director appointee(s) pursuant to Bye-law 40.3,
provided that no such resignation shall be effected if the resignation would cause the number of Directors to fall below the minimum number of Directors as set out in in these Bye-laws.
|
| 36.4 |
Any appointment of a Director pursuant to Bye-law 36.2 shall take immediate effect upon receipt (or deemed receipt) by the Company of such notice in writing, or the production of such notice at a meeting of the Directors, or if later,
the date (if any) specified in the notice, subject to the Company receiving satisfactory KYC Documents in respect of the Director to be appointed.
|
| 36.5 |
At any general meeting the Members may authorise the Board to fill any vacancy in their number left unfilled at a general meeting.
|
| 36.6 |
Except as provided in Bye-laws 36.2 to 36.4, no person shall, unless recommended by the Board for election, be eligible for election to the office of Director at any general meeting, unless notice in writing of the intention to propose
that person for election as a Director and notice in writing by that person of his or her willingness to be elected shall have been lodged at the Registered Office at least seven days before the date of the general meeting. The period for
lodgment of the notice required under this Bye-law will commence no earlier than the day after the dispatch of the notice of the meeting appointed for such election and end no later than seven days prior to the date of such meeting.
|
|
37.
|
Number of Directors
|
The Board shall consist of not less than one Director and not more than ten, unless the , with such number to be determined at each annual general meeting.
|
38.
|
Term of Office of Directors
|
Subject to Bye-laws 36.2 and 40.3, Directors shall hold office for such term as the Members may determine or, in the absence of such determination, until the next annual general meeting or until
their successors are elected or appointed or their office is otherwise vacated.
|
39.
|
Alternate Directors
|
| 39.1 |
At any general meeting, the Members may elect a person or persons to act as a Director in the alternative to any one or more Directors or may authorise the Board to appoint such Alternate Directors.
|
| 39.2 |
Unless the Members otherwise resolve, any Director may appoint a person or persons to act as a Director in the alternative to himself by notice deposited with the Secretary. Any person so elected or appointed shall have all the rights
and powers of the Director or Directors for whom such person is appointed in the alternative provided that such person shall not be counted more than once in determining whether or not a quorum is present.
|
| 39.3 |
An Alternate Director shall be entitled to receive notice of all meetings of the Board and to attend and vote at any such meeting at which a Director for whom such Alternate Director was appointed in the alternative is not personally
present and generally to perform at such meeting all the functions of such Director for whom such Alternate Director was appointed.
|
| 39.4 |
An Alternate Director shall cease to be such if the Director for whom he was appointed to act as a Director in the alternative ceases for any reason to be a Director, but he may be re-appointed by the Board as an alternate to the person
appointed to fill the vacancy in accordance with these Bye-laws.
|
|
40.
|
Removal of Directors
|
| 40.1 |
Subject to any provision to the contrary in these Bye-laws (including, but not limited to, Bye-law 40.3), the Members entitled to vote for the election of Directors may, at any special general meeting convened and held in accordance with
these Bye-laws, remove a Director provided that the notice of any such meeting convened for the purpose of removing a Director shall contain a statement of the intention so to do and be served on such Director not less than 14 days before
the meeting and at such meeting the Director shall be entitled to be heard on the motion for such Director’s removal.
|
| 40.2 |
If a Director is removed from the Board under this Bye-law, the Members may fill the vacancy at the meeting at which such Director is removed. In the absence of such election or appointment, the Board may fill the vacancy.
|
| 40.3 |
A Member entitled to appoint a Director pursuant to Bye-law 36.2 shall have the right from time to time to remove any such Director from office by notice in writing addressed to the Company and to appoint a replacement. Any removal of a
Director made in accordance with this Bye-law shall take immediate effect upon receipt (or deemed receipt) by the Company of such notice in writing, or the production of such notice at a meeting of the Directors or, if later, the date (if
any) specified in such notice. A Member removing a Director under this Bye-law 40 shall indemnify and keep indemnified the Company against any claim connected with the Director's removal from office.
|
|
41.
|
Vacancy in the Office of Director
|
41.1 The office of Director shall be vacated if the Director:
| (a) |
is removed from office pursuant to these Bye-laws or is prohibited from being a Director by law;
|
| (b) |
is or becomes bankrupt, or makes any arrangement or composition with his creditors generally;
|
| (c) |
is or becomes of unsound mind or dies; or
|
| (d) |
resigns his office by notice to the Company.
|
| 41.2 |
The Board shall have the power to appoint any person as a Director to fill a vacancy on the Board occurring as a result of the death, disability, disqualification or resignation of any Director and to appoint an Alternate Director to any
Director so appointed.
|
|
42.
|
Remuneration of Directors
|
The remuneration (if any) of the Directors shall be determined by the Company in a general meeting and shall be deemed to accrue from day to day. The Directors may also be paid all travel, hotel
and other expenses properly incurred by them in attending and returning from the meetings of the Board, any committee appointed by the Board, general meetings, or in connection with the business of the Company or their duties as Directors
generally.
| 43. |
Defect in Appointment
|
All acts done in good faith by the Board, any Director, a member of a committee appointed by the Board, any person to whom the Board may have delegated any of its powers, or any
person acting as a Director shall, notwithstanding that it be afterwards discovered that there was some defect in the appointment of any Director or person acting as aforesaid, or that he was, or any of them were, disqualified, be as valid as if
every such person had been duly appointed and was qualified to be a Director or act in the relevant capacity.
| 44. |
Directors to Manage Business
|
The business of the Company shall be managed and conducted by the Board. In managing the business of the Company, the Board may exercise all such powers of the Company as are not required to be
exercised by the Company in general meeting by these Bye-laws or the Companies Act.
| 45. |
Powers of the Board of Directors
|
The Board may:
| (a) |
appoint one or more Directors to the office of chief executive officer of the Company, who shall, subject to the control of the Board, supervise and administer all of the general business and affairs of the Company;
|
| (b) |
subject to Bye-law 36.2, appoint a Director to the office of Chairman of the Board and remove a Director so appointed;
|
| (c) |
appoint a person to act as manager of the Company’s day-to-day business and may entrust to and confer upon such manager such powers and duties as it deems appropriate for the transaction or conduct of such business;
|
| (d) |
appoint, suspend, or remove any manager, secretary, clerk, agent or employee of the Company and may fix their remuneration and determine their duties;
|
| (e) |
exercise all the powers of the Company to borrow money and to mortgage or charge its undertaking, property and uncalled capital, or any part thereof, and may issue debentures, debenture stock, convertible loan notes, and other
securities whether outright or as security for any debt, liability or obligation of the Company or any third party;
|
| (f) |
by power of attorney, appoint any company, firm, person or body of persons, whether nominated directly or indirectly by the Board, to be an attorney of the Company for such purposes and with such powers, authorities and discretions (not
exceeding those vested in or exercisable by the Board) and for such period and subject to such conditions as it may think fit and any such power of attorney may contain such provisions for the protection and convenience of persons dealing
with any such attorney as the Board may think fit and may also authorise any such attorney to sub-delegate all or any of the powers, authorities and discretions so vested in the attorney;
|
| (g) |
procure that the Company pays all expenses incurred in promoting and incorporating the Company;
|
| (h) |
in connection with the issue of any share, pay such commission and brokerage as may be permitted by law; and
|
| (i) |
authorise any company, firm, person or body of persons to act on behalf of the Company for any specific purpose and in connection therewith to execute any deed, agreement, document or instrument on behalf of the Company.
|
| (j) |
present any petition and make any application in connection with the liquidation or reorganisation of Company;
|
| (k) |
delegate any of its powers (including the power to sub-delegate) to a committee of one or more persons appointed by the Board which may consist partly or entirely of non-Directors, provided that every such committee shall conform to such
directions as the Board shall impose on them and provided further that the meetings and proceedings of any such committee shall be governed by the provisions of these Bye-laws regulating the meetings and proceedings of the Board, so far as
the same are applicable and are not superseded by directions imposed by the Board; and
|
| (l) |
delegate any of its powers (including the power to sub-delegate) to any person on such terms and in such manner as the Board may see fit.
|
| 46. |
Register of Directors and Officers
|
The Board shall cause to be kept in one or more books at the Registered Office a Register of Directors and Officers and shall enter therein the particulars required by the
Companies Act.
| 47. |
Appointment of Officers
|
The Board may appoint such Officers (who may or may not be Directors) as the Board may determine.
| 48. |
Appointment of Secretary
|
The Secretary shall be appointed by the Board from time to time.
|
49.
|
Duties of Officers
|
The Officers shall have such powers and perform such duties in the management, business and affairs of the Company as may be delegated to them by the Board from time to time.
| 50. |
Remuneration of Officers
|
The Officers shall receive such remuneration as the Board may determine.
| 51. |
Conflicts of Interest
|
| 51.1 |
Any Director, or any Director’s firm, partner or any company with whom any Director is associated, may act in any capacity for, be employed by or render services to the Company and such Director or such Director’s firm, partner or
company shall be entitled to remuneration as if such Director were not a Director. Nothing contained in this Bye-law shall authorise a Director or Director’s firm, partner or company to act as Auditor to the Company.
|
| 51.2 |
A Director who is directly or indirectly interested in a contract or proposed contract or arrangement with the Company shall declare the nature of such interest as required by the Companies Act.
|
| 51.3 |
Following a declaration being made pursuant to this Bye-law, and unless disqualified by the chairman of the relevant Board meeting, a Director may vote in respect of any contract or proposed contract or arrangement in which such director
is interested and may be counted in the quorum for such meeting.
|
| 52. |
Indemnification and Exculpation of Directors and Officers
|
| 52.1 |
The Directors, Secretary and other Officers (the term Officer for this Bye-law to include any person appointed to any committee by the Board) for the time being acting in relation to any of the affairs of the Company, any subsidiary
thereof, and the liquidation or trustees (if any) for the time being acting in relation to any of the affairs of the Company or any subsidiary thereof and every one of them, and their heirs, executors and administrators, shall be
indemnified and secured harmless out of the assets of the Company from and against all actions, costs, charges, losses, damages and expenses which they or any of them, their heirs, executors or administrators, shall or may incur or sustain
by or by reason of any act done, concurred in or omitted in or about the execution of their duty, or supposed duty, or in their respective offices or trusts, and none of them shall be answerable for the acts, receipts, neglects or defaults
of the others of them or for joining in any receipts for the sake of conformity, or for any bankers or other persons with whom any moneys or effects belonging to the Company shall or may be lodged or deposited for safe custody, or for
insufficiency or deficiency of any security upon which any moneys of or belonging to the Company shall be placed out on or invested, or for any other loss, misfortune or damage which may happen in the execution of their respective offices
or trusts, or in relation thereto, PROVIDED THAT this indemnity shall not extend to any matter in respect of any fraud or dishonesty which may attach to any of the said persons.
|
| 52.2 |
Each Member agrees to waive any claim or right of action such Member might have, whether individually or by or in the right of the Company, against any Director or Officer on account of any action taken by such Director or Officer, or
the failure of such Director or Officer to take any action in the performance of his duties with or for the Company or any subsidiary thereof, PROVIDED THAT such waiver shall not extend to any matter in respect of any fraud or dishonesty
which may attach to such Director or Officer.
|
| 52.3 |
The Company may purchase and maintain insurance for the benefit of any Director or Officer against any liability incurred by him under the Companies Act in his capacity as a Director or Officer or indemnifying such Director or Officer in
respect of any loss arising or liability attaching to him by virtue of any rule of law in respect of any negligence, default, breach of duty or breach of trust of which the Director or Officer may be guilty in relation to the Company or any
subsidiary thereof.
|
| 52.4 |
The Company may advance moneys to a Director or Officer for the costs, charges and expenses incurred by the Director or Officer in defending any civil or criminal proceedings against him, on condition that the Director or Officer shall
repay the advance if any allegation of fraud or dishonesty is proved against him.
|
MEETINGS OF THE BOARD OF DIRECTORS
| 53. |
Board Meetings
|
The Board may meet for the transaction of business, adjourn and otherwise regulate its meetings as it sees fit. A resolution put to the vote at a meeting of the Board shall be carried by the
affirmative votes of a majority of the votes cast and in the case of an equality of votes the resolution shall fail.
| 54. |
Notice of Board Meetings
|
A Director may, and the Secretary or Assistant Secretary on the requisition of a Director shall, upon not less than 72 hours advance notice, summon a meeting of the Board. Notice of a meeting of
the Board shall be deemed to be duly given to a Director if it is given to such Director verbally (including in person or by telephone) or otherwise communicated or sent to such Director by post, electronic means, or other mode of representing
words in visible a form at such Director’s last known address or in accordance with any other instructions given by such Director to the Company for this purpose. A Director may at any time waive the right to receive less than 72 hours advance
notice of a meeting of the Board.
| 55. |
Telephonic or electronic Participation in Meetings
|
Directors may participate in any meeting by telephonic or such electronic means as permit all persons participating in the meeting to communicate with each other simultaneously and instantaneously,
and participation in such a meeting shall constitute presence in person at such meeting. Such a meeting shall be deemed to take place where the largest group of Directors participating in the meeting is physically assembled or, if there is no such
group, where the chairman of the meeting then is.
| 56. |
Quorum at Board Meetings
|
The quorum necessary for the transaction of business at a meeting of the Board shall be a majority of the Directors then in office, provided that if there is only one director for the time being in
office, the quorum shall be one.
| 57. |
Board to Continue in the Event of Vacancy
|
The Board may act notwithstanding any vacancy in its number but, if and so long as its number is reduced below the number fixed by these Bye-laws as the quorum necessary for the transaction of
business at meetings of the Board, the continuing Directors or Director may act for the purpose of (i) summoning a general meeting; (ii) circulating a proposed written resolution of the Members; or (iii) preserving the assets of the Company.
|
58.
|
Chairman to Preside
|
Unless otherwise agreed by a majority of the Directors attending, the Chairman, if there be one, and if not, the President, if there be one, shall act as chairman at all meetings of the Board at
which such person is present. In their absence a chairman shall be appointed or elected by the Directors present at the meeting.
| 59. |
Written Resolutions
|
A resolution signed by all the Directors, which may be in counterparts, shall be as valid as if it had been passed at a meeting of the Board duly called and constituted, such resolution to be
effective on the date on which the last Director signs the resolution. For the purposes of this Bye-law only, “the Directors” shall not include an Alternate Director.
|
60.
|
Validity of Prior Acts of the Board
|
No regulation or alteration to these Bye-laws made by the Company in general meeting shall invalidate any prior act of the Board which would have been valid if that regulation or alteration had not
been made.
ACCOUNTS
| 61. |
Books of Account
|
| 61.1 |
The Board shall cause to be kept proper records of account with respect to all transactions of the Company and in particular with respect to:
|
| (a) |
all amounts of money received and expended by the Company and the matters in respect of which the receipt and expenditure relates;
|
| (b) |
all sales and purchases of goods by the Company; and
|
| (c) |
all assets and liabilities of the Company.
|
| 61.2 |
Such records of account shall be kept at the Registered Office, or subject to the Companies Act, at such other place as the Board thinks fit and shall be available for inspection by the Directors during normal business hours. Subject to
any rights attaching to a particular class of shares, no Member in its capacity as a Member shall have any right to inspect any accounting record or book or document of the Company except as conferred by the Act or as authorised by the
Board.
|
| 62. |
Financial Year End
|
The financial year end of the Company may be determined by resolution of the Board and failing such resolution shall be 30th June in each year.
AUDITS
| 63. |
Annual Audit
|
| 63.1 |
Subject to any rights to waive the laying of accounts or the appointment of an Auditor pursuant to the Companies Act, the accounts of the Company shall be audited at least once in every year.
|
| 63.2 |
The financial statements provided for by these Bye−laws shall be audited by the Auditor in accordance with generally accepted auditing standards. The Auditor shall make a written report thereon in accordance with generally accepted
auditing standards and the report of the Auditor shall be submitted to the Members in general meeting.
|
| 63.3 |
The generally accepted auditing standards referred to in Bye-law 63.2 may be those of a country or jurisdiction other than Bermuda. If so, the financial statements and the report of the Auditor must disclose this fact and name such
country or jurisdiction.
|
| 64. |
Appointment of Auditor
|
| 64.1 |
Subject to the Companies Act and provided that the Members have not waived the requirement to hold an annual general meeting or appoint an Auditor, at the annual general meeting or at a subsequent special general meeting in each year, an
independent representative of the Members shall be appointed by them as Auditor of the accounts of the Company.
|
| 64.2 |
The Auditor may be a Member but no Director, Officer or employee of the Company shall, during his continuance in office, be eligible to act as an Auditor of the Company.
|
| 65. |
Remuneration of Auditor
|
Save in the case of an Auditor appointed pursuant to Bye-law 70, the remuneration of the Auditor shall be fixed by the Company in a general meeting or in such manner as the Members may determine.
In the case of an Auditor appointed pursuant to Bye-law 70, the remuneration of the Auditor shall be fixed by the Board.
| 66. |
Duties of Auditor
|
| 66.1 |
The financial statements provided for by these Bye-laws shall be audited by the Auditor in accordance with generally accepted auditing standards. The Auditor shall make a written report on such financial statements in accordance with
generally accepted auditing standards.
|
| 66.2 |
The generally accepted auditing standards referred to in this Bye-law may be those of a country or jurisdiction other than Bermuda or such other generally accepted auditing standards as may be provided for in the Companies Act. If so,
the financial statements and the report of the Auditor shall identify the generally accepted auditing standards used.
|
|
67.
|
Access to Records
|
The Auditor shall at all reasonable times have access to all books kept by the Company and to all accounts and vouchers relating thereto, and the Auditor may call on the Directors or Officers of
the Company for any information in their possession relating to the books or affairs of the Company.
| 68. |
Financial Statements
|
Subject to the waiver of the laying of accounts by the Members in accordance with the Companies Act, financial statements, as required by the Companies Act, shall be laid before the Members in an
annual general meeting, or if the Members waive the requirement for an annual general meeting, financial statements, as required by the Companies Act, shall be made available to the Members in accordance with the Companies Act. A resolution in
writing made in accordance with Bye-law 30 receiving, accepting, adopting, approving or otherwise acknowledging financial statements shall be deemed to be the laying of such statements before the Members in a general meeting.
| 69. |
Distribution of Auditor’s Report
|
The report of the Auditor shall be submitted to the Members at a general meeting.
| 70. |
Vacancy in the Office of Auditor
|
The Board may fill any casual vacancy in the office of the Auditor.
CORPORATE RECORDS
| 71. |
Minutes
|
The Board shall cause minutes to be duly entered in books provided for the purpose of:
|
(a)
|
all elections and appointments of Officers;
|
| (b) |
the names of the Directors present at each meeting of the Board and of any committee appointed by the Board; and
|
| (c) |
all resolutions and proceedings of general meetings of the Members, meetings of the Board, meetings of managers and meetings of committees appointed by the Board.
|
| 72. |
Place Where Corporate Records Kept
|
Minutes prepared in accordance with the Companies Act and these Bye-laws shall be kept by the Secretary at the Registered Office.
| 73. |
Form and Use of Seal
|
| 73.1 |
The Company may adopt a seal in such form as the Board may determine. The Board may adopt one or more duplicate seals for use in or outside Bermuda.
|
| 73.2 |
A seal may, but need not be affixed to any deed, instrument, share certificate or document, and if the seal is to be affixed to such deed, instrument, share certificate or document, it shall be attested by the signature of (i) any
Director, or (ii) any Officer, or (iii) the Secretary, or (iv) any person authorised by the Board for that purpose.
|
| 73.3 |
A Resident Representative may, but need not, affix the seal of the Company to certify the authenticity of any copies of documents.
|
CHANGES TO CONSTITUTION
|
74.
|
Alteration or amendment of Bye-laws
|
No Bye-law may be rescinded, altered or amended and no new Bye-law may be made save in accordance with the Companies Act and until such amendment or alteration has been approved by a resolution of
the Board, and by a resolution of the Members carried by 75% or more those Members voting in such resolution.
| 75. |
Alteration or amendment of Memorandum
|
No alteration or amendment to the Memorandum may be made save in accordance with the Companies Act.
| 76. |
Discontinuance
|
The Board may exercise all the powers of the Company to discontinue the Company to a jurisdiction outside Bermuda pursuant to the Companies Act.
MISCELLANEOUS
| 77. |
Registered Office
|
The Registered Office shall be at such place in Bermuda as the Board shall from time to time determine.
| 78. |
Amalgamation and Merger
|
The Company may by resolution of the Members approve the amalgamation or merger of the Company with any other company wherever incorporated. The provisions in these Bye-laws relating to the quorum
for general meetings of the Members shall apply to any meeting of the Members of class of Members convened in connection with a merger or an amalgamation.
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79.
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Conversion
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The Company may by resolution of the Members approve a conversion of the Company into a partnership.
VOLUNTARY WINDING-UP AND DISSOLUTION
| 80. |
Winding-Up
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If the Company shall be wound up the liquidator may, with the sanction of a resolution of the Members, divide amongst the Members in specie or in kind the whole or any part of the assets of the
Company (whether they shall consist of property of the same kind or not) and may, for such purpose, set such value as he deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the
Members or different classes of Members. The liquidator may, with the same sanction of a resolution of the Members, vest the whole or any part of such assets in the trustees upon such trusts for the benefit of the Members as the liquidator shall
think fit, but so that no Member shall be compelled to accept any shares or other securities or assets whereon there is any liability.
FORUM FOR ADJUDICATION OF CERTAIN ACTIONS
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81.
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Forum for Adjudication of Certain Actions
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Notwithstanding any provision of law to the contrary, including without limitation 15 U.S.C. §§ 77v(a) and 78aa, unless the Company consents in writing to the selection of an alternative forum, the
United States District Court for the Southern District of New York shall be the exclusive forum for any private action asserting violations by the Company or any of its directors or officers of the United States Securities Act of 1933, as amended,
or the United States Securities Exchange Act of 1934, as amended, or the rules and regulations promulgated thereunder, and of all suits in equity and actions at law brought to enforce any liability or duty created by those statutes or the rules and
regulations thereunder. If any action the subject matter of which is within the scope of the preceding sentence is filed in a court other than the United States District Court for the Southern District of New York, the plaintiff or plaintiffs
shall be deemed by this provision of the bye-laws (i) to have consented to removal of the action by the Company to the United States District Court for the Southern District of New York, in the case of an action filed in a state court, and (ii) to
have consented to transfer of the action pursuant to 28 U.S.C. § 1404 to the United States District Court for the Southern District of New York.
EXHIBIT 4.14
Execution Version
REVOLVING CREDIT AND SECURITY AGREEMENT
This Thirteenth Amendment to Revolving Credit and Security Agreement (this “Amendment”) is made as of this 15th day of April 2020, by and among TRG CUSTOMER SOLUTIONS, INC. d/b/a IBEX Global Solutions (“IBEX”, together with any Person joined to the Loan Agreement as a borrower, collectively the “Borrowers”), the financial institutions
which are now or which hereafter become party to the Loan Agreement as lenders (collectively, the “Lenders”), and PNC BANK, NATIONAL ASSOCIATION (“PNC”), as agent for Lenders (PNC, in such
capacity, the “Agent”) and as a Lender.
A. On November 8, 2013, Borrowers, Lenders and PNC as a Lender and as Agent entered into that certain Revolving Credit and Security Agreement (as same has been or may
be amended, restated, modified, renewed, extended, replaced or substituted from time to time, the “Loan Agreement”) to reflect certain financing arrangements between the parties thereto. All capitalized terms not otherwise defined herein
shall have the meaning ascribed thereto in the Loan Agreement.
B. Borrowers have requested that Agent and Lenders modify certain definitions, terms and conditions in the Loan Agreement, and Agent and Lenders are willing to do so on the terms and
conditions hereafter set forth.
NOW THEREFORE, with the foregoing background hereinafter deemed incorporated by reference herein and made part hereof, the parties hereto, intending to be legally bound,
promise and agree as follows:
| Section 1 |
Amendments to Loan Agreement. On the Effective Date (as defined below):
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(a) New Definitions. The following defined terms shall be added
to Section 1.2 of the Loan Agreement in the proper alphabetical order:
““Adjusted EBITDA” shall mean EBITDA, calculated without recognizing obligations under any right-of-use leases, notwithstanding the requirements of IFRS 16.”
““Thirteenth Amendment Date” shall mean April 15, 2020.”
(b) Definitions. The following defined terms contained in Section 1.2 of the Loan
Agreement shall be amended and restated in their entirety as follows:
“EBITDA” shall mean for any period with respect to Borrowers on a Consolidated Basis, the sum of (a) net income (or loss) for such period (excluding extraordinary
gains and losses), plus (b) all interest expense for such period, plus (c) all charges against income for such period for (1) federal, state and local taxes, (2) expenses on account of the Royalty Agreements and (3) subcontractor
expenses due andowing by any Borrower to Ibex Global Bermuda Limited in excess of two percent (2%) of Ibex Global Bermuda Limited’s cost to provide such subcontractor services to any Borrower for such period, to the extent deducted in determining
net income plus (d) depreciation expenses for such period, plus (e) amortization expenses for such period, plus (f) one-time non-recurring expenses or charges incurred in connection with the Closing (which shall include
without limitation all such expenses or charges due to Lenders and to CapitalSource Bank in connection with the Closing), to the extent paid within ninety (90) days of the Closing Date plus (g) one-time non-recurring expenses or
charges in an amount not to exceed $100,000 incurred in connection with financing sought but not ultimately obtained from Fifth Third Bank, to the extent paid in cash within ninety (90) days of the Closing Date, plus (h) non-cash
expenses related to any Borrower’s share based payments, plus (i) losses from any sale of fixed assets, plus (j) one-time non-recurring expenses or charges in an amount not to exceed $4,000,000 in the aggregate paid in connection
with the 2019 Settlement, minus (k) gains from any sale of fixed assets.
““Debt Payments” “Debt Payments” shall mean for any period, in each case, all cash actually expended by any Borrower to make: (a) interest payments on any Advances
hereunder, plus (b) scheduled principal payments on the Equipment Loans, plus (c) scheduled principal payments on Term Loan C plus (d) payments on Capitalized Lease Obligations (for the avoidance of doubt, such obligations will include obligations
under any right-of-use leases as defined under IFRS 16), plus (e) payments with respect to any other Indebtedness for borrowed money (other than principal payments on Term Loan A and Term Loan B).”
““Fixed Charge Coverage Ratio” shall mean, with respect to any fiscal period, the ratio of (a) EBITDA, minus Unfunded Capital Expenditures
made by any Borrower during such period, minus distributions (including tax distributions but excluding (i) Permitted Holdings Distributions of $11,500,000 paid through June 30, 2016 and (ii) solely to the extent funded by the proceeds of
Term Loan C, and upon Agent’s receipt of satisfactory evidence, in its Permitted Discretion, that such proceeds have been expended on Capital Expenditures, Permitted Holdings Capital Expenditure Distributions), dividends and cash Royalty Payments
made by any Borrower during such period, minus cash taxes paid by any Borrower during such period, minus payments for subcontractor expenses made by any Borrower to Ibex Global Bermuda Limited in excess of two percent (2%) of Ibex
Global Bermuda Limited’s cost to provide such subcontractor services to any Borrower during such fiscal period to (b) all Debt Payments made by any Borrower during such period.”
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““Foreign Subcontractors” shall mean, collectively, Ibex Global Bermuda Limited, Ibex Philippines, Inc. and Ibex Global Jamaica Limited.”
““Special Reserve” shall mean a reserve in the amount of $10,000,000, provided, that, upon the delivery of Borrowers’ financial statements to Agent
pursuant to Section 9.7, 9.8 or 9.9, as applicable, such amount shall be reduced to (x) $5,000,000, if such financial statements for the two (2) most recently ended consecutive fiscal quarters evidence that Borrowers’ Adjusted EBITDA for the twelve
(12) months then ending is not less than $15,000,000 and (y) $0, if such financial statements for the two (2) most recently ended consecutive fiscal quarters evidence that Borrowers’ Adjusted EBITDA for the twelve (12) months then ending is not
less than $17,000,000, in each case, so long as (I) Borrowers have made a written request to Agent for such reduction within forty-five (45) days of delivery of such financial statements evidencing satisfaction of the applicable hurdle referenced
above and (II) the Compliance Certificate accompanying such financial statements certifies that no Default or Event of Default exists.”
(c) Subcontractor Expenses. Section 7.18 of the Loan Agreement shall be amended and
restated in its entirety as follows:
“7.18 Foreign Subsidiary Subcontractor Expenses.
| (a) |
Increase the transfer pricing percentage payable by any Borrower to any Foreign Subcontractor from the percentages in effect on the Twelfth Amendment Date, unless Borrower shall have notified Agent in writing within at least fifteen (15)
days’ of Borrower having notice or knowledge of such increase. The Borrower shall also provide Agent, within at least thirty (30) days’ of the earlier of (x) Borrower providing Agent notice of such increase or (y) the required notification
date of such increase referenced above, with financial projections for the twelve (12) month period following the date of such increase. Borrower acknowledges and agrees that if such projections fail to evidence, to Agent’s satisfaction,
that after giving effect to such increase, Borrower will be in compliance with the covenant in Section 6.5 (whether or not such covenant is required to be tested at such time under the Agreement) during such twelve (12) month period, an
immediate Event of Default shall be deemed to exist under this Agreement.
|
-3-
| (b) |
Make payments to Ibex Global Bermuda Limited for subcontractor expenses in excess of two percent (2%) plus Ibex Global Bermuda Limited’s cost of providing such subcontractor services to any Borrower during any fiscal year unless, (i) no
Default or Event of Default shall exist, (ii) no Springing Covenant Event shall exist, and (iii) Borrowers shall have caused to be maintained as of the end of the most recent fiscal quarter for which Borrowers shall have been required to
deliver financial statements to Agent pursuant to Section 9.7 or 9.8, as applicable, a Fixed Charge Coverage Ratio, calculated as if such payment was made during such period, of not less than 1.20 to 1.00, measured on a rolling four (4)
quarter basis.”
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| Section 2 |
Representations, Warranties and Covenants of Borrowers
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Each Borrower hereby represents and warrants to and covenants with the Agent and the Lenders that:
(a) such Borrower reaffirms all representations and warranties made to Agent and Lenders under the Loan Agreement and all of the Other
Documents (as described and defined in the Loan Agreement) and confirms that after giving effect to this Amendment all are true and correct in all material respects as of the date hereof (except to the extent any such representations and warranties
specifically relate to a specific date, in which case such representations and warranties were true and correct in all material respects on and as of such other specific date);
(b) such Borrower reaffirms all of the covenants contained in the Loan Agreement (as amended hereby) (including without limitation,
all covenants to pay fees, costs and expenses contained therein), covenants to abide thereby until all Advances, Obligations and other liabilities of Borrowers to Agent and Lenders under the Loan Agreement of whatever nature and whenever incurred,
are satisfied and/or released by Agent and Lenders (other than contingent indemnification obligations which survive termination of the Loan Agreement);
(c) no Default or Event of Default has occurred and is continuing under the Loan Agreement or the Other Documents
(as described and defined in the Loan Agreement);
(d) such Borrower has the authority and legal right to execute, deliver and carry out the terms of this
Amendment, that such actions were duly authorized by all necessary limited liability company or corporate action, as applicable, and that the officer executing this Amendment on its behalf was similarly authorized and empowered, and that this
Amendment does not contravene any provisions of its certificate of incorporation or formation, operating agreement, bylaws, or other formation documents, as applicable, or of any material contract or agreement to which it is a party or by which any
of its properties are bound; and
(e) this Amendment and all assignments, instruments, documents, and agreements executed and delivered in
connection herewith, are valid, binding and enforceable in accordance with their respective terms, except as such enforceability may be limited by any applicable bankruptcy, insolvency, moratorium or similar laws affecting creditors’ rights
generally.
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| Section 3 |
[Reserved].
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| Section 4 |
Conditions Precedent/Effectiveness Conditions
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This Amendment shall be effective upon the date of satisfaction of all of the following conditions precedent (the “Effective Date”):
(b) No Default or Event of Default shall have occurred and be continuing under the Loan Agreement; and
(c) Agent shall have received such other agreements, documents or information as requested by Agent in its reasonable discretion.
| Section 5 |
Further Assurances
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Each Borrower hereby agrees to take all such actions and to execute and/or deliver to Agent and Lenders all such documents, assignments, financing statements and other
documents, as Agent and Lenders may reasonably require from time to time, to effectuate and implement the purposes of this Amendment.
| Section 6 |
Payment of Expenses
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Borrowers shall pay or reimburse Agent and Lenders for their reasonable fees of external counsel and other expenses in connection with the preparation, negotiation and
execution of this Amendment and the documents provided for herein or related hereto.
| Section 7 |
Reaffirmation of Loan Agreement
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Except as modified by the terms hereof, all of the terms and conditions of the Loan Agreement, as amended, are hereby reaffirmed and shall continue in full force and effect as
therein written.
| Section 8 |
Miscellaneous
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(a) Third Party Rights. No rights are intended to be created hereunder for the benefit of any third party
donee, creditor, or incidental beneficiary.
(b) Headings. The headings of any paragraph of this Amendment are for convenience only and shall not be
used to interpret any provision hereof.
(c) Modifications. No modification hereof or any agreement referred to herein shall be binding or
enforceable unless in writing and signed on behalf of the party against whom enforcement is sought.
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(d) Governing Law. This Amendment and each Other Document (unless and except to the extent expressly
provided otherwise in any such Other Document), and all matters relating hereto or thereto or arising herefrom or therefrom (whether arising under contract law, tort law or otherwise) shall, in accordance with Section 5-1401 of the General
Obligations Law of the State of New York, be governed by and construed in accordance with the laws of the State of New York. Any judicial proceeding brought by or against any Borrower with respect to any of the Obligations, this Amendment, the
Other Documents or any related agreement may be brought in any court of competent jurisdiction in the State of New York, United States of America, and, by execution and delivery of this Amendment, each Borrower accepts for itself and in connection
with its properties, generally and unconditionally, the non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Amendment. Each Borrower hereby waives personal
service of any and all process upon it and consents that all such service of process may be made by certified or registered mail (return receipt requested) directed to Borrowing Agent at its address set forth in Section 16.6 of the Loan Agreement
and service so made shall be deemed completed five (5) days after the same shall have been so deposited in the mails of the United States of America, or, at Agent’s option, by service upon Borrowing Agent which each Borrower irrevocably appoints as
such Borrower’s Agent for the purpose of accepting service within the State of New York. Nothing herein shall affect the right to serve process in any manner permitted by law or shall limit the right of Agent or any Lender to bring proceedings
against any Borrower in the courts of any other jurisdiction. Each Borrower waives any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon
forum non conveniens. Each Borrower waives the right to remove any judicial proceeding brought against such Borrower in any state court to any federal court. Any judicial proceeding by any Borrower against Agent or any Lender involving, directly or
indirectly, any matter or claim in any way arising out of, related to or connected with this Amendment or any related agreement, shall be brought only in a federal or state court located in the County of New York, State of New York.
(e) Counterparts; Facsimile Signatures. This Amendment may be executed in any number of and by different parties hereto on
separate counterparts, all of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same agreement. Any signature delivered by a party by facsimile or electronic transmission (including email
transmission of a PDF image) shall be deemed to be an original signature hereto.
[signature page follows]
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IN WITNESS WHEREOF, the parties have caused this Amendment to be executed and delivered by their duly authorized officers as of the date first above written.
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BORROWERS:
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TRG CUSTOMER SOLUTIONS, INC.
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d/b/a IBEX Global Solutions
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/s/ Robert Dechant
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By:
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Robert T. Dechant
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Chief Executive Officer
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[SIGNATURE PAGE TO THIRTEENTH AMENDMENT TO
REVOLVING CREDIT AND SECURITY AGREEMENT]
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PNC BANK, NATIONAL ASSOCIATION
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as Lender and as Agent
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/s/ Jacqueline MacKenzie
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By:
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Jacqueline MacKenzie
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Senior Vice President
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[SIGNATURE PAGE TO THIRTEENTH AMENDMENT TO
REVOLVING CREDIT AND SECURITY AGREEMENT]
4,761,905 Shares
IBEX Limited
Common Shares, par value $0.000111650536 per share
UNDERWRITING AGREEMENT
August 6, 2020
August 6, 2020
Citigroup Global Markets Inc.
RBC Capital Markets, LLC
As Representatives of the Several Underwriters
Identified in Schedule I Annexed Hereto
c/o Citigroup Global Markets Inc.
388 Greenwich Street
New York, New York 10013
c/o RBC Capital Markets, LLC
200 Vesey Street
New York, New York 10281
Ladies and Gentlemen:
IBEX Limited, a company organized under the laws of Bermuda (the “Company”), proposes to issue and sell to the several Underwriters named in Schedule I hereto (the “Underwriters”), subject to the terms and conditions stated herein, an aggregate of 3,571,429 common shares, par value $0.000111650536 per share, of the Company (the “Primary Shares”).
The Resource Group International Limited (the “Selling Shareholder”) proposes to sell to the several Underwriters, subject to the terms and conditions stated herein, an aggregate of
1,190,476 common shares, par value $0.000111650536 per share, of the Company (the “Secondary Shares” and together with the Primary Shares, the “Firm Shares”).
The Selling Shareholder proposes to sell to the several Underwriters, subject to the terms and conditions stated herein, up to an additional 714,285 common shares, par value $0.000111650536 per share, of the Company (the “Additional Shares”), if and to the extent that Citigroup Global Markets Inc. (“Citi”) and RBC Capital Markets, LLC (“RBC”), as
representatives of the several Underwriters (the “Representatives”), shall have determined to exercise, on behalf of the Underwriters, the right to purchase such common shares granted to the Underwriters in
Section 3 hereof. The Firm Shares and the Additional Shares are hereinafter collectively referred to as the “Shares.” The common shares, par value $0.000111650536 per share, of the Company to be outstanding
after giving effect to the sales contemplated hereby are hereinafter referred to as the “Common Shares.” The Company and the Selling Shareholder are hereinafter sometimes collectively referred to as the “Sellers.”
1. Registration Statement. The Company has prepared and filed, in accordance with the Securities Act of 1933, as amended (the “Securities
Act”), and the rules and regulations thereunder, with the Securities and Exchange Commission (the “Commission”) a registration statement on Form F-1 (file no. 333-239821), including a preliminary
prospectus, relating to the public offering of the Shares (the “Offering”). The registration statement, as amended at the time it became effective, including the exhibits and documents filed as part thereof and
information contained in the prospectus filed as part of the registration statement pursuant to Rule 424 under the Securities Act or otherwise deemed to be part of the registration statement pursuant to Rule 430A or 430C under the Securities Act, is
hereinafter referred to as the “Registration Statement.” If the Company files an abbreviated registration statement to register additional Common Shares pursuant to Rule 462(b) under the Securities Act (the “Rule 462 Registration Statement”), then any reference herein to the term “Registration Statement” shall be deemed to include such Rule 462 Registration Statement. The Company
has also filed with, or transmitted for filing to, or shall promptly after the date of this underwriting agreement (the “Agreement”) file with or transmit for filing to, the Commission pursuant to Rule 424(b)
under the Securities Act a final prospectus (in the form first used to confirm sales of the Shares or in the form first made available to the Underwriters by the Company to meet requests of purchasers pursuant to Rule 173 under the Securities Act) that
meets the requirements of Section 10(a) of the Securities Act (the “Prospectus”). The term “Preliminary Prospectus” means any preliminary prospectus included in the
Registration Statement (and any amendments thereto) immediately before it is declared effective by the Commission, any prospectus filed with the Commission pursuant to Rule 424(a) under the Securities Act and the prospectus included in the Registration
Statement at the time of its effectiveness that omits certain information as permitted by Rule 430A under the Securities Act. The “Preliminary Prospectus” without reference to a time means the Preliminary Prospectus included in the Registration
Statement or deemed a part of the Registration Statement pursuant to Rule 430A under the Securities Act immediately prior to the Time of Sale (as defined below). The “Prospectus” shall be deemed to include the “electronic Prospectus” provided for use
in connection with the Shares as contemplated by Section 7(b) of this Agreement.
For purposes of this Agreement, “free writing prospectus” has the meaning set forth in Rule 405 under the Securities Act; “issuer free writing
prospectus” has the meaning set forth in Rule 433 under the Securities Act; “Time of Sale Prospectus” means the Preliminary Prospectus, together with the free writing prospectuses, if any, each
identified in Schedule II hereto (each, a “Permitted Free Writing Prospectus”), and other information conveyed to purchasers of the Shares at or prior to the Time of Sale as set forth in Schedule II hereto; “Time of Sale” means 5:30 p.m. (Eastern Time) on the date of this Agreement; “road show” has the meaning set forth in Rule 433(h)(4) under the Securities Act, and “bona fide electronic road show” has the meaning set forth in Rule 433(h)(5) under the Securities Act. As used herein, “Testing-the-Waters Communication” means any oral or
written communication by the Company or any person authorized to act on behalf of the Company, with potential investors undertaken in reliance on Rule 163B under the Securities Act. “Written Testing-the-Waters
Communication” means any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the Securities Act. “Permitted Testing-the-Waters Communication” means any
Written Testing-the-Waters Communication specifically authorized and approved by the Company to be made by the Representatives.
2
The Company has also prepared and filed, in accordance with Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), a registration statement on Form 8-A
(file no. 001-38442) to register the Common Shares under Section 12(b) or (g) of the Exchange Act, as applicable.
1. Representations and Warranties of the Company. The Company represents and warrants to and agrees with each of the Underwriters on the date
hereof, on the Closing Date and on each Option Closing Date, if any, that:
(a) The Registration Statement has become effective under the Securities Act; no stop order suspending the effectiveness of the Registration Statement or preventing or suspending the use of the Preliminary
Prospectus or the Prospectus is in effect, and no proceedings for such purpose are pending before or, to the knowledge of the Company, threatened by the Commission.
(b) The Preliminary Prospectus filed as part of the Registration Statement or pursuant to Rule 424 under the Securities Act, when so filed, complied in all material respects with the
applicable requirements of the Securities Act and the rules and regulations thereunder (including, without limitation, Rule 424, 430A and 430C under the Securities Act).
3
(c) (i) The Registration Statement, when it became effective and at the time of execution of this Agreement, did not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (ii) the Registration Statement complies and, as amended or supplemented, if applicable, will comply in all
material respects with the applicable requirements of the Securities Act and the rules and regulations thereunder; (iii) at the time of filing thereof with the Commission, the Preliminary Prospectus did not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (other than the omission of certain information as permitted by Rule 430A under the Securities
Act); (iv) the Preliminary Prospectus furnished to the Underwriters for delivery to prospective investors complied in all material respects with the applicable requirements of the Securities Act (including, without limitation, the requirements of
Section 10 of the Securities Act); (v) the Time of Sale Prospectus at the Time of Sale did not, and at the Closing Date and, if applicable, at each Option Closing Date, the Time of Sale Prospectus, as then amended or supplemented, if applicable, will
not, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (vi) each Permitted Free Writing
Prospectus does not conflict with the information contained in the Registration Statement, the Preliminary Prospectus, the Time of Sale Prospectus or the Prospectus that has not been superseded or modified and was accompanied or preceded by the
then-most recent Preliminary Prospectus, to the extent required by Rule 433 under the Securities Act; (vii) each road show, when considered together with the Time of Sale Prospectus, does not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; (viii) each individual Written Testing-the-Waters Communication, if any, when considered together
with the Time of Sale Prospectus, does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (ix)
the Prospectus, as of the date it is filed with the Commission pursuant to Rule 424(b) under the Securities Act, at the Closing Date and at each Option Closing Date, if any, will comply in all material respects with the Securities Act (including
without limitation Section 10(a) of the Securities Act) and the rules and regulations promulgated thereunder and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the representations and warranties set forth in this Section 1(c) do not apply to statements or omissions in the Registration Statement, the
Time of Sale Prospectus, any Preliminary Prospectus, the Permitted Free Writing Prospectus, any road show, any Written Testing-the-Waters Communication or the Prospectus or any amendments or supplements (or prospectus wrapper) thereto based upon or in
reliance upon information relating to any Underwriter furnished to the Company in writing by such Underwriter through the Representatives expressly for use therein, it being agreed that the only information furnished by the Underwriters to the Company
expressly for use therein are the statements contained in the first sentence of the fourth paragraph, the eighth paragraph and the three paragraphs under the heading “Stabilization, Short Positions and Penalty Bids” of the “Underwriting” section of the
Time of Sale Prospectus and Prospectus (collectively, the “Underwriter Information”).
4
(d) Prior to the execution of this Agreement, the Company has not, directly or indirectly, offered or sold any Shares by means of any “prospectus” (within the meaning of the Securities Act) or used any
“prospectus” (within the meaning of the Securities Act) in connection with the offer or sale of the Shares, in each case other than the Preliminary Prospectus, the Permitted Free Writing Prospectuses and/or any Permitted Testing-the-Waters
Communication; the Company has not, directly or indirectly, prepared, used or referred to any free writing prospectuses in connection with the offer or sale of the Shares, without the prior written consent of the Representatives, other than the
Permitted Free Writing Prospectuses, any Permitted Testing-the-Waters Communication and road shows furnished or presented to the Representatives before first use. Each Permitted Free Writing Prospectus has been prepared, used or referred to in
compliance, in all material respects, with Rules 164 and 433 under the Securities Act; assuming that such Permitted Free Writing Prospectus is so sent or given after the Registration Statement was filed with the Commission (and after such Permitted
Free Writing Prospectus was, if required pursuant to Rule 433(d) under the Securities Act, filed with the Commission), the sending or giving, by any Underwriter, of any Permitted Free Writing Prospectus will satisfy the provisions of Rules 164 and Rule
433 under the Securities Act; the conditions set forth in Rule 433(b)(2) under the Securities Act are satisfied, and the Registration Statement relating to the Offering, as filed with the Commission, includes a prospectus that, other than by reason of
Rule 433 or Rule 431 under the Securities Act, satisfies the requirements of Section 10 of the Securities Act, including a price range where required by rule; neither the Company nor the Underwriters are disqualified, by reason of subsection (f) or (g)
of Rule 164 under the Securities Act, from using, in connection with the offer and sale of the Shares, free writing prospectuses pursuant to Rules 164 and 433 under the Securities Act; each Permitted Free Writing Prospectus that the Company has filed,
or is required to file, pursuant to Rule 433(d) under the Securities Act or that was prepared by or on behalf of or used or referred to by the Company complies or will comply in all material respects with the requirements of the Securities Act; and, in
the case of any bona fide electronic road shows by the Company, the Company has complied with the requirements of Rule 433(d)(8)(ii) under the Securities Act.
(e) The Company was not an “ineligible issuer” (as defined in Rule 405 under the Securities Act) as of the eligibility determination date for purposes of Rules 164 and 433 under the Securities Act with respect to
the Offering contemplated by the Registration Statement.
(f) From the time of initial confidential submission of the Registration Statement to the Commission (or, if earlier, the first date on which the Company engaged directly or through any person authorized to act on
its behalf in any Testing-the-Waters Communication) through the date hereof, the Company has been and is an “emerging growth company,” as defined in Section 2(a) of the Securities Act (an “Emerging Growth Company”).
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(g) The Company (i) has not alone engaged in any Testing-the-Waters Communication, (ii) has not authorized anyone other than the
Representatives to engage in such communications, (iii) has not distributed any Written Testing-the-Waters Communication, and (iv) each Written Testing-the-Waters Communication, if any, does not and will not, conflict with the information contained
in the Registration Statement, the Preliminary Prospectus and the Prospectus.
(h) The Shares are approved for listing on the Nasdaq Global Market (the “Exchange”), subject only to official notice of issuance.
(i) Each of the Company and its subsidiaries has been duly organized and is validly existing and in good standing (to the extent this concept exists in the relevant jurisdiction) under the laws of the jurisdiction
of its organization, has the power and authority to own its property and to conduct its business as described in the Registration Statement, the Time of Sale Prospectus and the Prospectus, and is duly qualified to transact business and is in good
standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified by or be in good standing would not individually or in the
aggregate, reasonably be expected to have a material adverse effect on the performance of this Agreement or the consummation of any of the transactions contemplated hereby or reasonably be expected to have a material adverse effect on the condition
(financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business (a “Material
Adverse Effect”). All of the issued equity securities of each subsidiary of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and are owned directly by the Company, free and clear of all liens,
encumbrances, security interests, equities or claims, except for any liens, encumbrances, security interests, equities or claims described in the Registration Statement, the Preliminary Prospectus and the Prospectus.
(j) This Agreement has been duly authorized, executed and delivered by the Company and constitutes a valid, legal and binding obligation of the Company, enforceable in accordance with its terms, except as rights
to indemnity hereunder may be limited by federal or state securities laws and except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting the rights of creditors generally and subject to general
principles of equity.
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(k) The authorized, issued and outstanding capitalization of the Company is as set forth in the Registration Statement, the Time of Sale Prospectus and the Prospectus, subject, in each case, to the issuance of
common shares upon exercise of share options and warrants disclosed as outstanding in the Registration Statement, Time of Sale Prospectus and the Prospectus, as the case may be, and the grant of options under existing share option plans described in
the Registration Statement, the Time of Sale Prospectus and the Prospectus. The authorized share capital of the Company conforms in all material respects, as to legal matters, to the description thereof contained in the Registration Statement, the
Time of Sale Prospectus and the Prospectus, and such description conforms in all material respects to the rights set forth in the instruments defining the same. Except as disclosed in the Registration Statement, the Time of Sale Prospectus and the
Prospectus, (i) no Common Shares of the Company are reserved for any purpose, (ii) there are no outstanding securities convertible into or exchangeable for any Common Shares of the Company, (iii) there are no outstanding options, rights (preemptive or
otherwise) or warrants to purchase or subscribe for Common Shares or any other securities of the Company, and (iv) the Company has not granted to any person or entity a share option or other equity-based award of or to purchase Common Shares or any
other securities of the Company pursuant to an equity-based compensation plan or otherwise.
(l) The common shares of the Company outstanding prior to the issuance of the Firm Shares have been duly authorized, are validly issued, fully paid and non‑assessable, have been issued in compliance with
applicable securities laws and were not issued in violation of any preemptive or similar rights, in each case except as otherwise described in the Registration Statement, Preliminary Prospectus and the Prospectus.
(m) The Shares have been duly authorized and, when issued and delivered against payment therefor in accordance with the terms of this Agreement, will be validly issued, fully paid and non‑assessable, and the
issuance of such Shares will not be subject to or in violation of any preemptive or similar rights.
(n) Except as disclosed in the Prospectus, neither the execution and delivery by the Company of, nor the performance by the Company of its obligations under this Agreement, will conflict with, contravene, result
in a breach or violation of, or imposition of any lien, charge or encumbrance upon any assets of the Company or any of its subsidiaries pursuant to, or constitute a default or a Debt Repayment Triggering Event (as defined below) under (i) any statute,
law, rule, regulation, judgment, order or decree of any governmental body, regulatory or administrative agency or court having jurisdiction over the Company or any subsidiary; (ii) the articles or certificate of incorporation or bylaws (or charter and
other organizational documents) of the Company or any of its subsidiaries; or (iii) any contract, agreement, obligation, covenant or instrument to which the Company or any of its subsidiaries (or any of their respective assets) is subject or bound,
except in the case of clauses (i) and (iii) above, for any breach, violation, conflict, contravention, imposition or default as would not reasonably be expected to have a Material Adverse Effect. A “Debt Repayment
Triggering Event” means any event or condition that gives, or with the giving or notice or lapse of time would give, the holder of any note, debenture or other evidence of material indebtedness (or any person acting on such holder’s behalf)
the right to require the repurchase, redemption of repayment of all or a portion of such indebtedness by the Company or any of its subsidiaries.
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(o) No approval, authorization, consent or order of or filing with any federal, state, local or foreign governmental or regulatory commission, board, body, authority or agency, or of
or with any self-regulatory organization or other non-governmental regulatory authority (including, without limitation, the Exchange), is required in connection with the issuance and sale of the Shares or the consummation of the transactions
contemplated hereby, other than (i) registration of the Shares under the Securities Act, which has been effected (or, with respect to any Rule 462 Registration Statement, will be effected in accordance with Rule 462(b) under the Securities Act), (ii)
any necessary qualification under the securities or blue sky laws of the various jurisdictions in which the Shares are being offered by the Underwriters, (iii) such approvals as have been obtained in connection with the listing of the Shares on the
Exchange, (iv) under the FINRA Rules, or (v) if at any time the Shares are not listed on an “Appointed Stock Exchange” (as defined in the Notice to the Public of June 2005 issued by the Bermuda Monetary Authority pursuant to the Exchange Control Act
1972 and related regulations), the no objection of the Bermuda Monetary Authority to the issue of the Shares.
(p) There are no actions, suits, claims, investigations, inquiries or proceedings (collectively, “Actions”) pending or, to the Company’s knowledge, threatened or
contemplated to which the Company or any of its subsidiaries or any of their respective directors or officers is or would be a party or of which any of their respective properties is or would be subject at law or in equity, before or by any federal,
state, local or foreign governmental or regulatory commission, board, body, authority or agency, or before or by any self-regulatory organization or other non-governmental regulatory authority (including, without limitation, the Exchange), other than
such Actions that are described in all material respects in the Registration Statement, the Time of Sale Prospectus and the Prospectus or such Actions that, if resolved adversely to the Company or any of its subsidiaries, would not, individually or in
the aggregate, have a Material Adverse Effect.
(q) The Company and its subsidiaries are not, and, after giving effect to the Offering and sale of the Shares and the application of the proceeds thereof as described in the Prospectus, none of them will be,
required to register as an “investment company” as such term is defined in the Investment Company Act of 1940, as amended.
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(r) The Company’s securities are not rated by any “nationally recognized statistical rating organization,” as such term is defined under Section 3(a)(62) of the Exchange Act.
(s) BDO LLP has certified certain financial statements and the supporting schedules of the Company included in the Registration Statement, Time of Sale Prospectus and Prospectus, and is an independent registered
public accounting firm with respect to the Company within the applicable rules and regulations adopted by the Commission and the Public Company Accounting Oversight Board and as required by the Securities Act.
(t) The historical audited and unaudited combined financial statements included in the Registration Statement, the Time of Sale Prospectus and the Prospectus, together with the related notes and schedules, present
fairly in all material respects the consolidated financial position of the Company and its subsidiaries as of the dates indicated and the consolidated results of operations, cash flows and changes in shareholders’ equity of the Company and its
subsidiaries for the periods specified and comply in all material respects with the requirements of the Securities Act and the Exchange Act and comply with International Financial Reporting Standards as issued by the International Accounting Standards
Board applied on a consistent basis during the periods involved; the other financial and statistical data contained in the Registration Statement, the Time of Sale Prospectus and the Prospectus are accurately and fairly presented in all material
respects and prepared on a basis consistent with the financial statements and books and records of the Company and its subsidiaries to which such data relate; there are no financial statements (historical or pro forma) that are required to be included
in the Registration Statement, the Time of Sale Prospectus or the Prospectus that are not included as required; the Company and its subsidiaries do not have any other material liabilities or obligations, direct or contingent (including any off-balance
sheet obligations or “variable interest entities”), not described in the Registration Statement, the Time of Sale Prospectus and the Prospectus; and all disclosures contained in the Time of Sale Prospectus and the Prospectus regarding “non-GAAP
financial measures” (as such term is defined by the rules and regulations of the Commission) comply with Regulation G under the Exchange Act and Item 10 of Regulation S-K under the Securities Act, to the extent applicable.
(u) All statistical or market-related data included in the Registration Statement, Time of Sale Prospectus or the Prospectus are based on or derived from sources that the Company reasonably believes to be reliable
and accurate in all material respects. Each “forward-looking statement” (within the meaning of Section 27A of the Securities Act or Section 21E of the Exchange Act) contained in the Registration Statement, the Time of Sale Prospectus and the Prospectus
has been made or reaffirmed with a reasonable basis and in good faith.
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(v) Except as otherwise described in the Registration Statement, the Time of Sale Prospectus and the Prospectus (a) the Company and its subsidiaries (i) are in compliance with any and all applicable foreign and
U.S. federal, state and local laws, regulations, requirements, decisions and orders relating to pollution, protection of the Environment, protection of human health and safety (as such is affected by Hazardous Materials including those relating to the
Release or threat of Release of Hazardous Materials), and, Hazardous Materials (“Environmental Laws”); (ii) have received and are in compliance with all permits, licenses or other approvals required of them under
applicable Environmental Laws to conduct their respective businesses and own and operate their properties; (iii) have not received notice of any actual or potential liability under, or actual or alleged violation of, any Environmental Law, including
for investigation or remediation of any disposal or release of Hazardous Materials, except where such non-compliance with Environmental Laws, failure to receive or comply with required permits, licenses or other approvals, liability or violation, would
not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect, (b) the Company and its subsidiaries are not aware of any issues regarding compliance with Environmental Laws, or liabilities or other obligations under
Environmental Laws or concerning Hazardous Materials, that could reasonably be expected to have a material effect on the capital expenditures, earnings or competitive position of the Company and its subsidiaries, and (c) none of the Company and its
subsidiaries anticipates material capital expenditures relating to any Environmental Laws. For purposes of this Agreement, “Environment” means ambient air, surface water, groundwater, soil, surface and
subsurface strata, and natural resources such as wetlands, flora and fauna. “Hazardous Materials” means any substance, material, pollutant, contaminant, chemical, waste, compound, or constituent, in any form,
including, without limitation, petroleum and petroleum products, subject to regulation or which can give rise to liability under any Environmental Law. “Release” means any release, spill, emission, discharge,
deposit, disposal, leaking, pumping, pouring, dumping, emptying, injection or leaching into the Environment, or into, from or through any building, structure or facility.
(w) Except as disclosed in the Registration Statement or as have been waived, the Time of Sale Prospectus and the Prospectus, there are no contracts, agreements or understandings between the Company and any person
granting such person the right to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company or to require the Company to include such securities with the Shares registered pursuant to
the Registration Statement.
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(x) Except as disclosed in the Time of Sale Prospectus, there are no contracts, agreements or understandings between the Company and any person that would give rise to a valid claim
against the Company or any Underwriter for a brokerage commission, finder’s fee or other like payment in connection with the Offering.
(y) Subsequent to the respective dates as of which information is given in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus, (i) there has not occurred any material adverse
change, or any development that would reasonably be expected to result in a material adverse change in the assets, business, condition (financial or otherwise), management, results of operations or earnings of the Company and its subsidiaries, taken as
a whole; (ii) the Company and its subsidiaries have not incurred any liability or obligation, direct or contingent, nor entered into any transaction, in each case that is material to the Company and its subsidiaries, taken as a whole; (iii) the Company
and its subsidiaries have not sustained any loss or interference with their respective businesses from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or
decree, in each case that is material to the Company and its subsidiaries, taken as a whole; (iv) the Company has not purchased any of its outstanding share capital, nor declared, paid or otherwise made any dividend or distribution of any kind on its
share capital other than ordinary and customary dividends; and (v) there has not been any material change in the share capital, short‑term debt or long‑term debt of the Company and its subsidiaries, taken as a whole: except in each such case as
described in the Registration Statement, the Time of Sale Prospectus and the Prospectus.
(z) The Company and its subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them that is material to the business of the
Company and its subsidiaries, in each case free and clear of all liens, encumbrances and defects except those (i) described in the Registration Statement, the Time of Sale Prospectus and the Prospectus, (ii) that, individually, or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect or (iii) that do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its subsidiaries;
and any real property and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and its subsidiaries, in each case except as described in the Time of Sale Prospectus.
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(aa) Except as would not reasonably be expected to have a Material Adverse Effect, (i) the Company and its subsidiaries own or possess adequate rights to use or are licensed to use all material patents, patent
applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses and know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information,
systems or procedures) necessary for the conduct of their respective businesses as described in the Registration Statement, the Time of Sale Prospectus and the Prospectus, (ii) the conduct of their respective businesses does not infringe,
misappropriate or otherwise violate any such rights of others and (iii) the Company and its subsidiaries have not received any notice of any claim of infringement of or conflict with any such rights of others.
(bb) Except (1) as described in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus or (2) as would not reasonably be expected to have a Material Adverse Effect, no labor disturbance
by or dispute with employees of the Company or any of its subsidiaries exists or, to the knowledge of the Company, is imminent and the Company is not aware of any existing or imminent labor disturbance by, or dispute with, the employees of any of the
Company’s or subsidiaries’ suppliers, dealers or customers. To the knowledge of the Company, there has been no violation by the Company or any of its subsidiaries of any federal, state, local or foreign law relating to discrimination in the hiring,
promotion or pay of employees, any applicable wage or hour laws or any provision of the Employee Retirement Income Security Act (“ERISA”) or the rules and regulations promulgated thereunder concerning the
employees of the Company or any of its subsidiaries in any material respect and except as described in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus.
(cc) The Company and each of its subsidiaries are insured by insurers of recognized financial responsibility against such reasonably foreseeable losses and risks and in such amounts as are customary in the businesses
in which they are engaged; and neither the Company nor any of its subsidiaries has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect.
(dd) Except (1) as described in each of the Registration Statement, the Time of Sale Prospectus and the Prospectus or (2) in each case as would not reasonably be expected to have a Material Adverse Effect, (i) the
Company and its subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, and (ii) neither the Company nor any of its
subsidiaries has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit.
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(ee) No subsidiary of the Company is subject to any material direct or indirect prohibition on paying any dividends to the Company, on making any other distribution on such subsidiary’s share capital, on
repaying to the Company any loans or advances to such subsidiary from the Company or on transferring any of such subsidiary’s property or assets to the Company or any other subsidiary of the Company, except as described in the Time of Sale
Prospectus.
(ff) The Company has taken all necessary actions to ensure that, upon the effectiveness of the Registration Statement, it will be in compliance in all material respects with all provisions of the Sarbanes-Oxley
Act of 2002 and all rules and regulations promulgated thereunder or implementing the provisions thereof that are then in effect and with which the Company is required to comply as of the effectiveness of the Registration Statement, including
Section 402 thereof.
(gg) To the extent required by the Exchange Act, the Company maintains a system of “internal control over financial reporting” (as defined in Rule 13a-15(f) of the Exchange Act) that has been designed by, or under
the supervision of, their respective principal executive and principal financial officers, or persons performing similar functions, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles, including, but not limited to, internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any
differences. Except as disclosed in the Registration Statement, the Time of Sale Prospectus and the Prospectus, the Company is not aware of any material weakness or significant deficiency in its internal controls over financial reporting.
(hh) To the extent required by the Exchange Act, the Company maintains “disclosure controls and procedures” (as such term is defined in Rules 13a-15 and
15d-15 under the Exchange Act); such disclosure controls and procedures are designed to ensure that material information relating to the Company, including its consolidated subsidiaries, that is required to be disclosed by the Company in reports that
it will file or maintain under the Exchange Act, is made known to the Company’s principal executive officer and principal financial officer by others within those entities, and such disclosure controls and procedures are effective in all material
respects in performing the functions for which they were established.
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(ii) Neither the Company nor any of its subsidiaries has sent or received any communication regarding termination of, or intent not to renew, any of the contracts or agreements (i) referred to or described in
the Registration Statement, the Time of Sale Prospectus or the Prospectus, except as would not reasonably be expected to have a Material Adverse Effect, or (ii) filed as an exhibit to the Registration Statement; and no such termination or non-renewal
has been threatened by the Company or any of its subsidiaries or, to the Company’s knowledge, any other party to any such contract or agreement, except in such cases that would not individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(jj) There are no business relationships or related-party transactions involving the Company or any subsidiary or any other person required under the Securities Act to be described in the Registration Statement,
the Time of Sale Prospectus or the Prospectus which have not been described as required.
(kk) All tax returns required to be filed by the Company or any of its subsidiaries have been timely filed, and all taxes and other assessments of a similar nature (whether imposed directly or through withholding),
including any interest, additions to tax or penalties applicable thereto, due or claimed to be due from such entities have been timely paid, other than those either (i) being contested in good faith or for which an extension of the filing deadline has
been requested and for which adequate reserves have been provided or (ii) which, if not paid, would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
(ll) Neither the Company nor any of its subsidiaries, nor any director or officer thereof, nor, to the knowledge of the Company, any employee, authorized agent or representative, in each case, in the course of
acting on behalf of the Company or any of its subsidiaries has (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (ii) unlawfully made or taken an act in furtherance
of an offer, promise or authorization of any direct or indirect unlawful payment or benefit to any foreign or domestic government official or employee; (iii) violated or is in violation of any applicable provision of the Foreign Corrupt Practices Act
of 1977, as amended, or any applicable law or regulation implementing the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, or committed an offence under the Bribery Act 2010 of the United Kingdom
to the extent applicable, or any other applicable anti-bribery or anti-corruption law; or (iv) unlawfully made, offered, agreed, requested or taken an act in furtherance of any unlawful bribe or other unlawful benefit, including, without limitation,
any rebate, payoff, influence payment, kickback or other unlawful or improper payment or benefit. The Company and its subsidiaries have instituted, maintained and enforced, and will continue to maintain and enforce risk-based policies and procedures
designed to promote and ensure their continued compliance with all applicable anti-bribery and anti-corruption laws to the extent required by applicable law.
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(mm) The operations of the Company and its subsidiaries are, and have been conducted at all times, in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign
Transactions Reporting Act of 1970, as amended, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (commonly known as the USA PATRIOT Act), the applicable money laundering
statutes of all jurisdictions in which the Company or its subsidiaries operate, the applicable rules and regulations thereunder and any related or similar applicable rules, regulations or mandatory guidelines issued, administered or enforced by any
governmental agency (collectively, the “Money Laundering Laws”) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator against the Company or any of
its subsidiaries with respect to a violation of Money Laundering Laws is pending or, to the knowledge of the Company, threatened.
(nn) Neither the Company nor any of its subsidiaries, nor any director or officer thereof, nor, to the knowledge of the Company, any employee, authorized agent or representative, in each case is currently the
subject or target of any applicable sanctions administered or enforced by the U.S. Government (including, without limitation, the U.S. Department of State and the Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”) and including, without limitation, the designation as a “specially designated national” or “blocked person”), the United Nations Security Council (“UNSC”), the European
Union, Her Majesty’s Treasury (“HMT”) or other relevant sanctions authority (collectively, “Sanctions”). The Company will not knowingly, in violation of applicable
Sanctions, directly or indirectly, use the proceeds of this Offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity that intends to use such proceeds for the purpose of
financing the activities of any person currently subject to Sanctions without obtaining an appropriate license from the U.S. Government or otherwise complying with any exceptions to the relevant Sanction.
(oo) Except as described in the Time of Sale Prospectus, the Company has not sold, issued or distributed any Common Shares during the six-month period preceding the date hereof, including any sales pursuant to Rule
144A under, or Regulation D or S of, the Securities Act, other than shares issued pursuant to employee benefit plans, qualified share option plans or other employee compensation plans or pursuant to outstanding options, rights or warrants.
15
(pp) Neither the Company nor any of its subsidiaries has taken, directly or indirectly, any action designed, or which has constituted or might reasonably be expected to cause or result in the stabilization or
manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares.
(qq) Except for any net income, capital gains or franchise taxes imposed on the Underwriters by the government of Bermuda or any political subdivision or taxing authority thereof or therein as a result of any
present or former connection (other than any connection resulting from the transactions contemplated by this Agreement) between the Underwriters and the jurisdiction imposing such tax, no stamp duties or other issuance or transfer taxes are payable
by or on behalf of the Underwriters in Bermuda, the United States or any political subdivision or taxing authority thereof solely in connection with (A) the execution, delivery and performance of this Agreement, (B) the issuance and delivery of the
Shares in the manner contemplated by this Agreement and the Prospectus or (C) the sale and delivery by the Underwriters of the Shares as contemplated herein and in the Prospectus.
(rr) Neither the Company nor any of its subsidiaries or their properties or assets has immunity under Bermuda, U.S. federal or New York state law from any legal action, suit or proceeding, from the giving of any
relief in any such legal action, suit or proceeding, from set-off or counterclaim, from the jurisdiction of any Bermuda, U.S. federal or New York state court, from service of process, attachment upon or prior to judgment, or attachment in aid of
execution of judgment, or from execution of a judgment, or other legal process or proceeding for the giving of any relief or for the enforcement of a judgment, in any such court with respect to their respective obligations, liabilities or any other
matter under or arising out of or in connection herewith; and, to the extent that the Company or any of its subsidiaries or any of its properties, assets or revenues may have or may hereafter become entitled to any such right of immunity in any such
court in which proceedings arising out of, or relating to the transactions contemplated by this Agreement, may at any time be commenced, the Company has, pursuant to Section 24 of this Agreement, waived, and it will waive, or will cause its
subsidiaries to waive, such right to the extent permitted by law.
(ss) Any final judgment for a fixed or determined sum of money rendered by any U.S. federal or New York state court located in the State of New York having jurisdiction under its own laws in respect of any suit,
action or proceeding against the Company based upon this Agreement would be declared enforceable against the Company by the courts of Bermuda, without reconsideration or reexamination of the merits; provided, that (i) the court which gave the judgement
was competent to hear the action in accordance with private international law principles as applied in Bermuda and (ii) the judgment is not contrary to public policy in Bermuda, has not been obtained by fraud or in proceedings contrary to national
justice and is not based on an error in Bermuda law.
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(tt) The choice of laws of the State of New York as the governing law of this Agreement is a valid choice of law under the laws of Bermuda and will be honored by the courts of Bermuda, subject to the restrictions
described under the caption “Enforcement of Civil Liabilities” in the Registration Statement, the Preliminary Prospectus and the Prospectus. The Company has the power to submit, and pursuant to Section 25 of this Agreement, has legally, validly,
effectively and irrevocably submitted, to the personal jurisdiction of each New York state and United States federal court sitting in the City of New York and has validly and irrevocably waived any objection to the laying of venue of any suit, action
or proceeding brought in such court.
(uu) The indemnification and contribution provisions set forth in Section 10 hereof do not contravene Bermuda law or public policy.
(vv) Subject to the qualifications, limitations, exceptions and assumptions set forth in the Preliminary Prospectus and the Prospectus, the Company does not believe that it (i) was a passive foreign investment
company (a “PFIC”), as defined in Section 1297 of the Internal Revenue Code of 1986, as amended (the “Code”), for any taxable year ending prior to the Offering and sale of
the Shares, and (ii) will not be a PFIC for the taxable year including the date of the Offering and sale of the Shares. Based upon its current ownership, the Company believes that it is not, and, after giving effect to the offering and sale of the
Shares and the application of the proceeds thereof, will not be, a “controlled foreign corporation” as defined by the Code.
(ww) Except as disclosed in the Registration Statement, the Time of Sale Prospectus and the Prospectus, no approvals are currently required in Bermuda in order for the Company to pay dividends or other distributions
declared by the Company to the holders of Shares. Under current laws and regulations of Bermuda and any political subdivision thereof, any amount payable with respect to the Shares upon liquidation of the Company or upon redemption thereof and
dividends and other distributions declared and payable on the share capital of the Company may be paid by the Company in United States dollars or euros and freely transferred out of Bermuda, and no such payments made to the holders thereof or therein
who are non-residents of Bermuda will be subject to income, withholding or other taxes under laws and regulations of Bermuda or any political subdivision or taxing authority thereof or therein and without the necessity of obtaining any governmental
authorization in Bermuda or any political subdivision or taxing authority thereof or therein.
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(xx) The legality, validity, enforceability or admissibility into evidence of any of the Registration Statement, the Time of Sale Prospectus, the Prospectus, this Agreement or the Shares in any jurisdiction in
which the Company is organized or does business is not dependent upon such document being submitted into, filed or recorded with any court or other authority in any such jurisdiction on or before the date hereof or that any tax, imposition or charge
be paid in any such jurisdiction on or in respect of any such document.
(yy) A holder of the Shares and each Underwriter are each entitled to sue as plaintiff in the court of the jurisdiction of formation and domicile of the Company for the enforcement of their respective rights under
this Agreement and the Shares, subject to Section 25 (Submission to Jurisdiction) of this Agreement, and such access to such courts will not be subject to any conditions which are not applicable to residents of such jurisdiction or a company
incorporated in such jurisdiction except that plaintiffs not residing in Bermuda may be required to guarantee payment of a possible order for payment of costs or damages at the request of the defendant.
(zz) The Company is a “foreign private issuer” as defined in Rule 405 under the Securities Act.
2. Representations and Warranties of the Selling Shareholder. The Selling Shareholder represents and warrants to and agrees with each of the Underwriters on the date
hereof, on the Closing Date and on each Option Closing Date, if any, that:
(a) Neither the execution and delivery by the Selling Shareholder of, nor the performance by the Selling Shareholder of its obligations under, this Agreement will (i) conflict with, contravene, result in a
material breach or violation of, or imposition of any lien, charge or encumbrance upon any assets of the Selling Shareholder pursuant to, or constitute a default under any contract, agreement, obligation, covenant or instrument to which the Selling
Shareholder (or any of its assets) is subject or bound; (ii) result, to the extent applicable, in the violation of any statute, law, rule, regulation, judgment, order or decree of any governmental body, regulatory or administrative agency or court
having jurisdiction over the Selling Shareholder; or (iii) result, to the extent applicable, in any violation of the provisions of the certificate of incorporation or bylaws (or other organizational documents) of the Selling Shareholder, if applicable;
except in the case of clauses (i) and (ii) above, for any such breach, violation, lien, charge or encumbrance that would not, individually or in the aggregate, have a material adverse effect on the ability of the Selling Shareholder to consummate the
transactions contemplated herein. To the Selling Shareholder’s knowledge, no consent, approval, authorization or order of, or qualification with, any governmental body or agency is required for the performance by the Selling Shareholder of its
obligations under this Agreement, except such as may have been obtained or made or as may be required (i) in connection with registration of the Shares under the Securities Act, (ii) by the securities or blue sky laws of the various jurisdictions in
connection with the offer and sale of the Shares or (iii) in connection with the listing of the Shares on the Exchange or under the FINRA Rules.
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(b) The Selling Shareholder has and immediately prior to the Closing Date and on each Option Closing Date, as the case may be, the Selling Shareholder will have, valid marketable title to, or a valid security
entitlement (within the meaning of Sections 8-102 and 8-501 of the New York Uniform Commercial Code (the “UCC”) to the Shares maintained in a securities account on the books of The Depository Trust Company (“DTC”) free and clear of any lien, claim or encumbrance, and assuming that each Underwriter acquires its interest in the Shares it has purchased without notice of any adverse claim (within the meaning of Section
8-105 of the UCC), upon the crediting of such Shares to the securities account of such Underwriter maintained with DTC and payment therefor by such Underwriter, as provided herein, such Underwriter will have acquired a security entitlement to such
Shares, and no action based on any adverse claim may be asserted against such Underwriter with respect to such security entitlement, and the legal right and power, and all authorization and approval required by law, to enter into this Agreement and
to sell, transfer and deliver the Shares to be sold by the Selling Shareholder.
(c) The Selling Shareholder has not, directly or indirectly, taken any action designed to or which will constitute, or that might reasonably be expected to cause or result in the stabilization or manipulation of
the price of the Shares.
(d) (i) The Registration Statement, when it became effective and at the time of execution of this Agreement, did not contain and, as amended or supplemented, if applicable, will not contain any untrue statement
of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading; (ii) the Time of Sale Prospectus at the Time of Sale did not, and at the Closing Date and, if
applicable, at each Option Closing Date, the Time of Sale Prospectus, as then amended or supplemented, if applicable, will not, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not misleading; and (iii) the Prospectus, as of the date it is filed with the Commission pursuant to Rule 424(b) under the Securities Act, at the Closing Date and at each Option
Closing Date, if any, will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided,
however, that the representations and warranties set forth in this Section 2(d) are limited exclusively to statements or omissions of material fact made in reliance upon information relating to the Selling Shareholder furnished in writing by or on
behalf of the Selling Shareholder expressly for use in the Registration Statement, Time of Sale Prospectus and the Prospectus, it being understood and agreed that the only such information furnished by or on behalf of the Selling Shareholder consists
of the legal name and address of, and the number of shares beneficially owned and offered by the Selling Shareholder, and the other information with respect to the Selling Shareholder that appears under the caption “Principal and Selling Shareholders”
in the Time of Sale Prospectus and Prospectus (the “Selling Shareholder Information”).
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(e) The Selling Shareholder has been duly organized and is validly existing and in good standing under the laws of its jurisdiction of organization, is duly qualified to do business and is in good standing in
each jurisdiction in which its ownership or lease of property or the conduct of its businesses requires such qualification, and has all power and authority necessary to own or hold its properties and to conduct the businesses in which it is engaged,
except where the failure to be so qualified or in good standing or have such power or authority would not, individually or in the aggregate, have a material adverse effect on the ability of the Selling Shareholder to consummate the transactions
contemplated herein.
(f) In connection with the Company and its subsidiaries, neither the Selling Shareholder nor any of its subsidiaries, directors, officers, employees or authorized agents has, directly or indirectly, violated any
applicable provision of the Foreign Corrupt Practices Act of 1977, as amended, or any applicable law or regulation implementing the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, or committed an
offence under the Bribery Act 2010 of the United Kingdom, to the extent applicable, or any other applicable anti-bribery or anti-corruption law.
(g) The Selling Shareholder will not directly or indirectly use the proceeds of the offering of the Shares hereunder, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture
partner or other person or entity in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any person in a manner that would cause a material violation by the Underwriters of
any Money Laundering Laws.
(h) Neither the Selling Shareholder, nor, to the Selling Shareholder’s knowledge, any of its subsidiaries, nor any director, officer, employee, authorized agent or controlled affiliate, in each case is currently
the subject or target of any Sanctions. The Selling Shareholder will not directly or indirectly use the proceeds of the offering of the Shares hereunder, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture
partner or other person or entity (i) to fund or facilitate any activities of or business with any person, or in any country or territory, that, at the time of such funding, is the subject or the target of Sanctions, or (ii) in any other manner, in
either case as will result in a violation of Sanctions by any person participating in the transaction, whether as underwriter, advisor, investor or otherwise of such sanctions in connection with the transactions contemplated by this Agreement.
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(i) The sale of the Shares by the Selling Shareholder pursuant to this Agreement is not prompted by any material information concerning the Company or any of its subsidiaries that is not set forth in the Time of
Sale Prospectus and the Prospectus.
3. Agreements to Sell and Purchase. The Company and the Selling Shareholder hereby agree to issue and sell 4,761,905 Firm Shares to the several Underwriters at a price
of $17.67 per share (the “Purchase Price”), and each Underwriter, upon the basis of the representations and warranties herein contained, but subject to the conditions herein set forth, agrees, severally and not
jointly, to purchase from the Company and the Selling Shareholder at the Purchase Price the number of Firm Shares (subject to such adjustments to eliminate fractional shares as the Representatives may determine) set forth opposite the name of such
Underwriter set forth in Schedule I hereto.
Moreover, the Selling Shareholder hereby agrees to sell up to the total number of Additional Shares to the Underwriters at the Purchase Price, and the Underwriters, upon the basis of the representations and warranties
contained herein, but subject to the terms and conditions herein set forth, shall have the right (but not the obligation) to purchase, severally and not jointly, up to the total number of Additional Shares at the Purchase Price. The Representatives
may exercise this right on behalf of the Underwriters in whole or from time to time in part by giving written notice not later than 30 days after the date of this Agreement. Any exercise notice shall specify the number of Additional Shares to be
purchased by the Underwriters and the date on which such shares are to be purchased. Each purchase date must be at least one business day after the written notice is given and may not be earlier than the closing date for the Firm Shares or later than
ten business days after the date of such notice. Additional Shares may be purchased by the Underwriters solely for the purpose of covering over‑allotments made in connection with the Offering of the Firm Shares. On each day, if any, that Additional
Shares are to be purchased (an “Option Closing Date”), each Underwriter agrees, severally and not jointly, to purchase the number of Additional Shares (subject to such adjustments to eliminate fractional shares
as the Representatives may determine) that bears the same proportion to the total number of Additional Shares to be purchased on such Option Closing Date as the number of Firm Shares set forth in Schedule I hereto opposite the name of such Underwriter
bears to the total number of Firm Shares.
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4. Terms of Public Offering. It is understood that the Underwriters propose to offer the Shares for sale to the public initially at $19.00 per share (the “Public Offering Price”) and to certain dealers selected by the Representatives at a price that represents a concession not in excess of $0.7980 per share under the Public Offering Price, as set forth in the
Prospectus.
5. Payment and Delivery. Payment for the Firm Shares to be sold by the Company and the Selling Shareholder shall be made to the Company and
the Selling Shareholder in Federal or other funds immediately available in New York, New York against delivery of such Firm Shares for the respective accounts of the several Underwriters at 10:00 a.m., Eastern Time, on August 11, 2020, or at such
other time on the same or such other date, not later than August 18, 2020, as shall be designated in writing by the Representatives. The time and date of such payment are hereinafter referred to as the “Closing Date.”
Payment for any Additional Shares shall be made to the Selling Shareholder in Federal or other funds immediately available in New York, New York against delivery of such Additional Shares for the respective accounts of
the several Underwriters at 10:00 a.m., Eastern Time, on the date specified in the corresponding notice described in Section 3 or at such other time on the same or on such other date, in any event not later than September 11, 2020, as shall be
designated in writing by the Representatives.
The Firm Shares and Additional Shares shall be registered in such names and in such denominations as the Representatives shall request in writing not later than one full business day prior to the Closing Date or the
applicable Option Closing Date, as the case may be. The Firm Shares and Additional Shares shall be delivered to the Representatives on the Closing Date or an Option Closing Date, as the case may be, for the respective accounts of the several
Underwriters, with any transfer taxes payable in connection with the transfer of the Shares to the Underwriters duly paid against payment of the Purchase Price therefor. Delivery of the Shares shall be made through the facilities of DTC for the
accounts of the Underwriters, unless the Representatives shall otherwise instruct. The certificates for the Shares, if any, will be made available for inspection and packaging by the Representatives at the office of DTC or its designated custodian not
later than 12:00 p.m., Eastern Time, on the business day prior to the Closing Date or Option Closing Date, as the case may be.
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6. Conditions to the Underwriters’ Obligations. The several obligations of the Underwriters are subject to the condition that all representations and warranties on the
part of the Company and the Selling Shareholder contained in this Agreement are, on the date hereof, on the Closing Date and on each Option Closing Date, if any, true and correct in all material respects, the condition that the Company and the
Selling Shareholder have performed in all material respects their respective obligations required to be performed prior to the Closing Date and the following further conditions:
(a) Subsequent to the execution and delivery of this Agreement and prior to the Closing Date and each Option Closing Date, if any, there shall not have occurred any change, or any development involving a
prospective change, in or affecting the condition (financial or otherwise), earnings, business or properties of the Company and its subsidiaries taken as a whole, whether or not any change, or any development involving a prospective change, in or
affecting the condition (financial or otherwise), earnings, business or properties of the Company and its subsidiaries taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or
contemplated in the Time of Sale Prospectus and the Prospectus (exclusive of any amendment or supplement thereto) the effect of which is, in the sole judgment of the Representatives, so material and adverse as to make it impractical or inadvisable to
proceed with the offering or delivery of the Shares as contemplated by the Registration Statement (exclusive of any amendment thereof), the Time of Sale Prospectus and the Prospectus (exclusive of any amendment or supplement thereto).
(b) The Underwriters shall have received on the Closing Date and each Option Closing Date, if any, a certificate, dated the Closing Date or such Option Closing Date, as the case may be, and signed by the Chief
Executive Officer and Chief Financial Officer of the Company, to the effect that (i) the representations and warranties of the Company contained in Section 1 of this Agreement are true and correct in all material respects as of the Closing Date or such
Option Closing Date, as the case may be; (ii) that the Company has complied in all material respects with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied hereunder on or before the Closing Date or such
Option Closing Date, as the case may be; and (iii) no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings or examination for that purpose have been instituted or, to the knowledge of such officers,
threatened by the Commission, and as to such other matters as the Representatives may reasonably request. The delivery of the certificate provided for in this Section 6(b) shall constitute a representation and warranty of the Company as to the
statements made in such certificate.
(c) The Underwriters shall have received on the Closing Date and each Option Closing Date, if any, a certificate, dated the Closing Date or such Option Closing Date, as the case may be, and signed by the Selling
Shareholder, to the effect that the representations and warranties of the Selling Shareholder contained in Section 2 of this Agreement are true and correct in all material respects as of the Closing Date or such Option Closing Date, as the case may be,
and that the Selling Shareholder has complied in all material respects with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied hereunder on or before the Closing Date or such Option Closing Date, as the
case may be, and as to such other matters as the Representatives may reasonably request.
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(d) The Underwriters shall have received on the Closing Date and each Option Closing Date, if any, an opinion of DLA Piper LLP (US), outside counsel for the Company dated the Closing Date or such Option Closing
Date, as the case may be, in form and substance reasonably satisfactory to counsel for the Underwriters; in rendering such opinion, DLA Piper LLP (US) may rely as to matters of fact (but not as to legal conclusions) to the extent they deem proper, on
certificates of responsible officers of the Company.
(e) The Underwriters shall have received on the Closing Date and each Option Closing Date, if any, an opinion of WilmerHale, special counsel for the Company dated the Closing Date or such Option Closing Date, as
the case may be, in form and substance reasonably satisfactory to counsel for the Underwriters.
(f) The Underwriters shall have received on the Closing Date and each Option Closing Date, if any, an opinion of ASW Law Limited, Bermuda counsel for the Company, dated the Closing Date or such Option Closing
Date, as the case may be, in form and substance reasonably satisfactory to counsel for the Underwriters.
(g) The Underwriters shall have received on the Closing Date and each Option Closing Date, if any, an opinion of Cleary Gottlieb Steen & Hamilton LLP, outside counsel for the Selling Shareholder, dated the
Closing Date or such Option Closing Date, as the case may be, in form and substance reasonably satisfactory to counsel for the Underwriters.
(h) The Underwriters shall have received on the Closing Date and each Option Closing Date, if any, an opinion of Goodwin Procter LLP, counsel for the Underwriters, dated the Closing Date or such Option Closing
Date, as the case may be, in form and substance satisfactory to the Underwriters. In rendering such opinion, Goodwin Procter LLP may rely as to matters of fact (but not as to legal conclusions), to the extent they deem proper, on certificates of
responsible officers of the Company and its subsidiaries and of public officials.
(i) The Underwriters shall have received, on each of the date hereof, the Closing Date and each Option Closing Date, if any, a letter dated the date hereof, the Closing Date or the Option Closing Date, as the case
may be, in form and substance satisfactory to the Underwriters, from BDO LLP, addressed to the Underwriters and to the directors of the Company, containing statements and information of the type ordinarily included in accountants’ “comfort letters” to
underwriters with respect to the financial statements and certain financial information contained in the Registration Statement, the Time of Sale Prospectus and the Prospectus; provided that the letter delivered on the Closing Date and each Option
Closing Date, as the case may be, shall use a “cut-off date” not earlier than five days prior to the delivery thereof.
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(j) The Prospectus shall have been filed with the Commission pursuant to Rule 424(b) under the Securities Act within the applicable time period prescribed for such filing by the rules and regulations under the
Securities Act and in accordance with Section 7(b) hereof, and any issuer free writing prospectus or other material required to be filed by the Company pursuant to Rule 433 under the Securities Act shall have been filed with the Commission within the
applicable time period prescribed for such filing by Rule 433 under the Securities Act and in accordance with Section 7(b) hereof. No stop order suspending the effectiveness of the Registration Statement or preventing or suspending the use of any
Preliminary Prospectus, the Time of Sale Prospectus or the Prospectus shall have been issued, and no proceedings for such purpose shall have been instituted or, to the knowledge of the Company, threatened by the Commission; no notice of objection of
the Commission to the use of the Registration Statement shall have been received; and all requests for additional information on the part of the Commission shall have been complied with to the Representatives’ reasonable satisfaction. No action shall
have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued by any federal, state or foreign governmental or regulatory authority that would, as of the Closing Date or each Option Closing Date, as the case may
be, prevent the issuance or sale of the Shares; and no injunction, decree or order of any federal, state or foreign court shall have been issued that would, as of the Closing Date or each Option Closing Date, as the case may be, prevent the issuance
or sale of the Shares.
(k) The “lock‑up” agreements, each substantially in the form of Exhibit A hereto, between the Representatives and the officers, directors and certain shareholders and warrant holders of the Company relating to
sales and certain other dispositions of Common Shares or certain other securities, delivered to the Representatives on or before the date hereof, shall be in full force and effect on the Closing Date.
(l) The Shares shall have been approved for listing on the Exchange, subject only to official notice of issuance.
(m) FINRA shall have raised no objection to the fairness and reasonableness of the underwriting terms and arrangements.
(n) The Underwriters shall have received, on the date hereof and the Closing Date, a certificate of the principal financial officer of the Company, dated the date hereof or the Closing Date, as the case may be, in
form and substance reasonably satisfactory to the Underwriters, containing statements and information with respect to certain information contained in the Time of Sale Prospectus and the Prospectus.
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The several obligations of the Underwriters to purchase Additional Shares hereunder are subject to the delivery to the Representatives on the applicable Option Closing Date of such documents as the Representatives may
reasonably request, including certificates of officers of the Company, legal opinions and an accountants’ comfort letter, and other matters related to the issuance of such Additional Shares.
7. Covenants of the Company. The Company covenants with each Underwriter as follows:
(a) To furnish to the Representatives, without charge, three signed copies of the Registration Statement (including exhibits thereto) and for delivery to each other Underwriter a conformed copy of the
Registration Statement (without exhibits thereto) and to furnish to the Representatives in New York, New York, without charge, prior to 10:00 a.m. Eastern Time on the business day next succeeding the date of this Agreement and during the period
mentioned in Section 7(g) or 7(h) below, as many copies of the Time of Sale Prospectus, the Prospectus and any supplements and amendments (including prospectus wrappers) thereto or to the Registration Statement as the Representatives may reasonably
request.
(b) To cause to be prepared and delivered, at its expense, within one business day from the effective date of this Agreement, to the Representatives and the other Underwriters an “electronic Prospectus” to be used
by the Underwriters in connection with the Offering of the Shares. As used herein, the term “electronic Prospectus” means a form of Time of Sale Prospectus, and any amendment or supplement thereto, that meets each of the following conditions: (i) it
shall be encoded in an electronic format, satisfactory to the Representatives, including, but not limited to, portable document format, or PDF, that may be transmitted electronically by the Representatives and the other Underwriters to offerees and
purchasers of the Shares; and (ii) it shall disclose the same information as the paper Time of Sale Prospectus, except to the extent that graphic and image material cannot be disseminated electronically, in which case such graphic and image material
shall be replaced in the electronic Prospectus with a fair and accurate narrative description or tabular representation of such material, as appropriate. The Company hereby confirms that it has included or will include in the Prospectus filed pursuant
to EDGAR or otherwise with the Commission and in the Registration Statement at the time it was declared effective an undertaking that, upon receipt of a request by an investor or his or her representative, the Company shall transmit or cause to be
transmitted promptly, without charge, a paper copy of the Time of Sale Prospectus.
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(c) Before amending or supplementing the Registration Statement, the Time of Sale Prospectus or the Prospectus, to furnish to the Representatives a copy of each such proposed amendment or supplement and not to
file any such proposed amendment or supplement to which the Representatives reasonably object, to file with the Commission within the applicable period specified in Rule 424(b) under the Securities Act any prospectus (including the Prospectus)
required to be filed pursuant to such Rule, and to file any issuer free writing prospectus to the extent required by Rule 433 under the Securities Act.
(d) To furnish to the Representatives a copy of each proposed free writing prospectus to be prepared by or on behalf of, used by, or referred to by the Company and not to use or refer to any proposed free
writing prospectus to which the Representatives reasonably object.
(e) Not to take any action that would result in an Underwriter or the Company being required to file with the Commission pursuant to Rule 433(d) under the Securities Act a free writing prospectus prepared by or
on behalf of the Underwriter that the Underwriter otherwise would not have been required to file thereunder.
(f) To advise the Representatives promptly (i) when the Registration Statement has become effective, (ii) when any amendment to the Registration Statement has been filed or becomes
effective, (iii) when any supplement to the Prospectus or any issuer free writing prospectus or any Permitted Testing-the-Waters Communication or any amendment to the Prospectus has been filed or distributed, (iv) of any request by the Commission for
amendments or supplements to the Registration Statement, any Preliminary Prospectus or Prospectus or for additional information with respect thereto, or (v) of notice of institution of proceedings for, or the entry of a stop order, suspending the
effectiveness of the Registration Statement or preventing or suspending the use of any Preliminary Prospectus, the Time of Sale Prospectus or the Prospectus; and if the Commission should enter such a stop order, to use its best efforts to obtain the
lifting or removal of such order as soon as practicable.
(g) If the Time of Sale Prospectus is being used to solicit offers to buy the Shares at a time when the Prospectus is not yet available to prospective purchasers and any event shall occur or condition exist as a
result of which it is necessary to amend or supplement the Time of Sale Prospectus in order to make the statements therein, in the light of the circumstances, not misleading, or if any event shall occur or condition exist as a result of which the Time
of Sale Prospectus conflicts with the information contained in the Registration Statement then on file, or if, in the opinion of counsel for the Underwriters, it is necessary to amend or supplement the Time of Sale Prospectus to comply with applicable
law, forthwith to prepare, file with the Commission and furnish, at its own expense, to the Underwriters and to any dealer upon request, either amendments or supplements to the Time of Sale Prospectus so that the statements in the Time of Sale
Prospectus as so amended or supplemented will not, in the light of the circumstances when delivered to a prospective purchaser, be misleading or so that the Time of Sale Prospectus, as amended or supplemented, will no longer conflict with the
Registration Statement, or so that the Time of Sale Prospectus, as amended or supplemented, will comply with applicable law.
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(h) If, during such period after the first date of the Offering as in the opinion of counsel for the Underwriters the Prospectus (or in lieu thereof the notice referred to in Rule
173(a) under the Securities Act) is required by law to be delivered in connection with sales by an Underwriter or dealer, any event shall occur or condition exist as a result of which it is necessary to amend or supplement the Prospectus in order to
make the statements therein, in the light of the circumstances when the Prospectus (or in lieu thereof the notice referred to in Rule 173(a) under the Securities Act) is delivered to a purchaser, not misleading, or if, in the opinion of counsel for
the Underwriters, it is necessary to amend or supplement the Prospectus to comply with applicable law, forthwith to prepare, file with the Commission and furnish, at its own expense, to the Underwriters and to the dealers (whose names and addresses
the Representatives will furnish to the Company) to which Shares may have been sold by the Representatives on behalf of the Underwriters and to any other dealers upon request, either amendments or supplements to the Prospectus so that the statements
in the Prospectus as so amended or supplemented will not, in the light of the circumstances when the Prospectus (or in lieu thereof the notice referred to in Rule 173(a) under the Securities Act) is delivered to a purchaser, be misleading or so that
the Prospectus, as amended or supplemented, will comply with applicable law.
(i) If, at or after the time this Agreement is executed and delivered, it is necessary or appropriate for a post-effective amendment to the Registration Statement, or a Rule 462 Registration Statement, to be filed
with the Commission and become effective before the Shares may be sold, the Company will use commercially reasonable efforts to cause such post-effective amendment or such Registration Statement to be filed and become effective, and will pay any
applicable fees in accordance with the Securities Act, as soon as practicable; and the Company will advise the Representatives promptly and, if requested by the Representatives, will confirm such advice in writing, (i) when such post-effective
amendment or such Registration Statement has become effective, and (ii) if Rule 430A or 430C under the Securities Act is used, when the Prospectus is filed with the Commission pursuant to Rule 424(b) under the Securities Act (which the Company agrees
to file in a timely manner in accordance with such Rules).
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(j) To file in a timely manner all reports and any definitive proxy or information statements required to be filed by the Company with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of the Prospectus and for so long as the delivery of a prospectus (or, in lieu thereof, the notice referred to in Rule 173(a) under the Securities Act) is required in connection with the Offering of the Shares.
(k) Promptly to furnish such information or to take such action as the Representatives may reasonably request and otherwise to qualify the Shares for offer and sale under the securities or “blue sky” laws of
such states and other jurisdictions (domestic or foreign) as the Representatives shall reasonably request, and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be
necessary to complete the distribution of the Shares; provided, however, that the Company shall not be required to qualify as a foreign corporation or to file a consent to service of process in any jurisdiction (excluding service of process with
respect to the offer and sale of the Shares); and to promptly advise the Representatives of the receipt by the Company of any notification with respect to the suspension of the qualification of the Shares for offer or sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose.
(l) To make generally available to the Company’s security holders and to the Representatives as soon as practicable an earnings statement covering a period of at least 12 months beginning after the effective
date of the Registration Statement (as defined in Rule 158(c) under the Securities Act), which shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.
(m) To use its commercially reasonable efforts to cause the Shares to be listed on the Exchange and to maintain such listing.
(n) During the period beginning on the date hereof and ending 180 days after the date of the Prospectus, and without the prior written consent of the Representatives with the authorization to release the lock-up
letter on behalf of the Underwriters, not to (i) issue, offer, sell, pledge, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, make any short sale, lend,
or otherwise transfer or dispose of, directly or indirectly, any Common Shares or any securities convertible into or exercisable or exchangeable for Common Shares, (ii) enter into any swap, forward contract, hedging transaction or other arrangement
that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Shares, whether such transaction described in clause (i) or (ii) above is to be settled by delivery of the Common Shares or such other
securities, in cash or otherwise, (iii) file any registration statement with the Commission relating to the offering of any Common Shares or any securities convertible into or exercisable or exchangeable for Common Shares, or (iv) publicly disclose or
announce an intention to effect any transaction specified in clause (i), (ii) or (iii) above. The restrictions contained in the preceding sentence shall not apply to (A) the Shares to be sold hereunder, (B) the grant of options to purchase Common
Shares pursuant to the Company’s share option plans under the terms of such plans in effect on the date hereof and disclosed in the Registration Statement, the Time of Sale Prospectus and the Prospectus, provided such options are granted at fair market
value and in amounts and with exercise terms consistent with the Company’s past practice, or the sale of Common Shares to employees pursuant to the Company’s employee share purchase plans and disclosed in the Registration Statement, the Time of Sale
Prospectus and the Prospectus (or the filing of a registration statement on Form S-8 to register the Common Shares issuable under such plans), (C) the issuance by the Company of Common Shares upon the exercise of an option or warrant or the conversion
of a security outstanding on the date of the Agreement of which the Representatives have been advised in writing, or (D) the issuance of Common Shares or securities exercisable for, convertible into or exchangeable for Common Shares in connection with
any acquisition, merger, amalgamation, collaboration, licensing or other joint venture or strategic transaction involving the Company in an amount not to exceed 10% of the Company’s outstanding Common Shares as of the Closing Date, provided further
that, in the case of an issuance pursuant to this clause (D), any recipient of Common Shares shall have executed and delivered to the Representatives a lock-up agreement in the form of Exhibit A hereto. If the Representatives agree to release or waive
the restrictions set forth in a lock-up letter described in Section 6(k) above for an officer or director of the Company and provide the Company with notice of the impending release or waiver at least three business days before the effective date of
the release or waiver, the Company agrees to announce the impending release or waiver by a press release through a major news service at least two business days before the effective date of the release or waiver.
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(o) To prepare, if the Representatives reasonably request, a final term sheet relating to the Offering, containing only information that describes the final terms of the Offering in a form consented to by the
Representatives, and to file such final term sheet within the period required by Rule 433(d)(5)(ii) under the Securities Act following the date on which the final terms have been established for the Offering.
(p) To comply with Rule 433(d) under the Securities Act (without reliance on Rule 164(b) under the Securities Act) and with Rule 433(g) under the Securities Act.
(q) Not to take, directly or indirectly, any action designed to, or which will constitute, or has constituted, or might reasonably be expected to cause or result in the stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of the Shares.
(r) Not, at any time at or after the execution of this Agreement, to offer or sell any Shares by means of any “prospectus” (within the meaning of the Securities Act) or use any “prospectus” (within the meaning of
the Securities Act) in connection with the offer or sale of the Shares, except in each case other than the Prospectus.
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(s) To maintain a transfer agent and, if necessary under the jurisdiction of incorporation of the Company, a registrar for the Common Shares.
(t) To apply the net proceeds to the Company from the sale of the Shares in the manner set forth under the caption “Use of Proceeds” in the Registration Statement, the Time of Sale Prospectus and the
Prospectus.
(u) To use its commercially reasonable efforts to cause the Securities to be eligible for clearance through DTC.
(v) To promptly notify the Representatives if the Company ceases to be an Emerging Growth Company at any time prior to the later of (a) the time when a prospectus relating to the Shares is not required by
the Securities Act to be delivered (whether physically or through compliance with Rule 172 under the Securities Act or any similar rule) and (b) the expiration of the lock-up period described in Section 7(n) above.
(w) If at any time following the distribution of any Permitted Testing-the-Waters Communication, there occurred or occurs an event or development as a result of which such
Permitted Testing-the-Waters Communication included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in light of the circumstances
existing at that subsequent time, not misleading, the Company will promptly notify the Representatives and will promptly amend or supplement, at its own expense, such Permitted Testing-the-Waters Communication to eliminate or correct such
untrue statement or omission.
8. Covenants of the Selling Shareholder. The Selling Shareholder covenants to each Underwriter as follows:
(a) The Selling Shareholder has or shall furnish to the Representatives on or prior to the date hereof, a “lock-up” agreement in substantially the form of Exhibit B hereto, which lock-up agreement shall be duly authorized, executed and
delivered by the Selling Shareholder.
(b) The Selling Shareholder shall deliver to the Representatives prior to the Closing Date a properly completed and executed United States Treasury Department Form W-8BEN-E.
(c) The Selling Shareholder has not taken and will not take, directly or indirectly, any action designed to or which might reasonably be expected to cause or result in stabilization or manipulation of the price
of any security of the Company to facilitate the sale or resale of the Shares.
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9. Expenses. Whether or not the transactions contemplated in this Agreement are consummated or this Agreement is terminated, the Company agrees to pay or cause to be
paid all expenses incident to the performance of its and the Selling Shareholder’s obligations under this Agreement, including: (i) the fees, disbursements and expenses of the Company’s and Selling Shareholder’s counsel and, the Company’s
accountants in connection with the registration and delivery of the Shares under the Securities Act and all other fees or expenses in connection with the preparation and filing of the Registration Statement, any Preliminary Prospectus, the Time of
Sale Prospectus, the Prospectus, any free writing prospectus prepared by or on behalf of, used by, or referred to by the Company, and amendments and supplements to any of the foregoing, including all printing costs associated therewith, and the
mailing and delivering of copies thereof to the Underwriters and dealers, in the quantities hereinabove specified, (ii) all costs and expenses related to the transfer and delivery of the Shares to the Underwriters, including any transfer or other
taxes payable thereon, (iii) the cost of printing or producing any securities or blue sky memorandum in connection with the offer and sale of the Shares under the securities laws of the jurisdictions in which the Shares may be offered or sold and
all expenses in connection with the qualification of the Shares for offer and sale under such securities laws as provided in Section 7(k) hereof, including filing fees and the reasonable fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with a “blue sky” memorandum which when taken together with all fees and expenses pursuant to clauses (iv) and (x) below, shall not exceed $35,000, (iv) all filing fees and the reasonable fees
and disbursements of counsel to the Underwriters incurred in connection with the review and qualification of the Offering of the Shares by FINRA, which when taken together with all fees and expenses pursuant to clause (iii) above and clause (x)
below, shall not exceed $35,000, (v) all fees and expenses in connection with the preparation and filing of the registration statement on Form 8-A relating to the Common Shares and all costs and expenses incident to listing the Shares on the
Exchange, (vi) the cost of printing certificates representing the Shares, (vii) the costs and charges of any transfer agent, registrar or depositary, (viii) the costs and expenses of the Company relating to investor presentations on any “road show”
undertaken in connection with the marketing of the Offering, including, without limitation, expenses associated with the preparation or dissemination of any road show, expenses associated with the production of road show slides and graphics, fees
and expenses of any consultants engaged in connection with the road show presentations with the prior approval of the Company, travel, food and lodging expenses of the representatives and officers of the Company and any such consultants, provided,
however, that the Underwriters shall pay for 50% of the costs and expenses of any chartered flight used in connection with the road show presentation on which there is or is planned to be a representative of the Underwriters and a representative of
the Company, (ix) the document production charges and expenses associated with printing this Agreement, (x) all expenses in connection with any offer and sale of the Shares outside of the United States, including filing fees and the reasonable fees
and disbursements of counsel for the Underwriters in connection with offers and sales outside of the United States and the preparation of any prospectus wrappers or disclosures deemed advisable or necessary to comply with foreign securities laws,
and (xi) all other costs and expenses incident to the performance of the obligations of the Company hereunder for which provision is not otherwise made in this Section.
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Whether or not the sale of the Shares provided for herein is consummated, the Selling Shareholder will pay or cause to be paid all costs and expenses incident to the performance of the Selling Shareholder’s obligations
hereunder that are not otherwise specifically provided for in this Section 9.
Except as expressly set forth herein, the Underwriters will pay all of their own costs and expenses, including fees and disbursements of their counsel, share transfer taxes payable on resale of any of the Shares by
them and any advertising expenses connected with any offers they may make. Notwithstanding the above, if the sale of the Shares provided for herein is not consummated because any condition to the obligations of the Underwriters set forth in
Section 6 is not satisfied, because of any termination of this Agreement by the Underwriters pursuant to Section 11 hereof or because of any refusal, inability or failure on the part of the Company to perform any obligation or covenant hereunder or
comply with any provision hereof other than by reason of a default by any of the Underwriters, then the Company will reimburse the Underwriters or such Underwriters as have so terminated this Agreement with respect to themselves, severally, through
the Representatives on demand for all out-of-pocket expenses (including reasonable fees and disbursements of counsel) reasonably incurred by such Underwriters in connection with this Agreement or in furtherance of the Offering, provided, however,
that such reimbursement shall not exceed $600,000.
The provisions of this Section shall not supersede or otherwise affect any agreement that the Sellers may otherwise have for the allocation of such expenses among themselves.
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10. Indemnity and Contribution. (a) The Company agrees to indemnify and hold harmless each Underwriter and its directors, officers and employees, and
each person, if any, who controls any Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages and liabilities, including actions and other
proceedings in respect thereof and including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such claim, action or other proceeding (any of the foregoing being a “Loss”), caused by, arising out of or based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof, or any omission or alleged
omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (ii) any untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus,
the Time of Sale Prospectus, any issuer free writing prospectus, any issuer information that the Company has filed, or is required to file, pursuant to Rule 433(d) under the Securities Act, any road show, any Written Testing-the-Waters Communication
or the Prospectus or any amendment or supplement or wrapper thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that the Company shall not be liable under this Section 10(a) to the extent that such Losses are caused by, arise out of or are based upon any such untrue statement or omission or alleged
untrue statement or omission made therein in reliance upon and in conformity with the Underwriter Information furnished to the Company in writing by such Underwriter through the Representatives expressly for use therein.
(b) The Selling Shareholder agrees to indemnify and hold harmless each Underwriter and its directors, officers and employees, and each person, if any, who controls any Underwriter
within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all Losses caused by, arising out of or based upon (i) any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or any amendment thereof, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (ii) any untrue
statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Time of Sale Prospectus, any issuer free writing prospectus, any issuer information that the Company has filed, or is required to file, pursuant to
Rule 433(d) under the Securities Act, any road show, any Written Testing-the-Waters Communication or the Prospectus or any amendment or supplement or wrapper thereto, or any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, in each case, to the extent, but only to the extent, that such untrue statement or omission or alleged untrue
statement or omission was made therein in reliance upon and in conformity with the Selling Shareholder Information relating to the Selling Shareholder furnished in writing by or on behalf of the Selling Shareholder expressly for use therein. The
liability of the Selling Shareholder under this Section 10(b) shall be limited to an amount equal to the aggregate net proceeds (after deducting underwriting commissions and discounts, but before deducting expenses) applicable to the Public Offering
Price of the Shares sold by the Selling Shareholder under this Agreement (the “Selling Shareholder Proceeds”).
34
(c) Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, the Selling Shareholder, the directors of the Company, the officers of the Company who sign the Registration
Statement and each person, if any, who controls the Company or the Selling Shareholder within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the indemnity set forth in paragraph (a) and
(b) above, but with respect to any and all Losses caused by, arising from or based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any amendment thereof or any omission or
alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (ii) any untrue statement or alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the Time of Sale Prospectus, any issuer free writing prospectus, any issuer information that the Company has filed, or is required to file, pursuant to Rule 433(d) under the Securities Act, any road show, any Written Testing-the-Waters
Communication or the Prospectus or any amendment, supplement or wrapper thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that such Losses are caused by, arise out of or are based upon any untrue statement or omission or alleged untrue statement or omission was
made therein in reliance upon and in conformity with the Underwriter Information furnished to the Company in writing by such Underwriter through the Representatives expressly for use therein.
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(d) In case any claim, action or other proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to Section 10(a),
10(b) or 10(c) such person (the “indemnified party”) shall promptly notify the person against whom such indemnity may be sought (the “indemnifying party”) in writing
provided that the failure so to notify the indemnifying party (i) will not relieve it from liability under paragraph (a), (b) or (c) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture
by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a), (b) or
(c) above. The indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such
proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the
expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in
respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for (i) the fees and expenses of more than one separate law firm (in addition to any local counsel)
for all Underwriters and all persons, if any, who control any Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act or who are affiliates of any Underwriter within the meaning of Rule 405 under
the Securities Act, (ii) the fees and expenses of more than one separate law firm (in addition to any local counsel) for the Company, its directors, its officers who sign the Registration Statement and each person, if any, who controls the Company
within the meaning of either such Section, and (iii) the fees and expenses of more than one separate law firm (in addition to any local counsel) for the Selling Shareholder and all persons, if any, who control the Selling Shareholder within the
meaning of either such Section, and that all such fees and expenses shall be reimbursed as they are incurred. In the case of any such separate law firm for the Underwriters and such control persons and affiliates of any Underwriters, such law firm
shall be designated in writing by the Representatives. In the case of any such separate law firm for the Company, and such directors, officers and control persons of the Company, such firm shall be designated in writing by the Company. In the case
of any such separate law firm for the Selling Shareholder and such control persons of the Selling Shareholder, such law firm shall be designated in writing by an authorized representative of the Selling Shareholder. The indemnifying party shall
not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, then the indemnifying party agrees to indemnify the indemnified party from
and against any Loss by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second and third sentences of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into in
good faith more than 60 days after receipt by such indemnifying party of the aforesaid request and more than 60 days after the receipt by the indemnifying party of the terms of such settlement and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request and in good faith shall not have contested the reasonableness of such fees and expenses, in each case, prior to the date of such settlement. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such indemnified party from all liability on Losses that are the subject matter of such proceeding.
36
(e) To the extent the indemnification provided for in Section 10(a), 10(b) or 10(c) is unavailable to an indemnified party or insufficient in respect of any Losses referred to therein, then each indemnifying
party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such Losses (i) in such proportion as is appropriate to
reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party or parties on the other hand from the Offering or (ii) if the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the indemnifying party or parties on the one hand and of the indemnified party or parties on the other
hand in connection with the statements or omissions that resulted in such Losses, as well as any other relevant equitable considerations. The relative benefits received by the Sellers on the one hand and the Underwriters on the other hand in
connection with the Offering shall be deemed to be in the same respective proportions as the net proceeds from the Offering (after deducting underwriting commissions and discounts, but before deducting expenses) received by each Seller and the total
underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover of the Prospectus, bear to the aggregate Public Offering Price of the Shares. The relative fault of the Sellers on the one hand
and the Underwriters on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information
supplied by the Sellers or by the Underwriters and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Underwriters’ respective obligations to contribute pursuant to
this Section 10 are several in proportion to the respective number of Shares they have purchased hereunder, and not joint. The Selling Shareholder shall not be liable under the contribution agreement contained in this paragraph and the
indemnification provisions of this Section 10 in excess of an amount equal to the Selling Shareholder Proceeds.
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(f) The Sellers and the Underwriters agree that it would not be just or equitable if contribution pursuant to this Section 10 were determined by pro rata allocation
(even if the Selling Shareholder and the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in Section 10(e). Notwithstanding the
provisions of this Section 10, no Underwriter shall be required to contribute any amount in excess of the amount by which the total underwriting discounts and commissions received by such Underwriter with respect to the Offering of the Shares exceeds
the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The remedies provided for in this Section 10 are not exclusive and shall not limit any rights or remedies that
may otherwise be available to any indemnified party at law or in equity. For the avoidance of doubt, the aggregate liability of the Selling Shareholder under the indemnity and contribution agreements contained in this Section 10 shall not exceed the
Selling Shareholder Proceeds.
(g) The indemnity and contribution provisions contained in this Section 10 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by
or on behalf of any Underwriter, any director, officer or employee of any Underwriter, any person controlling any Underwriter or any affiliate of any Underwriter, the Selling Shareholder, any director, officer or employee of the Selling Shareholder,
any person controlling the Selling Shareholder, or the Company, its officers, directors or employees or any person controlling the Company and (iii) acceptance of and payment for any of the Shares.
11. Termination. The Underwriters may terminate this Agreement by notice given by the Representatives to the Company, if after the execution and delivery of this
Agreement and prior to the Closing Date or, in the case of the Additional Shares, prior to the Option Closing Date (a) there has been, since the time of execution of this Agreement or since the respective dates as of which information is given in the
Registration Statement, the Time of Sale Prospectus or the Prospectus, any Material Adverse Effect, whether or not arising in the ordinary course of business, (b) trading generally shall have been suspended or materially limited or minimum or maximum
prices shall have been established, or maximum ranges for prices have been required, on, or by, as the case may be, the Exchange, or by order of the Commission or FINRA or any other governmental authority, (c) trading of any securities of the Company
shall have been suspended or materially limited on any exchange or in any over‑the‑counter market, (d) a material disruption in securities settlement, payment or clearance services in the United States shall have occurred, (e) any moratorium or
material limitation on commercial banking activities shall have been declared by Federal or state authorities, (f) there shall have occurred any outbreak or escalation of hostilities, act of terrorism involving the United States or declaration by the
United States of a national emergency or war, or (g) any other calamity or crisis or any change in financial, political or economic conditions in the United States or elsewhere, if the effect of any such event specified in clause (f) or (g), in the
Representatives’ judgment, is material and adverse and is materially impracticable or inadvisable to proceed with the offer, sale or delivery of the Shares on the terms and in the manner contemplated in the Time of Sale Prospectus or the Prospectus
(exclusive of any supplement thereto).
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12. Default by an Underwriter. If any one or more Underwriters shall fail to purchase and pay for any of the Shares agreed to be purchased by such Underwriter or
Underwriters hereunder and such failure to purchase shall constitute a default in the performance of its or their obligations under this Agreement, the remaining Underwriters shall be obligated severally to take up and pay for (in the respective
proportions which the amount of Shares set forth opposite their names in Schedule I hereto bears to the aggregate amount of Shares set forth opposite the names of all the remaining Underwriters) the Shares which the defaulting Underwriter or
Underwriters agreed but failed to purchase; provided, however, that in the event that the aggregate amount of Shares which the defaulting Underwriter or Underwriters agreed but failed to purchase shall exceed 10% of the aggregate amount of Shares set
forth in Schedule I hereto, the remaining Underwriters shall have the right to purchase all, but shall not be under any obligation to purchase any, of the Shares, and if such non-defaulting Underwriters do not purchase all the Shares, this Agreement
will terminate without liability to any non-defaulting Underwriter, the Company or the Selling Shareholder. In the event of a default by any Underwriter as set forth in this Section 12, the Closing Date shall be postponed for such period, not
exceeding five business days, as the Representatives shall determine in order that the required changes in the Registration Statement and the Prospectus or in any other documents or arrangements may be effected. Nothing contained in this Agreement
shall relieve any defaulting Underwriter of its liability, if any, to the Company, the Selling Shareholder and/or any non-defaulting Underwriter for damages occasioned by its default hereunder.
13. Representations and Indemnities to Survive. The respective agreements, representations, warranties, indemnities and other statements of the Company, the Selling
Shareholder and the Underwriters set forth or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of any Underwriter, the Selling Shareholder or the Company or any of the
officers, directors, employees, agents or controlling persons referred to in Section 10 hereof, and will survive delivery of and payment for the Shares. The provisions of Sections 9 and 10 hereof shall survive the termination or cancellation of this
Agreement.
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14. Entire Agreement; No Advisory or Fiduciary Relationship. (a) This Agreement represents the entire agreement between the Company and the Selling Shareholder, on the
one hand, and the Underwriters, on the other, with respect to the preparation of any Preliminary Prospectus, the Time of Sale Prospectus, the Prospectus, the conduct of the Offering, and the purchase and sale of the Shares.
(b) The Company and the Selling Shareholder acknowledge that in connection with the Offering: (i) the Underwriters have acted at arm’s length, are not agents of, and owe no fiduciary duties to, the Company, the
Selling Shareholder, or any other person; (ii) the Underwriters owe the Company and the Selling Shareholder only those duties and obligations set forth in this Agreement and prior written agreements (to the extent not superseded by this Agreement),
if any; (iii) the Underwriters have not provided any legal, accounting, regulatory or tax advice with respect to the Offering and each of the Company and the Selling Shareholder has consulted its, her or his respective legal, accounting, regulatory
and tax advisors to the extent that it, she or he deemed appropriate; and (iv) the Underwriters may have interests that differ from those of the Company and the Selling Shareholder. Each of the Company and the Selling Shareholder waives to the
fullest extent permitted by applicable law any claims it may have against the Underwriters arising from an alleged breach of fiduciary duty in connection with the Offering.
15. Intended Beneficiaries. This Agreement shall inure to the benefit of and be binding upon the Underwriters, the Company and the Selling Shareholder and their
respective successors. No purchaser of Shares from any Underwriter shall be deemed to be a successor by reason merely of such purchase. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any individual or
entity, other than the Underwriters, the Company and the Selling Shareholder and their respective successors, and the controlling persons, affiliates, officers and directors referred to in Section 10 and their heirs and legal representatives, any
legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. This Agreement is intended to be for the sole and exclusive benefit of the Underwriters, the Company and the Selling Shareholder and
their respective successors, and said controlling persons, affiliates, officers and directors and their heirs and legal representatives, and for the benefit of no one else.
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16. Partial Unenforceability. The invalidity or unenforceability of any Section, subsection, paragraph, clause or other provision of this Agreement shall not affect
the validity or enforceability of any other Section, subsection, paragraph, clause or other provision hereof. If any Section, subsection, paragraph, clause or other provision of this Agreement is for any reason determined to be invalid or
unenforceable, then there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make the remainder of this Agreement valid and enforceable.
17. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument. An executed counterpart of a signature page of this Agreement delivered by facsimile, e-mail or other electronic means, shall be deemed to have, for all purposes, the same force and legal
effect as delivery of an original, manually executed counterpart of this Agreement.
18. Applicable Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York.
19. TRIAL BY JURY. THE COMPANY (ON ITS BEHALF AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ON BEHALF OF ITS SUBSIDIARIES, SHAREHOLDERS AND AFFILIATES), THE SELLING
SHAREHOLDER AND EACH OF THE UNDERWRITERS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
20. Headings. The headings of the sections of this Agreement have been inserted for convenience of reference only and shall not be deemed a part of this Agreement.
21. Research Analyst Independence. The Company and Selling Shareholder acknowledge that (a) the Underwriters’ research analysts and research departments are required to
be independent from their respective investment banking divisions and are subject to certain regulations and internal policies and (b) the Underwriters’ research analysts may hold views and make statements or investment recommendations and/or publish
research reports with respect to the Company, the value of the Common Shares and/or the Offering that differ from the views of their respective investment banking divisions. The Company and Selling Shareholder hereby waives and releases, to the
fullest extent permitted by law, any claims that it may have against the Underwriters with respect to any conflict of interest that may arise from the fact that the views expressed by the Underwriters’ independent research analysts and research
departments may be different from or inconsistent with the views or advice communicated to the Company and/or Selling Shareholder by any Underwriter’s investment banking division. The Company and Selling Shareholder acknowledges that each of the
Underwriters is a full service securities firm and as such, from time to time, subject to applicable securities laws, may effect transactions for its own account or the account of its customers and hold long or short positions in debt or equity
securities of the Company.
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22. Notices. All communications hereunder shall be in writing and effective only upon receipt and shall be delivered, mailed or sent to the parties as follows:
| (a) |
If to the Underwriters, to:
|
Citigroup Global Markets Inc.
388 Greenwich Street
New York, New York 10013
Attn: General Counsel
Fax: +1 (646) 291-1469
RBC Capital Markets, LLC
200 Vesey Street, 10th Floor
Attention: Equity Syndicate
Fax: +1 (212) 858-8337
| (b) |
If to the Company, to:
|
IBEX Limited
1700 Pennsylvania Avenue NW, Suite 560
Washington, DC 20006
Attn: Bob Dechant (Bob.Dechant@ibex.co)
with a copy to:
DLA Piper LLP (US)
1251 Avenue of the Americas, 27th Floor
New York, New York 10020-1104
Attn: Christopher C. Paci (christopher.paci@us.dlapiper.com) and
Stephen P. Alicanti (stephen.alicanti@us.dlapiper.com)
| (c) |
If to the Selling Shareholder, to:
|
The Resource Group International Limited
Crawford House, Hamilton HM11, Bermuda
Attn: Legal Department (pat.costello@trgworld.com)
with a copy to:
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Cleary Gottlieb Steen & Hamilton LLP
One Liberty Plaza
New York, New York 10006
Attn: Adam Fleisher (afleisher@cgsh.com)
23. Judgment Currency. The Company agrees to indemnify each Underwriter, its directors, officers, affiliates and each person, if any, who controls such Underwriter
within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any loss incurred by such Underwriter as a result of any judgment or order being given or made for any amount due hereunder and such judgment or order
being expressed and paid in a currency (the “judgment currency”) other than U.S. dollars and as a result of any variation as between (i) the rate of exchange at which the U.S. dollar amount is converted into
the judgment currency for the purpose of such judgment or order, and (ii) the rate of exchange at which such indemnified person is able to purchase U.S. dollars with the amount of the judgment currency actually received by the indemnified person. The
foregoing indemnity shall constitute a separate and independent obligation of the Company and shall continue in full force and effect notwithstanding any such judgment or order as aforesaid. The term “rate of exchange” shall include any premiums and
costs of exchange payable in connection with the purchase of, or conversion into, the relevant currency.
24. Waiver of Immunity. To the extent that any party hereto has or hereafter may acquire any immunity (sovereign or otherwise) from jurisdiction of any court of (i)
Bermuda, or any political subdivision thereof or (ii) the United States or the State of New York from any legal process (whether through service of notice, attachment prior to judgment, attachment in aid of execution, execution, set-off or otherwise)
with respect to any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby, each party hereto hereby irrevocably waive such immunity in respect of its obligations under this Agreement to
the fullest extent permitted by applicable law.
25. Submission to jurisdiction. Each of the parties hereto hereby submits to the exclusive jurisdiction of the U.S. federal and New York state courts in the Borough of
Manhattan in The City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. Each of the parties hereto waives any objection which it may now or hereafter have to the laying of
venue of any such suit or proceeding in such courts. Each of the parties hereto agrees that final judgment in any such suit, action or proceeding brought in such court shall be conclusive and binding upon such party, as applicable, and may be
enforced in any court to the jurisdiction of which such party, as applicable, is subject by a suit upon such judgment. The Company and the Selling Shareholder each irrevocably appoints Bob Dechant, Chief Executive Officer, IBEX Limited, 1700
Pennsylvania Avenue NW, Suite 560, Washington, DC 20006, as its authorized agent upon which process may be served in any such suit or proceeding, and agrees that service of process upon such authorized agent, and written notice of such service to the
Company and/or the Selling Shareholder, as the case may be, by the person serving the same to the address provided in this Section 25, shall be deemed in every respect effective service of process upon the Company and/or the Selling Shareholder, as
applicable, in any such suit or proceeding. The Company and the Selling Shareholder hereby represent and warrant that such authorized agent has accepted such appointment and has agreed to act as such authorized agent for service of process. The
Company and the Selling Shareholder further agree to take any and all commercially reasonable action to maintain such designation and appointment of such authorized agent in full force and effect.
43
26. Recognition of U.S. Special Resolution Regimes.
(a) In the event that any Underwriter that is a Covered Entity becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer from such Underwriter of this Agreement, and any interest and
obligation in or under this Agreement, will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if this Agreement, and any such interest and obligation, were governed by the laws of the United
States or a state of the United States.
(b) In the event that any Underwriter that is a Covered Entity or a BHC Act Affiliate of such Underwriter becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under this
Agreement that may be exercised against such Underwriter are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if this Agreement were governed by the laws of the United
States or a state of the United States.
As used in this Section 26, “BHC Act Affiliate” has the meaning assigned to the term “affiliate” in, and shall be interpreted in accordance with, 12 U.S.C. § 1841(k); “Covered Entity” means any of the following: (i) a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b), (ii) a “covered bank” as that term is defined in, and
interpreted in accordance with, 12 C.F.R. § 47.3(b) or (iii) a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b); “Default Right” has the meaning assigned to
that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable; and “U.S. Special Resolution Regime” means each of (i) the Federal Deposit Insurance Act and the
regulations promulgated thereunder and (ii) Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations promulgated thereunder.
44
|
Very truly yours,
|
||
|
IBEX LIMITED
|
||
|
By:
|
/s/ Robert Dechant
|
|
|
Name: Robert Dechant
|
||
|
Title: CEO
|
||
[Signature Page to Underwriting Agreement]
|
Very truly yours,
|
||
|
THE RESOURCE GROUP INTERNATIONAL, LTD.
|
||
|
By:
|
/s/ Mohammed Khaishgi
|
|
|
Name: Mohammed Khaishgi
|
||
|
Title: Director
|
||
[Signature Page to Underwriting Agreement]
|
Accepted as of the date hereof
|
||
|
CITIGROUP GLOBAL MARKETS INC.
|
||
|
/s/ Eishpal Dhillon
|
||
|
By:
|
||
|
Name: Eishpal Dhillon
|
||
|
Title: Managing Director
|
||
|
RBC CAPITAL MARKETS, LLC
|
||
|
/s/ Avinash Patel
|
||
|
By:
|
||
|
Name: Avinash Patel
|
||
|
Title: Managing Director
|
||
Acting severally on behalf of themselves and
the several Underwriters named in
Schedule I hereto
[Signature Page to Underwriting Agreement]
SCHEDULE I
|
Underwriter
|
Number of Firm Shares
To Be Purchased
|
Number of Additional
Shares To Be Purchased
Upon Exercise in Full of
Underwriter’s Option to
Purchase Additional Shares
|
|
|
Citigroup Global Markets Inc.
|
1,666,667
|
250,000
|
|
|
RBC Capital Markets, LLC
|
1,380,953
|
207,143
|
|
|
Robert W. Baird & Co. Incorporated
|
904,762
|
135,714
|
|
|
Truist Securities, Inc.
|
476,190
|
71,428
|
|
|
Piper Sandler & Co.
|
333,333
|
50,000
|
|
|
Total
|
4,761,905
|
714,285
|
SCHEDULE II
Time of Sale Prospectus
| 1. |
Preliminary Prospectus dated July 29, 2020
|
EXHIBIT A
FORM OF LOCK-UP LETTER TO BE SIGNED BY OFFICERS, DIRECTORS AND CERTAIN SHAREHOLDERS AND WARRANT HOLDERS
______, 2020
Citigroup Global Markets Inc.
RBC Capital Markets, LLC
As Representatives of the several Underwriters
c/o Citigroup Global Markets Inc.
388 Greenwich Street
New York, New York 10013
c/o RBC Capital Markets, LLC
200 Vesey Street
New York, New York 10281
Ladies and Gentlemen:
The undersigned understands that Citigroup Global Markets Inc. and RBC Capital Markets, LLC (collectively, the “Representatives”) propose to enter into an
Underwriting Agreement (the “Underwriting Agreement”) with IBEX Limited, a company organized under the laws of Bermuda (the “Company”), providing for the public offering
(the “Public Offering”) by the several Underwriters named in Schedule I of the Underwriting Agreement (the “Underwriters”), including the Representatives, of common
shares, par value $0.000111650536 per share, of the Company (the “Common Shares”).
To induce the Underwriters that may participate in the Public Offering to continue their efforts in connection with the Public Offering, the undersigned hereby agrees that, without the prior written consent of the
Representatives on behalf of the Underwriters, he, she or it will not, during the period commencing on the date hereof and ending 180 days after the date of the final prospectus relating to the Public Offering (the “Restricted
Period”), (1) directly or indirectly offer, sell, pledge, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, make any short sale, lend, or
otherwise transfer or dispose of, or establish or increase any “put equivalent position” or liquidate or decrease any “call equivalent position” (each within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) with respect to any Common Shares, any options or warrants to purchase any Common Shares, or any securities convertible into or exercisable or exchangeable for or that represent the right to
receive Common Shares, (2) enter into any swap, forward contract, hedging transaction or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Shares, whether any such
transaction described in clause (1) or (2) above is to be settled by delivery of Common Shares or such other securities, in cash or otherwise, (3) file or approve the filing of any registration statement with the Securities and Exchange Commission
relating to the offering of any Common Shares or any securities convertible into or exercisable or exchangeable for Common Shares, or make any demand for or exercise any right with respect to (other than piggyback registration rights, if any) the
registration of any Common Shares or the filing of any registration statement with respect thereto, or (4) publicly disclose or announce an intention to effect any transaction specified in clause (1), (2) or (3). The undersigned also agrees and
consents to the entry of stop transfer instructions with the Company’s transfer agent and registrar against the transfer by the undersigned of Common Shares except in compliance with this lock-up agreement.
The foregoing restrictions shall not apply to:
| (a) |
the sale of the Common Shares in the Public Offering,
|
| (b) |
sales of Common Shares or other securities acquired in open market transactions after the completion of the Public Offering, provided that no filing under the Exchange Act shall be required or
shall be voluntarily made in connection with subsequent sales of Common Shares or other securities acquired in such open market transactions,
|
| (c) |
transfers of Common Shares or any security convertible into Common Shares as a bona fide gift or gifts, or by will or intestacy upon the death of the undersigned,
|
| (d) |
transfers by will or estate or intestate succession to the undersigned’s immediate family, or to a trust, the beneficiaries of which are exclusively the undersigned or members of the undersigned’s immediate family (for purposes of this
letter, “immediate family” means any relationship by blood, marriage or adoption, not more remote than first cousin), or to a charitable organization,
|
| (e) |
transfers pursuant to a court or regulatory agency order, a qualified domestic relations order or in connection with a divorce settlement, provided that any filing under the Exchange Act or any
other public filing or disclosure of such transfer by or on behalf of the undersigned that is required to be made during the Restricted Period as a result of such transfer shall include a statement that such transfer has occurred by operation
of law,
|
II-2
| (f) |
transfers or distributions, if the undersigned is not a natural person, of Common Shares or any security convertible into Common Shares to limited or general partners, members, subsidiaries, shareholders or affiliates of the undersigned to
the extent the undersigned is a partnership, limited liability company, corporation or other business entity,
|
| (g) |
the exercise of any options to purchase Common Shares or the vesting, award, delivery or settlement of Common Shares and the receipt by the undersigned from the Company of Common Shares thereunder, in each case pursuant to the Company’s
share option or equity-based compensation plans that are described in the registration statement and prospectus related to the Public Offering, and sales of such Common Shares in transactions exempt from Section 16(b) of the Exchange Act that
are issued upon exercise of such options or warrants or such vesting, award, delivery, settlement or receipt in order to pay or provide for any taxes due on such exercise, vesting, delivery, settlement or receipt or to pay the exercise price
therefor, provided that, if required, any public report or filing under the Exchange Act will clearly indicate in the footnotes thereto that the filing relates to the exercise of a share option, that
no shares were sold to the public by the reporting person and that the shares received upon exercise of the share option are subject to a lock-up agreement with the Underwriters of the Public Offering or that such dispositions to the Company
or withholding by the Company of shares or securities was solely to the Company pursuant to the circumstances described in this clause (g),
|
| (h) |
a written plan meeting the requirements of Rule 10b5-1 under the Exchange Act for the transfer of Common Shares that does not in any case provide for the transfer of Common Shares during the Restricted Period;
|
provided that (i) in the case of any transfer, distribution or issuance pursuant to clause
(c), (d), (e), (f) or (g) each donee, heir, legatee, trustee, distributee, transferee or recipient shall sign and deliver (or has signed and delivered) a lock‑up letter substantially in the form of this letter for the balance of the Restricted
Period, (ii) other than transfers pursuant to clauses (a), (b), (e), (g) or the entering into of a plan pursuant to clause (h), no filing under the Exchange Act, reporting a reduction in beneficial ownership of Common Shares, shall be required or
shall voluntarily be made during the Restricted Period, and (iii) to the extent a public announcement or filing under the Exchange Act, if any, is required or voluntarily made by or on behalf of the undersigned or the Company regarding the
establishment of a plan pursuant to clause (h), such announcement or filing shall include a statement to the effect that no transfer of Common Shares may be made under such plan during the Restricted Period.
II-3
The undersigned understands that, if the undersigned is an officer or director of the Company, (1) this agreement shall be applicable to any issuer-directed shares that the undersigned may purchase
in the Public Offering, (2) the Representatives will notify the Company at least three business days before the effective date of any release or waiver of the foregoing restrictions, (3) the Company will announce the impending release or waiver by a
press release through a major news service announcing such waiver or release, and (4) any release or waiver granted by the Representatives under this agreement will only be effective two business days after the publication date of such press
release. The provisions of this paragraph will not apply if (a) the release or waiver is effected solely to permit a transfer not for consideration and (b) the transferee has agreed in writing to be bound by the same terms described in this letter
to the extent and for the duration that such terms remain in effect at the time of the transfer.
The undersigned understands that the Company and the Underwriters are relying upon this lock-up agreement in proceeding toward consummation of the Public Offering. The undersigned further
understands that this lock-up agreement is irrevocable and shall be binding upon the undersigned’s heirs, legal representatives, successors and assigns.
Whether or not the Public Offering actually occurs depends on a number of factors, including market conditions. Any Public Offering will only be made pursuant to an Underwriting Agreement, the terms
of which are subject to negotiation between the Company and the Underwriters.
It is understood that, if (i) the Company notifies the Representatives in writing that it does not intend to proceed with the Public Offering, (ii) the Representatives notify the Company that the
Underwriters do not intend to proceed with the Public Offering, (iii) the Registration Statement on Form F-1 is withdrawn; (iv) the Underwriting Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated
prior to payment for and delivery of the Common Shares or (v) the Public Offering is not completed by December 31, 2020, this lock-up agreement shall be terminated and be of no further force or effect.
The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this lock-up agreement and that upon request, the undersigned will execute and
additional documents necessary to ensure the validity or enforcement of this lock-up agreement. All authority herein conferred or agreed to be conferred and any obligations of the undersigned shall be binding upon the successors, assigns, heirs or
personal representatives of the undersigned.
II-4
|
(Address)
|
II-5
EXHIBIT B
FORM OF LOCK-UP LETTER TO BE SIGNED BY THE SELLING SHAREHOLDER
______, 2020
Citigroup Global Markets Inc.
RBC Capital Markets, LLC
As Representatives of the several Underwriters
c/o Citigroup Global Markets Inc.
388 Greenwich Street
New York, New York 10013
c/o RBC Capital Markets, LLC
200 Vesey Street
New York, New York 10281
Ladies and Gentlemen:
The undersigned understands that Citigroup Global Markets Inc. and RBC Capital Markets, LLC (collectively, the “Representatives”) propose to enter into an
Underwriting Agreement (the “Underwriting Agreement”) with IBEX Limited, a company organized under the laws of Bermuda (the “Company”), providing for the public offering
(the “Public Offering”) by the several Underwriters named in Schedule I of the Underwriting Agreement (the “Underwriters”), including the Representatives, of common
shares, par value $0.000111650536 per share, of the Company (the “Common Shares”).
To induce the Underwriters that may participate in the Public Offering to continue their efforts in connection with the Public Offering, the undersigned hereby agrees that, without the prior written
consent of the Representatives on behalf of the Underwriters, he, she or it will not, during the period commencing on the date hereof and ending 180 days after the date of the final prospectus relating to the Public Offering (the “Restricted Period”), (1) directly or indirectly offer, sell, pledge, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to
purchase, make any short sale, lend, or otherwise transfer or dispose of, or establish or increase any “put equivalent position” or liquidate or decrease any “call equivalent position” (each within the meaning of Section 16 of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”)) with respect to any Common Shares, any options or warrants to purchase any Common Shares, or any securities convertible into or exercisable or exchangeable for or
that represent the right to receive Common Shares, (2) enter into any swap, forward contract, hedging transaction or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Shares,
whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Shares or such other securities, in cash or otherwise, (3) file or approve the filing of any registration statement with the Securities and
Exchange Commission relating to the offering of any Common Shares or any securities convertible into or exercisable or exchangeable for Common Shares, or make any demand for or exercise any right with respect to (other than piggyback registration
rights, if any) the registration of any Common Shares or the filing of any registration statement with respect thereto that would require the Company to make any public announcement or filing prior to the termination of the Restricted Period, or (4)
publicly disclose or announce an intention to effect any transaction specified in clause (1), (2) or (3). The undersigned also agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent and registrar against the
transfer by the undersigned of Common Shares except in compliance with this lock-up agreement.
II-6
The foregoing restrictions shall not apply to:
| (a) |
the sale of the Common Shares in the Public Offering,
|
| (b) |
sales of Common Shares or other securities acquired in open market transactions after the completion of the Public Offering,
|
| (c) |
transfers of Common Shares or any security convertible into Common Shares as a bona fide gift or gifts, or by will or intestacy upon the death of the undersigned,
|
| (d) |
transfers by will or estate or intestate succession to the undersigned’s immediate family, or to a trust, the beneficiaries of which are exclusively the undersigned or members of the undersigned’s immediate family (for purposes of this
lock-up agreement, “immediate family” means any relationship by blood, marriage or adoption, not more remote than first cousin), or to a charitable organization,
|
| (e) |
transfers pursuant to a court or regulatory agency order, a qualified domestic relations order or in connection with a divorce settlement, provided that any filing under the Exchange Act or any
other public filing or disclosure of such transfer by or on behalf of the undersigned that is required to be made during the Restricted Period as a result of such transfer shall include a statement that such transfer has occurred by operation
of law,
|
| (f) |
transfers or distributions, if the undersigned is not a natural person, of Common Shares or other securities to limited or general partners, members, subsidiaries, shareholders or affiliates of the undersigned or to any investment fund or
other entity that controls or manages the undersigned (or is under common control or management with the undersigned) provided that such transferee agrees to be bound by the restrictions set forth herein,
|
II-7
| (g) |
the exercise of any options to purchase Common Shares or the vesting, award, delivery or settlement of Common Shares and the receipt by the undersigned from the Company of Common Shares thereunder, in each case pursuant to the Company’s
share option or equity-based compensation plans that are described in the registration statement and prospectus related to the Public Offering, and sales of such Common Shares that are issued upon exercise of such options or warrants or such
vesting, award, delivery, settlement or receipt in order to pay or provide for any taxes due on such exercise, vesting, delivery, settlement or receipt or to pay the exercise price therefor, provided that,
if required, any public report or filing under the Exchange Act will clearly indicate in the footnotes thereto that the filing relates to the exercise of a share option, that no shares were sold to the public by the reporting person and that
the shares received upon exercise of the share option are subject to a lock-up agreement with the Underwriters of the Public Offering or that such dispositions to the Company or withholding by the Company of shares or securities was solely to
the Company pursuant to the circumstances described in this clause (g),
|
| (h) |
transfers of Common Shares arising as a result of the termination of employment of the undersigned to the Company pursuant to agreements under which the Company has the option to repurchase such Common Shares provided that, if required, any public report or filing under the Exchange Act will clearly indicate in the footnotes thereto that the filing relates to a repurchase of Common Shares by the Company in connection with the
termination of the undersigned’s employment with the Company, and that any Common Shares subject to this letter agreement that continue to be held by the undersigned remain subject to the terms of a lock-up agreement with the Underwriters of
the Public Offering,
|
| (i) |
a bona fide third party tender offer, merger, consolidation or other similar transaction made to all holders of Common Shares involving a change of control of the Company that, in each case, has been approved by the Company’s board of
directors, provided that all of the undersigned’s Common Shares subject to the restrictions in this lock-up agreement that are not so transferred, sold, tendered or otherwise disposed of remain subject to this lock-up agreement, and, provided
that in the event that the tender offer, merger, consolidation or other such transaction is not completed, the Common Shares owned by the undersigned shall remain subject to the restrictions contained in this lock-up agreement,
|
II-8
| (j) |
in connection with the conversion of the outstanding preferred stock of the Company and Class B common stock of the Company into Common Shares; provided that any such Common Shares received upon such conversion shall be subject to the
terms of this lock-up agreement, or
|
| (k) |
a written plan meeting the requirements of Rule 10b5-1 under the Exchange Act for the transfer of Common Shares that does not in any case provide for the transfer of Common Shares during the Restricted Period;
|
provided that (i) in the case of any transfer, distribution or issuance pursuant to clause
(c), (d), (e), (f) or (g), each donee, heir, legatee, trustee, distributee, transferee or recipient shall sign and deliver (or have signed and delivered) a lock‑up letter substantially in the form of this lock-up agreement for the balance of the
Restricted Period, (ii) other than transfers pursuant to clauses (a), (b), (e), (g), (h) or the entering into of a plan pursuant to clause (k), no filing under the Exchange Act, reporting a reduction in beneficial ownership of Common Shares, shall
be required or shall voluntarily be made during the Restricted Period, and (iii) to the extent a public announcement or filing under the Exchange Act, if any, is required or voluntarily made by or on behalf of the undersigned or the Company
regarding the establishment of a plan pursuant to clause (k), such announcement or filing shall include a statement to the effect that no transfer of Common Shares may be made under such plan during the Restricted Period.
The undersigned understands that, if the undersigned is an officer or director of the Company, (1) this lock-up agreement shall be applicable to any issuer-directed shares that the undersigned may
purchase in the Public Offering, (2) the Representatives will notify the Company at least three business days before the effective date of any release or waiver of the foregoing restrictions, (3) the Company will announce the impending release or
waiver by a press release through a major news service announcing such waiver or release, and (4) any release or waiver granted by the Representatives under this lock-up agreement will only be effective two business days after the publication date of
such press release. The provisions of this paragraph will not apply if (a) the release or waiver is effected solely to permit a transfer not for consideration and (b) the transferee has agreed in writing to be bound by the same terms described in
this lock-up agreement to the extent and for the duration that such terms remain in effect at the time of the transfer.
The undersigned understands that the Company and the Underwriters are relying upon this lock-up agreement in proceeding toward consummation of the Public Offering. The undersigned further
understands that this lock-up agreement is irrevocable and shall be binding upon the undersigned’s heirs, legal representatives, successors and assigns.
Whether or not the Public Offering actually occurs depends on a number of factors, including market conditions. Any Public Offering will only be made pursuant to an Underwriting Agreement, the terms
of which are subject to negotiation between the Company and the Underwriters.
II-9
It is understood that, if (i) the Company notifies the Representatives in writing that it does not intend to proceed with the Public Offering, (ii) the Representatives notify the Company that the
Underwriters do not intend to proceed with the Public Offering, (iii) the Registration Statement on Form F-1 is withdrawn; (iv) the Underwriting Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated
prior to payment for and delivery of the Common Shares or (v) the Public Offering is not completed by December 31, 2020, this lock-up agreement shall be terminated and be of no further force or effect.
The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this lock-up agreement and that upon request, the undersigned will execute and
additional documents necessary to ensure the validity or enforcement of this lock-up agreement. All authority herein conferred or agreed to be conferred and any obligations of the undersigned shall be binding upon the successors, assigns, heirs or
personal representatives of the undersigned.
|
Very truly yours,
|
|
|
(Name)
|
|
|
(Address)
|
II-10
EXHIBIT 8.1
List of subsidiaries
|
ENTITY
|
LOCATION
|
OWNERSHIP %
|
|
IBEX LIMITED
|
||
|
IBEX GLOBAL LIMITED
|
Bermuda
|
100%
|
|
Ibex Global Bermuda Ltd
|
Bermuda
|
100%
|
|
Ibex Global Solutions, Inc.
|
USA
|
100%
|
|
TRG Customer Solutions (Canada) Inc.
|
Canada
|
100%
|
|
Ibex Receivable Solutions, Inc.
|
USA
|
100%
|
|
Ibex Global Solutions Limited
|
England
|
100%
|
|
TRG Marketing Solutions Limited
|
England
|
100%
|
|
Ibex Global Europe
|
Luxembourg
|
100%
|
|
Ibex Global ROHQ
|
Philippines
|
100%
|
|
Ibex Philippines, Inc.
|
Philippines
|
100%
|
|
Ibex Global Solutions Philippines, Inc.
|
Philippines
|
100%
|
|
TRG Customer Solutions (Philippines) Inc.
|
Philippines
|
100%
|
|
Ibex Global St. Lucia Limited
|
St. Lucia
|
100%
|
|
Ibex Global Jamaica Limited
|
Jamaica
|
100%
|
|
Ibex Global Solutions Nicaragua S.A.
|
Nicaragua
|
100%
|
|
Virtual World (Private) Limited
|
Pakistan
|
100%
|
|
Ibex Global Solutions (Private) Limited
|
Pakistan
|
100%
|
|
Ibex Global Solutions Senegal S.A.
|
Senegal
|
100%
|
|
Ibex Global Solutions France S.a.r.l.
|
France
|
100%
|
|
Ibex Global MENA FZE
|
UAE
|
100%
|
|
Lovercius Consultants Limited
|
Cyprus
|
100%
|
| |
||
|
DGS LIMITED
|
Bermuda
|
100%
|
|
Digital Globe Services, Inc.
|
USA
|
100%
|
|
7 Degrees, LLC
|
USA
|
100%
|
|
Lake Ball LLC
|
USA
|
47.5%
|
|
TelSat Online, Inc.
|
USA
|
100%
|
|
DGS (Private) Limited
|
Pakistan
|
100%
|
|
DGS Worldwide Marketing Limited
|
Cyprus
|
100%
|
| |
||
|
ISKY, INC.
|
USA
|
100%
|
IBEX LIMITED
Conducting the business affairs of IBEX Limited (together with its subsidiaries, the “Company”) in accordance with the highest ethical standards and in compliance with legal
requirements aligns directly with our mission of providing quality solutions to our customers. A reputation for ethical conduct, market leadership and business success builds the bond between employees, officers, members of the Board of Directors
of the Company (the “Board”), shareholders, vendors, consultants and all business partners to satisfy the demands of customers. The integrity of the Company provides a foundation for this
mission.
The Board has adopted this Code of Business Conduct and Ethics (this “Code”) in order to deter wrongdoing and promote:
| 1. |
honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
|
| 2. |
full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with, or submits to, the Securities and Exchange Commission (the “SEC”)
and in other public communications made by the Company;
|
| 3. |
compliance with applicable governmental laws, rules and regulations;
|
| 4. |
the protection of Company assets, including corporate opportunities and confidential information;
|
| 5. |
fair dealing practices;
|
| 6. |
deter wrongdoing;
|
| 7. |
the prompt internal reporting of violations of this Code to an appropriate person or persons identified in this Code; and
|
| 8. |
accountability for adherence to this Code.
|
Nothing in this Code is intended to require any action contrary to law or the contractual obligations of the Company under that certain Stockholder’s Agreement, dated as of September 15, 2017 (the “Stockholder’s Agreement”), between the Company
and The Resource Group International Limited (“TRGI”). If the Code conflicts with any law, you must comply with the law. If the Code conflicts with any contractual obligation of the Company or right of TRGI under the Stockholder’s Agreement, you
should consult with the Company’s Legal Department.
Nothing in the Code is intended or will be considered (i) to amend the memorandum of association or bye-laws of the Company, (ii) to change the legal duties imposed under state, federal and other applicable statutes, rules and regulations or
otherwise change any contractual obligation of the Company or rights of TRGI under the Stockholder’s Agreement, (iii) to expand liabilities beyond applicable law, (iv) to create or imply an employment contract or term of employment or (v) to affect
any rights available under state and other applicable law or the Company’s memorandum of association or bye-laws.
All directors, officers and employees are required to be familiar with this Code, comply with its provisions and report any suspected violations as described below.
HONEST AND ETHICAL CONDUCT
The Company’s policy is to promote high standards of integrity by conducting its affairs honestly and ethically.
Each director, officer and employee must act with integrity and observe the highest ethical standards of business conduct in his or her dealings with the Company’s customers, suppliers, partners, service providers, competitors, employees and
anyone else with whom he or she has contact in the course of performing his or her job.
CONFLICTS OF INTEREST
A conflict of interest occurs when an individual’s private interest (or the interest of a member of his or her family) interferes, or even appears to interfere, with the interests of the Company as a whole. A conflict of interest can arise when
an employee, officer or director (or a member of his or her family) takes actions or has interests that may make it difficult to perform his or her work for the Company objectively and effectively. Conflicts of interest also arise when an employee,
officer or director (or a member of his or her family) receives improper personal benefits as a result of his or her position in the Company.
Loans by the Company to, or guarantees by the Company of, obligations of directors, officers, employees or their family members are of special concern and could constitute improper personal benefits to the recipients of such loans or guarantees,
depending on the facts and circumstances. Loans by the Company to, or guarantees by the Company of, obligations of any director or executive officer or their family members are expressly prohibited.
Whether or not a conflict of interest exists or will exist can be unclear. Conflicts of interest should be avoided unless specifically authorized as described in the paragraph below.
Persons other than directors and executive officers who have questions about a potential conflict of interest or who become aware of an actual or potential conflict should discuss the matter with, and seek a determination and prior authorization
or approval from, their supervisor or the Legal Department. A supervisor may not authorize or approve conflict of interest matters or make determinations as to whether a problematic conflict of interest exists without first providing the Legal
Department with a written description of the activity and seeking the Legal Department’s written approval. If the supervisor is himself involved in the potential or actual conflict, the matter should instead be discussed directly with the Legal
Department.
2
Directors and executive officers should seek determinations and prior authorizations or approvals of potential conflicts of interest exclusively from the Audit Committee or otherwise comply with the procedures set
forth in the Company’s Bye-laws.
CORPORATE OPPORTUNITIES
All directors, officers and employees owe a duty to the Company to advance its interests when the opportunity to do so arises. Directors, officers and employees are prohibited from taking for themselves personally opportunities that are
discovered through the use of Company property, information or position. Directors, officers and employees may not use Company property, information or position for personal gain. Except as otherwise permitted by the Stockholder’s Agreement with
respect to Identified Persons (as defined therein) serving as directors or officers of the Company, no director, officer or employee may compete with the Company.
CONFIDENTIALITY
Directors, officers and employees should maintain the confidentiality of information entrusted to them by the Company or by its customers, except when disclosure is authorized or legally mandated. Confidential information includes all non-public
information that might be of use to the Company’s competitors, or harmful to the Company or its customers, suppliers or partners if disclosed.
FAIR DEALING
Each director, officer and employee should endeavor to deal fairly with the Company’s customers, suppliers, partners, service providers, competitors, employees and anyone else with whom he or she has contact in the course of performing his or
her job. No director, officer or employee should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of facts or any other unfair dealing practice.
PROTECTION AND PROPER USE OF COMPANY ASSETS
All directors, officers and employees should protect the Company’s assets and ensure their efficient use. Theft, carelessness and waste have a direct impact on the Company's profitability and are prohibited.
All Company assets should be used only for legitimate business purposes. Any suspected incident of fraud or theft should be reported for investigation immediately.
The obligation to protect Company assets includes the Company’s proprietary information. Proprietary information includes intellectual property such as trade secrets, patents, trademarks, and copyrights, as well as business and marketing plans,
engineering and manufacturing ideas, designs, databases, records and any non-public financial data or reports. Unauthorized use or distribution of this information is prohibited and could also be illegal and result in civil or criminal penalties.
3
COMPLIANCE
Directors, officers and employees should comply, both in letter and spirit, with all applicable laws, rules and regulations in the cities, states and countries in which the Company operates.
The Company’s operations are subject to laws and regulations in the United States, Bermuda, and in other countries. Our core values demand that we ensure diligent adherence to the requirements of all applicable laws, rules and regulations.
Significant areas of law that could be applicable to the activities of the Company include, but are not limited to (i) privacy and data security/protection laws; (ii) patent and trademarks laws; (iii) anti-trust laws governing free and open
competition; (iv) health, safety and environmental laws; (v) federal securities laws; and (vi) federal and state laws and regulations related to healthcare and health insurance industries.
In addition to the areas addressed above, the Company requires full compliance with the Foreign Corrupt Practices Act (“FCPA”), which makes illegal any corrupt offer, payment, promise
to pay, or authorization to pay any money, gift, or anything of value to any foreign official, or any foreign political party, candidate or official, for the purpose of (i) influencing any act or failure to act, in the official capacity of that
foreign official or party or (ii) inducing the foreign official or party to use influence to affect a decision of a foreign government or agency; in order to obtain or retain business for anyone, or direct business to anyone. Furthermore, the
Company requires full compliance with the Bermuda Bribery Act 2016 (the “Bribery Act”) which includes offences of a similar nature to the FCPA including: (i) bribing, (ii) being bribed,
(iiii) bribery of foreign public officials, and (iv) a corporate offence of failing to prevent bribery. All Company employees, officers and directors, whether located in the United States or abroad, are responsible for FCPA and Bribery Act
compliance and the procedures to ensure FCPA and Bribery Act compliance.
Although not all directors, officers and employees are expected to know the details of all applicable laws, rules and regulations, it is important to know enough to determine when to seek advice from appropriate personnel. Questions about
compliance should be addressed to the Legal Department.
Insider trading is unethical, illegal and a violation of the Company’s Insider Trading Policy.
DISCLOSURE
The Company’s periodic reports and other documents filed with the SEC, including all financial statements and other financial information, must comply with applicable federal securities laws and the applicable rules and regulations promulgated
by the SEC.
Each director, officer and employee who contributes in any way to the preparation or verification of the Company’s financial statements and other financial information must use appropriate efforts to ensure that the Company’s books, records and
accounts are accurately maintained.
Each director, officer and employee must cooperate with the Company’s accounting and internal audit departments, as well as the Company’s independent public accountants and counsel.
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Each director, officer and employee who is involved in the Company’s disclosure process must:
| 1. |
be familiar with and comply with the Company’s disclosure controls and procedures and its internal control over financial reporting; and
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| 2. |
take all appropriate steps to ensure that all filings with the SEC and all other public communications about the financial and business condition of the Company provide full, fair, accurate, timely and understandable disclosure.
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REPORTING AND INVESTIGATION OF VIOLATIONS
Actions prohibited by this Code involving directors or executive officers must be reported to the Audit Committee.
Actions prohibited by this Code involving anyone other than a director or executive officer must be reported to the reporting person’s supervisor or the Legal Department.
After receiving a report of an alleged prohibited action, the Audit Committee, the Legal Department or the relevant supervisor must promptly take all appropriate actions necessary to investigate.
All directors, officers and employees are expected to cooperate in any internal investigation of misconduct.
PROHIBITION ON RETALIATION
The Company does not tolerate acts of retaliation against any director, officer or employee who makes a good faith report of known or suspected acts of misconduct or other violations of this Code, and any such retaliation may be a violation of
the Company’s Whistleblower Policy.
ENFORCEMENT AND AMENDMENT
The Company must ensure prompt and consistent action against violations of this Code.
If, after investigating a report of an alleged prohibited action by a director or executive officer, the Audit Committee determines that a violation of this Code has occurred, the Audit Committee will report such determination to the Board.
If, after investigating a report of an alleged prohibited action by any other person, the relevant supervisor determines that a violation of this Code has occurred, the supervisor will report such determination to the Legal Department.
Upon receipt of a determination that there has been a violation of this Code, the Board or the Legal Department will take such preventative or disciplinary action as it deems appropriate, including, but not limited to, reassignment, demotion,
dismissal and, in the event of criminal conduct or other serious violations of the law, notification of appropriate governmental authorities.
This Code may be amended, modified or waived by the Nominating and Corporate Governance Committee of the Board.
5
WAIVERS
The Board (in the case of a violation by a director or executive officer) or the Legal Department (in the case of a violation by any other person) may, in its discretion, waive any violation of this Code.
Any waiver for a director or an executive officer shall be disclosed as required by SEC and Nasdaq rules.
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EXHIBIT 12.1
Certification by the Principal Executive Officer pursuant to
Securities Exchange Act Rules 13a-14(a) and 15d-14(a)
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Robert Dechant, certify that:
|
1.
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I have reviewed this annual report on Form 20-F of IBEX Limited (the “Company”);
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| 2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
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| 3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and
for, the periods presented in this report;
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| 4. |
The Company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and have:
|
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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| (b) |
Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
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| (c) |
Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the
Company’s internal control over financial reporting; and
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| 5. |
The Company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or
persons performing the equivalent functions):
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| (a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report
financial information; and
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| (b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
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Date: October 22, 2020
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By:
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/s/ Robert Dechant
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Chief Executive Officer
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Title:
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(Principal Executive Officer)
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EXHIBIT 12.2
Certification by the Principal Financial Officer pursuant to
Securities Exchange Act Rules 13a-14(a) and 15d-14(a)
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Karl Gabel, certify that:
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1.
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I have reviewed this annual report on Form 20-F of IBEX Limited (the “Company”);
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| 2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
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| 3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and
for, the periods presented in this report;
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| 4. |
The Company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and have:
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
| (b) |
Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
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| (c) |
Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the
Company’s internal control over financial reporting; and
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| 5. |
The Company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or
persons performing the equivalent functions):
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| (a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report
financial information; and
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| (b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
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Date: October 22, 2020
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/s/ Karl Gabel
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Chief Financial Officer
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Title:
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(Principal Financial Officer)
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EXHIBIT 13.1
Certification by the Principal Executive Officer and Principal Financial Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350),
Robert Dechant, Chief Executive Officer of IBEX Limited (the “Company”), and Karl Gabel, Chief Financial Officer of the Company, each hereby certifies that, to the best of his knowledge:
| (1) |
The Company’s Annual Report on Form 20-F for the year ended June 30, 2020, to which this Certification is attached as Exhibit 13.1 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934, as amended; and
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| (2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: October 22, 2020
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/s/ Robert Dechant
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||
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Chief Executive Officer
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||
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Title:
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(Principal Executive Officer)
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By:
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/s/ Karl Gabel
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Chief Financial Officer
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||
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Title:
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(Principal Financial Officer)
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EXHIBIT 15.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ibex Limited
Hamilton, Bermuda
We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-242044) of Ibex Limited, of our report dated October 22, 2020, relating to the consolidated
financial statements, which appears in this Annual Report on Form 20-F.
/s/ BDO LLP
BDO LLP
Reading, United Kingdom
October 22, 2020