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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 10-Q
_______________________
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2023
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____________to______________
Commission File Number: 001-38442
_______________________
IBEX LIMITED
(Exact name of registrant as specified in its charter)
_______________________
Bermuda
00-0000000
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
1717 Pennsylvania Avenue NW, Suite 825
Washington, DC
20006
(Address of principal executive offices)(Zip Code)
(202) 580-6200
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
_______________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common shares, par value $0.0001IBEX
 Nasdaq Global Market
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. x Yes o No
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). x Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated fileroAccelerated filerx
 
Non-accelerated fileroSmaller reporting companyo
 
Emerging growth companyx
If an emerging growth company, 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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No
The number of common shares outstanding of IBEX LIMITED as of January 31, 2024 was 17,572,123.


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IBEX LIMITED
Quarterly Report on Form 10-Q
For Quarterly Period Ended December 31, 2023
Table of Contents
Page No.


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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (“Form 10-Q”) contains forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995, relating to our operations, expected financial position, and other business matters that are based on our current expectations, assumptions, and projections with respect to the future, and are not a guarantee of performance. Forward-looking statements provide management’s current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements may include words such as “anticipate,” “believe,” “budgeted,” “contemplate,” “estimate,” “expect,” “forecast,” “guidance,” “may,” “outlook,” “plan,” “projection,” “should,” “target,” “will,” “would” 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. Such forward-looking statements involve known and unknown risks, uncertainties, assumptions, and other important factors that could cause our actual results, performance or achievements or industry results, to differ materially from historical results or any future results, performance or achievements expressed, suggested, or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to statements about:
General economic uncertainty in global markets and unfavorable economic conditions, including inflation, rising interest rates, recession, foreign exchange fluctuations and supply-chain issues;
Geopolitical conditions, including developing or ongoing conflicts;
Our ability to attract new business and retain key clients;
Our profitability based on our utilization, pricing and managing costs;
The potential for our clients or potential clients to consolidate;
Our clients deciding to enter into or further expand their insourcing activities and current trends toward outsourcing services may reverse;
Our ability to manage our international operations, particularly in the Philippines, Jamaica, Pakistan and Nicaragua;
Our ability to anticipate, develop and implement information technology solutions that keep pace with evolving industry standards and changing client demands;
Our ability to recruit, engage, motivate, manage and retain our global workforce;
Our ability to comply with applicable laws and regulations, including those regarding privacy, data protection and information security, employment and anti-corruption;
The effect of cyberattacks or cybersecurity vulnerabilities on our information technology systems; and
Our ability to realize the anticipated strategic and financial benefits of our relationship with Amazon.
We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. 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 Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023. 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 filings with the United States Securities and Exchange Commission (“SEC”) and public communications. You should evaluate all forward-looking statements made in this Form 10-Q 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 Form 10-Q 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.

1

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements
2

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IBEX LIMITED AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
(in thousands, except share data)
December 31,
2023
June 30,
2023
Assets
Current assets
Cash and cash equivalents$49,016 $57,429 
Accounts receivable, net104,747 86,364 
Prepaid expenses5,278 6,616 
Due from related parties129 43 
Tax advances and receivables8,367 5,965 
Other current assets1,956 2,190 
Total current assets169,493 158,607 
Non-current assets
Property and equipment, net35,950 41,151 
Operating lease assets69,190 70,919 
Goodwill11,832 11,832 
Deferred tax asset, net4,289 4,585 
Other non-current assets7,420 6,230 
Total non-current assets128,681 134,717 
Total assets$298,174 $293,324 
Liabilities and stockholders' equity
Current liabilities
Accounts payable and accrued liabilities$17,934 $18,705 
Accrued payroll and employee-related liabilities32,387 29,360 
Current deferred revenue6,463 6,413 
Current operating lease liabilities13,608 13,036 
Current maturities of long-term debt441 413 
Due to related parties54 2,314 
Income taxes payable3,346 3,020 
Total current liabilities74,233 73,261 
Non-current liabilities
Non-current deferred revenue1,634 1,383 
Non-current operating lease liabilities62,406 64,854 
Long-term debt560 600 
Other non-current liabilities3,228 3,262 
Total non-current liabilities67,828 70,099 
Total liabilities142,061 143,360 
Commitments and contingencies (Note 7)
Stockholders' equity
Common stock: par value $0.0001, 108,057,967 shares authorized, 17,681,035 and 18,280,419 shares outstanding as of December 31, 2023 and June 30, 2023, respectively
2 2 
Additional paid-in capital207,638 204,734 
Treasury stock at cost: 868,774 and 245,447 shares as of December 31, 2023 and June 30, 2023, respectively
(14,116)(3,682)
Accumulated other comprehensive loss(6,133)(6,312)
Accumulated deficit(31,278)(44,778)
Total stockholders' equity156,113 149,964 
Total liabilities and stockholders' equity$298,174 $293,324 
See accompanying notes to unaudited consolidated financial statements.
3

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IBEX LIMITED AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(Unaudited)
(in thousands, except per share data)
Three Months Ended December 31,Six Months Ended
December 31,
2023202220232022
Revenue$132,634 $139,325 $257,243 $267,130 
Cost of services (exclusive of depreciation and amortization presented separately below)95,884 99,790 184,080 195,943 
Selling, general and administrative24,857 23,502 47,897 42,807 
Depreciation and amortization4,946 4,582 9,988 9,259 
Total operating expenses125,687 127,874 241,965 248,009 
Income from operations6,947 11,451 15,278 19,121 
Interest income512 138 1,098 186 
Interest expense(111)(300)(215)(448)
Income before income taxes7,348 11,289 16,161 18,859 
Provision for income tax expense(1,273)(2,019)(2,661)(3,066)
Net income$6,075 $9,270 $13,500 $15,793 
Other comprehensive income / (loss)
Foreign currency translation adjustments$679 $554 $(22)$(1,123)
Unrealized gain on cash flow hedging instruments, net of tax395 814 201 553 
Total other comprehensive gain / (loss)1,074 1,368 179 (570)
Total comprehensive income$7,149 $10,638 $13,679 $15,223 
Net income per share
Basic$0.34 $0.51 $0.75 $0.87 
Diluted$0.33 $0.49 $0.72 $0.84 
Weighted average common shares outstanding
Basic17,88518,14918,08418,154
Diluted18,44018,86018,66718,759
See accompanying notes to unaudited consolidated financial statements.
4

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IBEX LIMITED AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity
(Unaudited)
(in thousands)
Three months ended December 31, 2022 and 2023
Common sharesTreasury
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income / (Loss)
Accumulated
Deficit
Total
Stockholders'
Equity
SharesAmountAmount
Balance, September 30, 202218,230 $2 $(3,682)$198,898 $(6,500)$(69,837)$118,881 
Net income— — — — — 9,270 9,270 
Foreign currency translation adjustment— — — — 554 — 554 
Changes in fair value of cash flow hedges— — — — 814 — 814 
Provision for common stock warrants— — — 310 — — 310 
Issuance of common shares68 — — 1,188 — — 1,188 
Share-based compensation expense— — — 706 — — 706 
Balance, December 31, 202218,298 $2 $(3,682)$201,102 $(5,132)$(60,567)$131,723 
Common sharesTreasury
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income / (Loss)
Accumulated
Deficit
Total
Stockholders'
Equity
SharesAmountAmount
Balance, September 30, 202318,169 $2 $(5,726)$206,323 $(7,207)$(37,353)$156,039 
Net income— — — — — 6,075 6,075 
Foreign currency translation adjustment— — — — 679 — 679 
Changes in fair value of cash flow hedges— — — — 395 — 395 
Purchase of treasury shares(489)— (8,390)— — — (8,390)
Provision for common stock warrants— — — 307 — — 307 
Issuance of common shares1 — — 6 — — 6 
Share-based compensation expense— — — 1,002 — — 1,002 
Balance, December 31, 202317,681 $2 $(14,116)$207,638 $(6,133)$(31,278)$156,113 
5

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Six months ended December 31, 2022 and 2023
Common sharesTreasury
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income / (Loss)
Accumulated
Deficit
Total
Stockholders'
Equity
SharesAmountAmount
Balance, June 30, 202218,247 $2 $(3,406)$197,785 $(4,562)$(76,360)$113,459 
Net income— — — — — 15,793 15,793 
Foreign currency translation adjustment— — — — (1,123)— (1,123)
Changes in fair value of cash flow hedges— — — — 553 — 553 
Purchase of treasury shares(18)— (276)— — — (276)
Provision for common stock warrants— — 596 — — 596 
Issuance of common shares69 — — 1,209 — — 1,209 
Share-based compensation expense— — — 1,512 — — 1,512 
Balance, December 31, 202218,298 $2 $(3,682)$201,102 $(5,132)$(60,567)$131,723 

Common sharesTreasury
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income / (Loss)
Accumulated
Deficit
Total
Stockholders'
Equity
SharesAmountAmount
Balance, June 30, 202318,280 $2 $(3,682)$204,734 $(6,312)$(44,778)$149,964 
Net income— — — — — 13,500 13,500 
Foreign currency translation adjustment— — — — (22)— (22)
Changes in fair value of cash flow hedges— — — — 201 — 201 
Purchase of treasury shares(623)— (10,434)— — — (10,434)
Provision for common stock warrants— — 594 — — 594 
Issuance of common shares24 — — 11 — — 11 
Share-based compensation expense— — — 2,299 — — 2,299 
Balance, December 31, 202317,681 $2 $(14,116)$207,638 $(6,133)$(31,278)$156,113 

See accompanying notes to unaudited consolidated financial statements.
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IBEX LIMITED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Six Months Ended December 31,
20232022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income$13,500 $15,793 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization9,988 9,259 
Noncash lease expense6,522 7,273 
Warrant contra revenue594 596 
Deferred income tax296 1,506 
Share-based compensation expense2,275 2,655 
Allowance of expected credit losses6 117 
Change in assets and liabilities:
Increase in accounts receivable(18,336)(18,272)
(Increase) / decrease in prepaid expenses and other current assets(2,192)3,223 
Increase / (decrease) in accounts payable and accrued liabilities544 (1,282)
Increase / (decrease) in deferred revenue301 (2,905)
Decrease in operating lease liabilities(6,451)(7,108)
Net cash inflow from operating activities7,047 10,855 
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment(4,944)(11,506)
Net cash outflow from investing activities(4,944)(11,506)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit96 39,314 
Repayments of line of credit(148)(46,300)
Repayment of debt (3,524)
Proceeds from the exercise of options11 1,209 
Principal payments on finance leases(204)(266)
Purchase of treasury shares(10,274)(276)
Net cash outflow from financing activities(10,519)(9,843)
Effects of exchange rate difference on cash and cash equivalents3 (255)
Net decrease in cash and cash equivalents(8,413)(10,749)
Cash and cash equivalents, beginning57,429 48,831 
Cash and cash equivalents, ending$49,016 $38,082 
Supplemental cash flow disclosures
Cash paid for interest$215 $448 
Cash paid for income taxes$4,018 $1,982 
Supplemental non-cash disclosures
Change in accounts payable related to fixed assets$(416)$(766)
See accompanying notes to unaudited consolidated financial statements.
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IBEX LIMITED AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(Unaudited)
(in thousands, except per share amounts)
1.     OVERVIEW AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
OVERVIEW
IBEX Limited (“IBEX” and together with its subsidiaries, the “Company,” “ibex,” “we,” “us,” or “our”) was incorporated on February 28, 2017 in Hamilton, Bermuda. Our registered office in Bermuda is Crawford House, 50 Cedar Avenue, Hamilton HM 11, Bermuda. We are a “controlled company” within the meaning of the rules of Nasdaq, with The Resource Group International Limited (“TRGI”) being our controlling shareholder. TRG Pakistan Limited holds a controlling interest in TRGI. On August 7, 2020, the Company was admitted to trade on the Nasdaq Global Market under the ticker symbol “IBEX.”
The Company is an end-to-end provider of technology-enabled customer lifecycle experience (“CLX”) solutions. Through the Company’s integrated CLX platform, a comprehensive portfolio of solutions is offered to optimize customer acquisition, engagement, expansion and experience for clients. The Company leverages sophisticated technology and proprietary analytics, in combination with its global footprint and business process outsourcing expertise, to protect and enhance clients’ brands.
Our services cover three main areas:
ibex Connect: Our Connect business lies at the core of our offerings and generates the majority of the Company’s revenue. This business unit delivers differentiated customer service (assisting our clients’ 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), revenue generation (upselling and cross selling) and other value-added outsourced back office services (finance and accounting, marketing support, sales operations, and human resources administration) to our clients. We deploy these capabilities through a true omni-channel CX model, which integrates voice, email, chat, SMS, social media and other communication applications.
ibex Digital: Our ibex Digital suite of solutions works with consumer-facing businesses to help them build, grow and scale technology-driven customer acquisition solutions, while helping drive digital transformation. We offer digital marketing, e-commerce technology, and platform solutions for our clients, helping them build new customer acquisition channels, increase acquired customers, and often do both at a reduced cost.
ibex CX: Our CX business measures, monitors and manages our clients’ holistic customer experiences. By offering a 360-degree CX approach, our clients can harness the power of data and customer feedback to differentiate themselves within today’s “customer expectation economy.” We enable our clients to improve retention of their customers, identify and manage service issues in real time, predict future behavior and outcomes, derive impact analysis scenarios and assign “action plans” throughout the enterprise.
Operating segments
An operating segment is defined as a component of a company for which separate financial information is available and which is regularly evaluated by the chief operating decision maker (“CODM”) for the purpose of making decisions regarding resource allocation and performance assessment. The Company’s CODM is the chief executive officer (“CEO”). The Company’s CODM reviews consolidated financial results to make decisions, allocate resources and assess performance. Therefore, the Company has determined that it operates in a single operating and reportable segment.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and principles of consolidation
The Company’s interim consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), and include the financial results of all wholly-owned subsidiaries. When the Company does not have majority ownership in an entity but exerts significant influence over that entity, the Company accounts for the entity under the equity method of accounting. All intercompany balances and transactions have been eliminated in consolidation.

These unaudited consolidated financial statements and accompanying notes have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements and should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the fiscal year ended June 30, 2023 (the “Annual Report”) as filed with the SEC. There have been no changes to the Company’s significant accounting policies described in the Annual Report that have had a material impact on the Company’s consolidated financial statements and related notes.

In the opinion of the Company, these unaudited consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its financial position as of December 31, 2023, its results of operations, comprehensive income, and shareholders’ equity for the three and six months ended December 31, 2023 and 2022, and cash flows for the six months ended December 31, 2023 and 2022. The consolidated balance sheet as of June 30, 2023, was derived from the audited annual financial statements included in the Annual Report.
Use of estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements. Significant items subject to such estimates and assumptions include useful lives for property and equipment; impairment of long-lived assets, operating lease assets and liabilities, goodwill, and other intangible assets; allowance for credit losses; valuation allowances for deferred tax assets and other receivables; fair value of share-based compensation, warrants, and derivatives, and legal provisions. The Company bases its estimates on historical experience and other assumptions it believes are reasonable, including the use of outside experts as necessary, and updates these estimates on an ongoing basis and as new events occur, more experience is acquired and/or more information is obtained. Actual results could differ materially from these estimates.
Concentration of credit risk
The Company is exposed to credit risk in the normal course of business, primarily related to accounts receivable and derivative instruments. Historically, the losses related to credit risk have been immaterial. The Company regularly monitors its credit risk to mitigate losses. The Company evaluates the creditworthiness of its clients prior to and throughout the life of the client relationship. The Company does not believe it is exposed to more than a nominal amount of credit risk in its derivative instruments as all of its counterparties are investment-grade financial institutions.

Leases

The Company determines whether an arrangement contains a lease at inception in accordance with the provisions of Accounting Standards Codification (“ASC”) 842, Leases. Operating leases are included in operating lease assets and current and non-current operating lease liabilities, and assets leased under finance leases are included in property and equipment and current and long-term debt in the consolidated balance sheets.

Operating lease assets represent the Company’s right to use an underlying asset for the lease term, and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease expense is recognized on a straight-line basis over the lease term in cost of services or selling, general and administrative expense, as applicable. Interest on finance leases is included in interest expense in the consolidated statements of comprehensive income.
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Share-based compensation plans

The Company accounts for its share-based awards in accordance with provisions of ASC 718, Compensation - Stock Compensation. The Company calculates the fair value of option awards using the Black-Scholes model. For equity-classified awards, total compensation cost is based on the grant date fair value. For liability-classified awards, total compensation cost is based on the fair value of the award on the date the award is granted and is subsequently re-measured at each reporting date until settlement.

The Company recognizes share-based compensation expense over the requisite vesting period using a graded vesting model. Awards to employees and directors may contain service, performance and/or market vesting conditions. For unvested awards with performance conditions, the Company assesses the probability of attaining the performance conditions at each reporting period. Awards that are deemed probable of attainment are recognized in expense over the requisite service period. The Company accounts for forfeitures as they occur.

Share repurchase programs

The board of directors may authorize share repurchases of the Company’s common shares. Purchases made pursuant to these authorizations may be carried out through open market transactions at prevailing market prices, in privately negotiated transactions, in block trades and/or through other legally permissible means, depending on the market conditions and in accordance with applicable rules and regulations, at times and in such amounts as the Company deems appropriate. Shares repurchased under such authorizations are held in treasury for general corporate purposes, including issuances under various employee share-based award plans. When Company shares are repurchased, the amount of the consideration paid (including directly attributable costs, net of any tax effects) is recognized as a deduction of additional paid in capital. Repurchased shares are classified as treasury shares and are presented as a deduction from total equity. When treasury shares are subsequently sold or reissued, the amount received is recognized as an increase in additional paid in capital, and any resulting surplus or deficit on the transaction is reclassified to accumulated deficit.

Cloud Computing Software Implementation Costs

The Company incurs costs to implement cloud computing arrangements that are hosted by a third-party vendor. In accordance with Accounting Standards Codification ("ASC") 350-40, Goodwill and Other, Internal-Use Software, for cloud computing arrangements that meet the definition of a service contract, the Company capitalizes qualifying implementation costs incurred during the application development stage as a component of prepaid expenses or other non-current assets. Capitalized costs are primarily comprised of third-party consulting fees, direct labor, and related expenses. Capitalization of these costs concludes once the project is substantially complete and the software is ready for the Company's intended use. Once available for its intended use, the capitalized costs will be amortized on a straight-line basis over the term of the associated hosting arrangement including periods covered by an option to extend, and are included in selling, general and administrative expenses in the consolidated statements of comprehensive income. Costs related to data conversion, overhead, general and administrative activities, and training are expensed as incurred. Post-configuration training and maintenance costs are expensed as incurred.

The Company capitalized $0.8 million and $1.2 million during the three and six months ended December 31, 2023, respectively. There were no costs capitalized during the three and six months ended December 31, 2022.
Emerging Growth Company
The Company currently qualifies as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Accordingly, the Company has the option to adopt new or revised accounting guidance either (i) within the same periods as those otherwise applicable to non-emerging growth companies or (ii) within the same time periods as private companies pursuant to Section 13(a) of the Exchange Act. The Company has elected to use the extended transition period until we are no longer an emerging growth company or until we choose to opt out of the extended transition period affirmatively and irrevocably.
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Recently Issued Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The amendments in ASU No. 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the impact of the new guidance on the disclosures to our consolidated financial statements.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which modifies the rules on income tax disclosures to require entities to disclose (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign), and (3) the income tax expense or benefit from continuing operations (separated by federal, state and foreign). This update also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. The amendments in ASU No. 2023-09 are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. We are currently evaluating the impact of the new guidance on the disclosures to our consolidated financial statements.
2.REVENUE FROM CONTRACTS WITH CUSTOMERS
The Company recognizes revenues for services for which control has transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring the promised services. This process involves identifying the customer contract, determining the performance obligations in the contract, determining the transaction price, allocating the transaction price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. A performance obligation is considered distinct from other obligations in a contract when it (a) provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and (b) is separately identified in the contract. The Company considers a performance obligation satisfied as it provides services to a customer, meaning the customer has the ability to direct the use and obtain the benefit of the service.
Revenues from contact center services, which consist of customer service, technical support and other value-added outsourced back-office services, are recognized as the services are performed on the basis of the number of billable minutes or hours, contractual rates, and other contractually agreed metrics, if applicable. Certain of our client contracts include bonus and penalty provisions. Revenues related to training that occurs upon commencement of a new client contract or statement of work are deferred and recognized on a straight-line basis over the estimated life of the client program, as it is not considered to have a standalone value to the customer. The related expenses are expensed as incurred. Revenues are recognized over time as performance obligations are satisfied and in the period in which the Company has a right to invoice, net of discounts, incentives, and/or penalties as per contractual terms. Bonuses and penalties accrue for the current billing period and do not depend on future performance. In some cases, we may estimate these bonuses or penalties using the “most likely amount” method based on actual data and historical experience.
Revenues from digital services are recognized at a point in time upon the successful consumer activation or purchase of clients’ services. We utilize third parties in the satisfaction of this performance obligation; however, because we retain control over these third parties and are solely responsible for the risk and reward associated with this performance obligation, we have determined that we are the principal in these transactions and therefore recognize revenue on a gross basis.
Revenues from CX software-as-a-service products are recognized over time based on the term of the subscription. 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 term of the subscription. Revenues related to additional consulting services are recognized over the period as the related services are performed on a per hour basis.
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All of our contracts include the right to invoice for services on a monthly basis. None of our contracts include significant termination penalties, and generally may be terminated for convenience at any time with a short notice period (generally 30 to 120 days).
The Company generally does not incur significant upfront costs to fulfill or obtain a contract that would qualify for capitalization under ASC 606, Revenue from Contracts with Customers.

Disaggregation of Revenue
The majority of the Company’s revenues are derived from contracts with customers who are located in the United States of America (the "United States" or "U.S."). However, the Company delivers most of its services from regional customer experience delivery centers that are located in geographies outside of the United States. Our global delivery model is built on regional customer experience delivery centers and includes a unique ability to support work-at-home capabilities in any region that we currently operate.

The Company generated approximately 97% of its revenue from clients based in the United States for both the three and six months ended December 31, 2023, as follows:


Three Months Ended December 31,Six Months Ended
December 31,
($000s)2023202220232022
Revenue
United States$128,606 $135,597 $249,790 $259,510 
Other countries4,028 3,728 7,453 7,620 
Total$132,634 $139,325 $257,243 $267,130 

The following table presents the breakdown of the Company’s revenues by geographical location, based on where the services are provided:
Three Months Ended December 31,Six Months Ended
December 31,
($000s)2023202220232022
Revenue
Onshore (United States)$29,911 $37,423 $61,447 $75,600 
Offshore (Philippines, Pakistan)64,910 59,292 122,269 110,448 
Nearshore (Jamaica, Nicaragua, Honduras)37,813 42,610 73,527 81,082 
Total$132,634 $139,325 $257,243 $267,130 


The following table presents the breakdown of the Company’s revenue by pattern of revenue recognition:
Three Months Ended December 31,Six Months Ended
December 31,
($000s)2023202220232022
Pattern of Revenue recognition
Services transferred over time$124,801 $131,514 $240,139 $249,868 
Services transferred at a point in time7,833 7,811 17,104 17,262 
Total$132,634 $139,325 $257,243 $267,130 

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The movement in the Company's deferred revenue is as follows:
Three Months Ended December 31,Six Months Ended
December 31,
($000s)2023202220232022
Beginning balance$7,424 $11,329 $7,796 $12,593 
Revenue recognized(2,261)(4,001)(4,933)(7,949)
Revenue deferred2,934 2,360 5,234 5,044 
Ending balance$8,097 $9,688 $8,097 $9,688 
3.ACCOUNTS RECEIVABLE AND SIGNIFICANT CLIENTS
Accounts receivable, net in the accompanying consolidated balance sheets consists of the following:

December 31,June 30,
($000s)20232023
Accounts receivable$104,864 $86,484 
Less: Allowance for credit losses(117)(120)
Accounts receivable, net$104,747 $86,364 

The Company estimates its expected credit losses using the lifetime expected credit loss model. The allowance for credit losses is calculated quarterly based on the Company’s historical loss percentages, net of recoveries. In addition to the evaluation of historical losses, the Company considers current and future economic conditions and events such as changes in customer credit quality and liquidity. The Company will write-off accounts receivable against the allowance when it determines a balance is uncollectible.

Activity in the Company’s allowance for credit losses consists of the following:

Three Months Ended December 31,Six Months Ended
December 31,
($000s)2023202220232022
Beginning balance$131 $1,191 $120 $1,290 
Provision for credit losses13 136 24 138 
Reversal of provision for credit losses(18)(21)(18)(21)
Uncollectible receivables written off(11)(951)(11)(951)
Effect of foreign exchange2 69 2 (32)
Ending balance$117 $424 $117 $424 

Significant Client

During the six months ended December 31, 2023 and 2022, the Company had one client that contributed approximately 12.9% and 13.5% of total revenue, respectively.

To limit the Company’s credit risk with its clients, management regularly monitors the aging of customer receivables, maintains allowances for credit losses and may require prepayment for services from certain clients. Based on currently available information, management does not believe significant credit risk exists as of December 31, 2023.
4.LEASES

The Company has operating lease obligations primarily for our delivery centers and finance lease obligations primarily for vehicles and other equipment. Leases typically have initial terms of two to fifteen years, and may include renewal options if the Company is reasonably certain to exercise such options.

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The components of lease cost are as follows:
Three Months Ended December 31,Six Months Ended
December 31,
($000s)2023202220232022
Operating lease cost:
Operating lease cost$4,992 $5,589 $9,878 $10,873 
Variable lease cost785 1,146 1,566 2,201 
Total operating lease cost$5,777 $6,735 $11,444 $13,074 
Finance lease cost:
Amortization of right of use assets$114 $89 $214 $169 
Interest on lease liabilities47 24 90 43 
Total finance lease cost$161 $113 $304 $212 

The following table presents supplemental balance sheet information related to leases:
December 31,June 30,
($000s)20232023
Operating lease assets$69,190 $70,919 
Operating lease liabilities, current13,608 13,036 
Operating lease liabilities, non-current62,406 64,854 
Total operating lease liabilities$76,014 $77,890 
Finance lease assets, net$944 $929 
Finance lease liabilities, current441 361 
Finance lease liabilities, non-current560 600 
Total finance lease liabilities$1,001 $961 

The following table presents supplemental cash flow information related to leases:

Six Months Ended
December 31,
($000s)20232022
Cash paid for amounts included in the measurement of lease liabilities$6,451 $7,108 
Operating cash flows paid for interest portion of finance leases90 43 
Financing cash flows paid for principal portion of finance leases204 266 
The following table presents supplemental noncash information related to leases:
Six Months Ended
December 31,
($000s)20232022
Right-of-use assets obtained in exchange for lease obligations
Operating leases$4,622 10,023 
Finance leases$218 294 

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December 31,June 30,
20232023
Weighted average remaining lease term (in years)
Operating leases5.45.7
Finance leases2.22.6
Weighted average discount rate
Operating leases10.1 %9.2 %
Finance leases19.8 %13.4 %

The following table presents the maturities of our lease liabilities as of December 31, 2023:

($000s)Operating
Leases
Finance
Leases
2024-remainder of year$9,935 $302 
202518,479 539 
202617,141 324 
202716,953 58 
202814,098  
Thereafter23,906  
Total undiscounted lease payments100,512 1,223 
Less: liability accretion(24,498)(222)
Total lease liabilities$76,014 $1,001 

5.DERIVATIVES
Cash flow hedges
Interest rate swap
In March 2020, the Company entered into a three-year $15 million notional floating to fixed interest rate swap to hedge the interest rate risk on the first $15 million of the balance outstanding under our $80 million revolving credit facility (as amended, the "PNC Credit Facility") with PNC Bank, N.A. ("PNC"). At the time the hedge was executed, all critical terms matched between the hedge and the hedged item. Hedge effectiveness was assessed prospectively at inception, and on an ongoing basis by confirming that the critical terms continue to match. Any hedge ineffectiveness is recorded in interest expense in the consolidated statements of comprehensive income. For the three and six months ended December 31, 2022, there was no hedge ineffectiveness. The hedge expired in March 2023 and was not replaced.
Foreign exchange contracts
From time to time, the Company enters into foreign currency exchange contracts, consisting of offsetting foreign exchange option contracts (“collars”), to mitigate foreign exchange fluctuations on the Philippine Peso (“PHP”) within a certain range and on a certain percentage of its PHP operating costs. The collars are designated as cash flow hedges upon inception, in accordance with ASC 815, in order to match the financial results of the hedges with the forecasted transactions. These contracts cover periods commensurate with the expected exposure, generally three to twelve months. We execute our contracts with our primary banking partner, PNC. The Company has not experienced and does not anticipate experiencing any material issues related to derivative counterparty defaults.
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The following tables show the notional amount and fair value of our foreign exchange cash flow hedging instruments as of December 31, 2023 and June 30, 2023:

Settlement dateHedged
currency
Foreign
currency rate
Notional
amount
($000s)
Fair Value
($000s)
Foreign currency option contracts - assets
January 5, 2024 through December 19, 2024PHP
52.50 - 57.60
$32,694 
Fair value as of June 30, 2023$ 
Fair value as of December 31, 2023  $63 

Settlement dateHedged
currency
Foreign
currency rate
Notional
amount
($000s)
Fair Value
($000s)
Foreign currency option contracts - liabilities
January 5, 2024 through December 19, 2024PHP
52.50 - 57.60
$32,694 
Fair value as of June 30, 2023$100 
Fair value as of December 31, 2023  $ 
The fair value of the collars is included in other current assets and accounts payable and accrued liabilities in the consolidated balance sheets.
Changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognized in accumulated other comprehensive income ("AOCI"). Amounts previously recognized in AOCI are reclassified to cost of services in the periods in which the hedged expenses occur.

Refer to Note 12. "Stockholders' Equity" for further details on the change in fair value of our cash flow hedges and the net gain or loss reclassified to earnings from effective hedges during the three and six months ended December 31, 2023 and 2022.


6.DEBT
Debt consists of the following:
December 31,June 30,
($000s)20232023
Debt
PNC Credit Facility$ $52 
Finance leases1,001 961 
Total debt$1,001 $1,013 
Less: Current maturities of long-term debt and finance leases(441)(413)
Total long-term debt$560 $600 
As of December 31, 2023, the Company had $80.0 million of borrowing available under the PNC Credit Facility based on eligible collateral.

The PNC Credit Facility contains certain financial, operating, and other covenants, including, among other things, covenants restricting additional borrowings, paying any dividends and making certain investments. The Company was in compliance with all debt covenants as of December 31, 2023.
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7.COMMITMENTS AND CONTINGENCIES
The Company is subject to claims and lawsuits filed in the ordinary course of business. Although management does not believe that any such proceedings will have material adverse effect on its consolidated financial position, results of operations, or cash flows, no assurances to that effect can be given based on the uncertainty of litigation and demands of third parties. The Company records a liability for pending litigation and claims where losses are both probable and can be reasonably estimated.
Indemnification
In addition, in the ordinary course of business, we enter into agreements of varying scope and terms pursuant to which we agree to indemnify clients, vendors and other business partners with respect to certain matters, including, but not limited to, losses arising out of breach of such agreements, cybersecurity breach, services to be provided by us or from intellectual property infringement claims made by third parties. Historically, we have not experienced significant losses on these types of indemnification obligations.
8.WARRANT
On November 13, 2017, and as subsequently amended, the Company issued to Amazon.com NV Investment Holdings LLC, a subsidiary of Amazon.com, Inc. (“Amazon”), a 10-year warrant to acquire approximately 1,674,017 common shares (the "warrant shares"), representing 10.0% of our equity on a fully diluted basis at the time of the warrant's issuance. The warrant is exercisable at a price per share of $9.42. The warrant provides for net share settlement, that if elected by the holder, will reduce the number of shares issued upon exercise to reflect the net settlement of the exercise price. The warrant is classified as an equity instrument in accordance with ASU No. 2019-08, which was adopted retroactively on July 1, 2020. The Company determined the grant date fair value of the warrant using the Black-Scholes option pricing model.
The warrant shares vest on the satisfaction of specified milestones tied to Amazon’s purchase of services from the Company during a seven-and-a-half-year period ending on June 30, 2024. The vesting is partially accelerated in the event of a reorganization transaction (as defined in the warrant). 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.
As of December 31, 2023 and June 30, 2023, 1,004,410 and 1,004,410 warrant shares were vested, respectively. To date, the warrant has not been exercised, expired or cancelled.
The Company recorded contra revenue of approximately $0.3 million and $0.6 million, respectively, during the three and six months ended for both December 31, 2023 and 2022.

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9.SHARE BASED COMPENSATION
Share-based compensation expense
The following tables summarize the components of share-based compensation expense recognized in the Company’s consolidated statements of comprehensive income, both by line item and by plan:

Three Months Ended December 31,Six Months Ended
December 31,
($000s)2023202220232022
Cost of services$172 $264 $69 $383 
Selling, general and administrative1,255 1,269 2,206 2,272 
Total share-based compensation expense$1,427 $1,533 $2,275 $2,655 
Three Months Ended December 31,Six Months Ended
December 31,
2023202220232022
Phantom Stock Plans$425 $827 $(24)$1,143 
2018 Restricted Stock Award Plan   (7)
2020 Long term Incentive Plan1,002 706 2,299 1,519 
Total share-based compensation expense$1,427 $1,533 $2,275 $2,655 

As of December 31, 2023, there was $6.9 million of total unrecognized compensation expense related to non-vested share-based awards, which is expected to be recognized over a weighted-average period of 3.3 years.
10.FAIR VALUE
The fair value hierarchy prioritized the input to valuation techniques used to measure fair value. The hierarchy requires that the Company maximize the use of observable inputs and minimize the use of unobservable inputs. The levels of the fair value hierarchy are as follows:
Level 1: Quoted prices for identical instruments traded in active markets.
Level 2: Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
Level 3: Unobservable inputs that cannot be supported by market activity and that are significant to the fair value of the asset, liability, or equity such as the use of certain pricing models, discounted cash flow models and similar techniques that use significant unobservable inputs.
The carrying value of our cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, accrued payroll and employee-related liabilities, approximate fair value because of their short-term nature. The Company measures its debt at carrying value including accrued interest, which approximates fair value because of its short-term nature.
Derivatives designated as cash flow hedges
The values of our derivative instruments are derived from pricing models using inputs based upon market information, including contractual terms, market prices and yield curves. The inputs to the valuation pricing models are observable in the market, and as such the derivatives are classified as Level 2 in the fair value hierarchy.
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Phantom stock awards
The Company uses the Black-Scholes option pricing model to value our phantom stock awards. All inputs to the model are derived from active market information for identical or similar instruments, including stock price, volatility, and interest rates. The inputs to the valuation pricing models are observable in the market, and as such the phantom stock awards are classified as Level 2 in the fair value hierarchy.
The following is a summary of the Company’s fair value measurements on a recurring basis as of December 31, 2023 and June 30, 2023:

As of December 31, 2023Fair Value Measurements Using
($000s)Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets
Cash flow hedge - foreign currency collars, net$ $63 $ 
Total assets$ $63 $ 
Liabilities
Phantom stock options$ $1,143 $ 
Total liabilities$ $1,143 $ 

As of June 30, 2023Fair Value Measurements Using
($000s)Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Liabilities
Cash flow hedge - foreign currency collars, net$$100$
Phantom stock options1,173
Total liabilities$$1,273$

These balances are included in other current assets and accounts payable and accrued liabilities and other non-current liabilities in the consolidated balance sheets.
There were no transfers between the different hierarchy levels in the three and six months ended December 31, 2023 and 2022.
11.INCOME TAXES
In determining its interim provision for income taxes, the Company used an estimated annual effective tax rate, which is based on expected income before taxes, statutory tax rates and tax planning opportunities available in the various jurisdictions in which the Company operates. Certain significant or unusual items are separately recognized in the period in which they occur and can be a source of variability in the effective tax rate from quarter to quarter.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their
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respective tax bases. The Company records valuation allowances against its deferred tax assets based on whether it is more likely than not that the deferred tax assets will be realized.
The Company’s income tax provision includes the results of the Company’s U.S. operations and its various foreign operations including subsidiaries based in the United Kingdom, European Union, Canada, Jamaica, Nicaragua, Pakistan, Senegal, Honduras, and the Philippines. Historically, the Company’s Bermuda-based companies are not subject to income tax as there was no corporate income tax in Bermuda. On December 27, 2023 the Bermuda Corporate Income Tax Act 2023 was passed and provides for a 15% corporate tax rate beginning on or after January 1, 2025 for Companies with revenue in excess of 750 million Euros. The Company is evaluating the impact of this legislation, but it does not anticipate that it will have a material impact on the Company’s operations.
The Company recorded a provision for income taxes of $1.3 million and $2.7 million in the three and six months ended December 31, 2023, respectively. The effective tax rate was 17.3% and 16.5% for the three and six months ended December 31, 2023, respectively. The Company recorded a provision for income taxes of $2.0 million and $3.1 million in the three and six months ended December 31, 2022, respectively. The effective tax rate was 17.9% and 16.3% for the three and six months ended December 31, 2022, respectively. The changes in effective tax rates between these periods was primarily attributable to changes in revenue mix across our taxable jurisdictions.
The difference between the effective tax rate and the 21% federal statutory rate in the three and six months ended December 31, 2023 was primarily due to "Tax Holidays" in certain countries in which we operate and the distribution of taxable income in countries with differing tax rates. We have been granted Tax Holidays as an incentive to attract foreign investment by the governments of Nicaragua, Pakistan, Honduras, Jamaica, and certain qualifying locations in the Philippines. Generally, a Tax Holiday is an agreement between us and a foreign government under which we receive certain tax benefits in that country.

The aggregate reduction in income tax expense due to the above Tax Holidays were $1.2 million and $2.6 million for the three and six months ended December 31, 2023, respectively. The aggregate reduction in income tax expense per diluted share was $0.07 and $0.14 for the three and six months ended December 31, 2023, respectively. The aggregate reduction in income tax expense due to the above Tax Holidays were $0.9 million and $1.8 million for the three and six months ended December 31, 2022, respectively. The aggregate reduction in income tax expense per diluted share was $0.05 and $0.10 for the three and six months ended December 31, 2022, respectively.
As of December 31, 2023, we had no unrecognized tax positions and do not expect changes to our uncertain tax positions within the next 12 months.
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12.STOCKHOLDERS’ EQUITY

AOCI
The following table presents changes by component for the three months ended December 31, 2022 and 2023:

($000s)Foreign
Currency
Translation
Adjustment
Derivative
Valuation
Defined
Benefit Plan
Total
Balance as of September 30, 2022$(5,703)$(900)$103 $(6,500)
Foreign currency translation554 — — 554 
Unrealized loss on cash flow hedges— (825)— (825)
Reclassifications to earnings— 1,639 — 1,639 
Balance as of December 31, 2022$(5,149)$(86)$103 $(5,132)

($000s)Foreign
Currency
Translation
Adjustment
Derivative
Valuation
Defined
Benefit Plan
Total
Balance as of September 30, 2023$(6,961)$(318)$72 $(7,207)
Foreign currency translation679 — — 679 
Unrealized gain on cash flow hedges— 365 — 365 
Reclassifications to earnings— 30 — 30 
Balance as of December 31, 2023$(6,282)$77 $72 $(6,133)

The following table presents changes by component for the six months ended December 31, 2022 and 2023:

($000s)Foreign
Currency
Translation
Adjustment
Derivative
Valuation
Defined
Benefit Plan
Total
Balance as of June 30, 2022$(4,026)$(639)$103 $(4,562)
Foreign currency translation(1,123)— — (1,123)
Unrealized loss on cash flow hedges— (487)— (487)
Reclassifications to earnings— 1,040 — 1,040 
Balance as of December 31, 2022$(5,149)$(86)$103 $(5,132)
($000s)Foreign
Currency
Translation
Adjustment
Derivative
Valuation
Defined
Benefit Plan
Total
Balance as of June 30, 2023$(6,260)$(124)$72 $(6,312)
Foreign currency translation(22)— — (22)
Unrealized gain on cash flow hedges— 130 — 130 
Reclassifications to earnings— 71 — 71 
Balance as of December 31, 2023$(6,282)$77 $72 $(6,133)

Share buyback
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On September 18, 2023, the Company announced that the board of directors (the "Board") had authorized a share repurchase program under which the Company may repurchase up to $30 million of its shares over the next six months beginning September 18, 2023 (the “Share Repurchase Program”). During the three and six months ended December 31, 2023, we repurchased 488,803 and 623,327 shares of our common shares under the Share Repurchase Program for $8.4 million and $10.4 million, respectively, which the Company funded with available cash. As of December 31, 2023, approximately $19.6 million remained available for share repurchases under our Share Repurchase Program.

During the six months ended December 31, 2022, we repurchased 17,558 shares of our common shares under our previous share repurchase program for $0.3 million. The previous share repurchase program was announced in December 2021 and expired a year later.


13.WEIGHTED AVERAGE SHARE COUNTS
The following table sets forth the components of the computation from basic to diluted earnings per share for net income for the three and six months ended December 31, 2023 and 2022:

Three Months Ended December 31,Six Months Ended December 31,
(000s)2023202220232022
Shares used in basic earnings per share calculation17,88518,14918,08418,154
Effect of dilutive securities:
Employee share-based compensation95223104168
Warrant460488479437
Total effects of dilutive securities555711583605
Shares used in dilutive earnings per share calculation18,44018,86018,66718,759
Shares considered anti-dilutive using the treasury method(527)(349)(512)(408)

14.RELATED PARTY TRANSACTIONS
The Company has agreements with multiple companies under the control of our controlling shareholder, TRGI, and with companies which have common directors with us, in the normal course of business. These transactions were executed on mutually agreed terms and include contact center services, back office support services and an office lease. During the three and six months ended December 31, 2023, the Company recognized revenue of $0.02 million and $0.03 million, respectively, with these related parties. During the three and six months ended December 31, 2022, the Company recognized revenue of $0.01 million and $0.03 million, respectively, with these related parties. As of December 31, 2023 and June 30, 2023, the Company had accounts receivable of $0.1 million and $0.04 million, respectively, and accounts payable of $0.05 million and $2.3 million, respectively, with these related parties.

15.INVESTMENT IN JOINT VENTURE
The Company has an investment in Lake Ball, LLC to procure and sell commercial leads for its customers. The Company’s ownership interest is 47.5% and is accounted for under the equity method. The Company’s investment of $0.4 million at December 31, 2023 and June 30, 2023, respectively, is included in other non-current assets in the consolidated balance sheets, while net earnings from the joint venture is included in selling, general and administrative expense in the consolidated statements of comprehensive income.
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The table below presents our investment in the joint venture:
Three Months Ended December 31,Six Months Ended December 31,
($000s)2023202220232022
Beginning balance$385 $384 $372 $382 
Dividends received(270)(177)(527)(327)
Share of profit255 173 525 325 
Ending balance$370 $380 $370 $380 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q (this "Form 10-Q"), the financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023 (the "Annual Report"), as filed with the Securities and Exchange Commission (the "SEC"), and the information included under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report. In addition to historical data, the following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed in our forward-looking statements as a result of various factors, including but not limited to those discussed under "Cautionary Note Regarding Forward-Looking Statements" in this Form 10-Q and under Part I, Item 1A, "Risk Factors" in the Annual Report.
This Form 10-Q includes certain historical consolidated financial and other data for IBEX (“ibex,” “we,” “us,” “our” or the “Company”). The following discussion provides a narrative of our financial condition and results of operations for the three and six months ended December 31, 2023 compared to the three and six months ended December 31, 2022.
Overview

ibex delivers innovative business process outsourcing (“BPO”), smart digital marketing, online acquisition technology, and end-to-end customer engagement solutions to help companies acquire, engage, and retain valuable customers. Today, ibex operates a global CX delivery center model consisting of 31 delivery centers around the world, while deploying next-generation technology to drive superior customer experiences for many of the world’s leading companies across various verticals, including Retail & E-commerce, HealthTech, FinTech, Utilities and Logistics. ibex leverages its diverse global team of approximately 32,000 employees together with industry-leading technology, including its Wave X platform, to manage customer interactions on behalf of our clients, driving a truly differentiated customer experience.
Business Highlights

During the second quarter of our fiscal year ending June 30, 2024, the Company continued to deliver solid financial performance, in particular, growth in our digital first solutions with leading clients in our HealthTech and Retail & E-commerce verticals, while optimizing our geographic diversity for delivery of services to our clients. Despite macroeconomic trends impacting our historical growth trends, as well as the unfavorable impact on our revenue from shifting mix from onshore to offshore geographies, the business performed well in several important areas, including new client wins with key clients in strategic verticals.
Recent Financial Highlights

The Company delivered revenues of $132.6 million during the three months ended December 31, 2023, a 4.8% decline compared to same quarter in the prior year, largely due to the year over year shift of delivery from onshore to higher margin offshore regions, macroeconomic conditions, lower training revenue recognized, and external factors impacting the FinTech and Telecommunications verticals, partially offset by revenue increases in the Retail & E-commerce and HealthTech verticals. Net income during the three months ended December 31, 2023 was $6.1 million, a decrease of 34.5% from $9.3 million during the same quarter in the prior year. Fully diluted earnings per share for the three months ended December 31, 2023 of $0.33, a decrease of 33% from $0.49 per share during the same quarter in the prior year.

The Company delivered revenues of $257.2 million during the six months ended December 31, 2023, a 3.7% decline compared to same period in the prior year, largely due to aforementioned macroeconomic conditions. Net income during the six months ended December 31, 2023 was $13.5 million, a decrease of 14.5% from $15.8 million during the same period in the prior year. The decrease in net income was primarily driven by lower revenue, including training revenue recognized, and planned investments in our technology, and sales and marketing, and client service functions as we continue to focus on revenue growth. Fully diluted earnings per
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share for the six months ended December 31, 2023 of $0.72, a decrease of 14% from $0.84 per share during the same period in the prior year.
Trends and Factors Affecting our Performance
There are a number of key trends and factors that have affected and may affect our results of operations.
Macroeconomic Trends

Macroeconomic factors, including but not limited to, increasing inflation and interest rates, global economic and geopolitical uncertainty, changes in foreign currency exchange rates, and the impact that these factors are having on our clients and their customers, have also impacted our financial results during the six months ended December 31, 2023. Some of our customers have increased their focus on cost reduction, resulting in decisions to shift work from onshore sites to offshore sites, which has contributed to a modest decline in revenue during the six months ended December 31, 2023 when compared to the same period in the prior year. We expect that these factors will continue to impact our operations in the near term; however, we also believe that they present opportunities with both new and existing clients, as companies maintain a focus on cost reduction.

Artificial Intelligence ("AI")

With the increasing applicability of AI in enhancing business processes, the customer care industry is starting to integrate AI into its range of solutions to improve the customer experience and improve efficiencies. The proliferation and evolution of generative AI may have impacts on the CX sector. Potential automation in back-end and middle-office business processes, as well as potential increased use of bots to respond to pre-defined queries, could impact assisted customer interactions. Additionally, productivity, data availability and quality due to generative AI could result in an increased volume of work, as agents may be up-skilled to deploy improved analytical capabilities. However, the adoption of generative AI also presents key challenges in the forms of data security, governance, implementation and coordination of an overall customer service solution. These challenges create opportunities for trusted CX partners.

We are moving aggressively to develop the “Next wave of Wave X” by leveraging generative AI in our business. We have created our three-pronged AI strategy, which continues to keep ibex at the forefront of digital transformation. Our solutions are focused on increasing agent productivity, providing deeper customer insights to elevate the customer experience and putting AI in front of the customer journey with voice and chat bots. We believe we are well positioned to leverage our leadership position in adopting new technology in the CX sector and to create significant value for our clients through the application of AI. More information on the risks related to the adoption of AI is described in Part 1. Item 1A of the Annual Report.

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, shifting volume to lower cost geographies, and potential increases 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 industry consolidation, client investments in growth, and overall macroeconomic environment, all of which can result in short term revenue volatility for providers. Demand during the six months ended December 31, 2023 was constrained when compared to the same period in the prior year, due in large part to the aforementioned macroeconomic conditions.

Capacity Utilization
As a significant portion of our customer interaction services are performed by customer-facing agents located in delivery centers, our margins are impacted by the level of capacity utilization in those facilities. We incur substantial fixed costs in operating such facilities. 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.
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As demand for delivery locations has continued to shift towards lower cost geographies during the six months ended December 31, 2023, we have continued to fill the additional capacity in our offshore region, and expect this capacity to be absorbed quickly as clients and prospective clients look to relocate work to cost advantageous markets in the near term. We also realized cost savings as we reduced the number of onshore and nearshore delivery centers year over year.
Labor Costs

When compensation levels of our employees increase, we may not be able to pass on 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 six months ended December 31, 2023, we continued to see increasing wage pressure in all of our geographies, in part brought on by the current global inflation and labor shortage, which is increasing competition for contact center agents from other sectors of the economy. During the six months ended December 31, 2023, we have offset some of these wage increases with higher agent quality and increased productivity, higher agent retention, and increased client prices under contractual cost of living adjustments (“COLA”). Furthermore, our overall labor cost as a percentage of revenue is impacted by the aforementioned shift in delivery location from onshore delivery centers to offshore centers.
Delivery Location

We generate greater profit margins from our work carried out by agents located in offshore and nearshore geographies compared to our work carried out from onshore locations in the United States. As a result, our operating margins are 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 is approximately 94% as of December 31, 2023. We regularly evaluate new markets to continue to service our clients.
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. Our revenues have generally increased as a result of performance-based market share gains with our existing clients, as well as due to our new client wins.

Sales Cycles and New Client Wins

We have a strong track record of winning key new client accounts and as a result of our land and expand strategy, we have been successful in winning an increasing number of new client engagements, and subsequently increasing our revenues with these clients period over period. Historically, our in-year new client wins have generated 2.5x to 3.0x revenue in the second and third years of the engagement. However, in the current slowing economic environment, our sales cycles have lengthened. We believe that the sales activity has and will continue to pick up pace in fiscal year 2024.
Client Concentration
During the six months ended December 31, 2023, our largest client accounted for 13%, while our three largest clients accounted for 31% of our consolidated revenues. We believe client diversification is an important attribute in a challenging market.

Seasonality

Our business performance is subject to seasonal fluctuations. 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.
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Pricing
Our revenues are dependent upon both volumes and unit pricing for our services. Client pricing is often expressed in terms of a base price per minute or hour as well as, in limited cases, with bonuses and occasionally penalties depending upon our achievement of certain client objectives. During the fiscal year ended June 30, 2023 and the six months ended December 31, 2023, the tightening in the global labor market and corresponding wage inflation, as well as increasing facilities expenses has resulted in us pursuing and successfully negotiating price increases or COLA with many of our clients.
The current economic environment is also encouraging our clients to consider locating more of their support offshore. Within our customer engagement solutions, pricing for services delivered from onshore locations is higher than pricing for services delivered from offshore locations, largely driven by higher wage levels in onshore locations. Accordingly, a shift in service delivery location from onshore to offshore locations results in a lower price for our clients and a decline in our absolute revenues; however, our margins tend to increase, in percentage and often in absolute terms, as compared to onshore service delivery.
Results of Operations
The following summarizes the results of our operations for the three and six months ended December 31, 2023 and 2022:

Three Months Ended December 31,Six Months Ended
December 31,
($000s)2023202220232022
Revenue$132,634 $139,325 $257,243 $267,130 
Cost of services95,884 99,790 184,080 195,943 
Selling, general and administrative24,857 23,502 47,897 42,807 
Depreciation and amortization4,946 4,582 9,988 9,259 
Income from operations$6,947 $11,451 $15,278 $19,121 
Interest income512 138 1,098 186 
Interest expense(111)(300)(215)(448)
Income before income taxes$7,348 $11,289 $16,161 $18,859 
Provision for income tax expense(1,273)(2,019)(2,661)(3,066)
Net income$6,075 $9,270 $13,500 $15,793 
Three Months Ended December 31, 2023 and 2022
Revenue

Our revenue was $132.6 million during the three months ended December 31, 2023, a decrease of $6.7 million, or 4.8%, compared to the prior year quarter. This decrease was primarily driven by macroeconomic factors impacting the FinTech and Telecommunications verticals, which decreased $8.6 million or 32.3%, and $3.6 million or 15.4%, respectively, from the comparative period. These decreases were partially offset by increases in the HealthTech vertical of $4.1 million, or 34.0%, and Retail & E-commerce vertical of $0.9 million, or 2.5%, from the comparative period.

As a percentage of total revenue, the revenue from our Retail & E-commerce vertical increased to 29.0% during the three months ended December 31, 2023 compared to 26.9%, and the revenue from our HealthTech vertical increased to 12.2% compared to 8.7% during the prior year quarter. Conversely, the revenue from our FinTech vertical decreased to 13.7% compared to 19.2%, and the revenue from our Telecommunications vertical decreased to 14.8% compared to 16.7% during the prior year quarter.
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Operating Expenses

Cost of services
Cost of services was $95.9 million during the three months ended December 31, 2023, a decrease of $3.9 million, or 3.9%, compared to the prior year quarter. The decrease in cost of services was primarily due to decreases in payroll and related costs, facilities, and local transportation expenses, partially offset by an increase in lead costs.
Payroll and related costs were $74.3 million during the three months ended December 31, 2023, a decrease of $3.4 million, or 4.4%, compared to the prior year quarter. As a percent of revenue, payroll costs remained consistent at 56.0% during the three months ended December 31, 2023 compared to 55.8% during the prior year quarter.
Facilities expenses, including rent and utilities, were $13.0 million during the three months ended December 31, 2023, a decrease of $0.5 million, or 3.4%, compared to the prior year quarter, and local transportation expenses were $1.7 million during the three months ended December 31, 2023, a decrease of $0.2 million, or 10.7%, compared to the prior year quarter. These decreases were primarily due to the site optimization efforts completed in the fourth quarter of fiscal year 2023.
Lead expenses were $2.9 million during the three months ended December 31, 2023, an increase of $0.4 million, or 17.3%, compared to the prior year quarter. These increases were primarily due to increases in the utilization of our third-party affiliates for inbound inquiries as well as search engine costs in connection with our digital sales and marketing efforts, which may continue throughout the remainder of fiscal year 2024.
Selling, general and administrative expense (“SG&A”)

SG&A expense was $24.9 million during the three months ended December 31, 2023, an increase of $1.4 million, or 5.8%, compared to the prior year quarter. The increase in SG&A expense was primarily due to increases in payroll and related costs, IT expenses, rent and utilities, partially offset by decreases in legal and professional fees.

The increase in payroll and related costs of $0.6 million was primarily driven by continued investments in our technology, sales and marketing, and client service functions as we continue to focus on revenue growth. IT expenses increased $0.7 million due to continued investments in cybersecurity and core business management systems. Rent increased $0.3 million due to an overall increase in utility expenses in certain regions, which were driven by higher fuel prices. These increases were partially offset by a decrease in legal and professional fees of $0.1 million.
Depreciation and amortization expense (“D&A”)
D&A expense was $4.9 million during the three months ended December 31, 2023, an increase of $0.4 million or 7.9% compared to the prior year quarter. As a percentage of revenue, depreciation and amortization expense increased to 3.7% during the three months ended December 31, 2023 compared to 3.3% in the comparative period.
Income from operations
Income from operations was $6.9 million during the three months ended December 31, 2023 compared to $11.5 million compared to the prior year quarter. The operating margin was 5.2% for three months ended December 31, 2023, down from 8.2% for the three months ended December 31, 2022. The decrease was primarily driven by lower revenue, including training revenue recognized, as well as planned investments in technology, sales and marketing, and client service functions as we continue to focus on revenue growth.

Interest income

Interest income during the three months ended December 31, 2023 was $0.5 million compared to $0.1 million for the three months ended December 31, 2022 as income on invested funds increased compared to the prior year quarter.
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Interest expense

Interest expense during the three months ended December 31, 2023 was $0.1 million, down from $0.3 million during the three months ended December 31, 2022 driven by lower borrowings for this quarter.
Provision for Income Taxes

Income tax expense was $1.3 million during three months ended December 31, 2023, a decrease of $0.7 million when compared with the same period of the prior year, primarily due to lower pre-tax income in the current year.
Six Months Ended December 31, 2023 and 2022
Revenue

Our revenue was $257.2 million during the six months ended December 31, 2023, a decrease of $9.9 million, or 3.7%, compared to the same prior year period. This decrease was primarily driven by macroeconomic factors impacting the FinTech and Telecommunications verticals, which decreased $15.6 million or 30.0%, and $4.7 million or 10.4%, respectively, from the comparative period. These decreases were partially offset by increases in the HealthTech vertical of $5.9 million, or 23.5%, Retail & E-commerce vertical of $2.9 million, or 4.4%, and Cable vertical of $1.8 million, or 17.8%, from the comparative period.

As a percentage of total revenue, the revenue from our Retail & E-commerce vertical increased to 26.3% during the six months ended December 31, 2023 compared to 24.2%, and the revenue from our HealthTech vertical increased to 12.0% compared to 9.4% during the same prior year period. Conversely, the revenue from our FinTech vertical decreased to 14.2% compared to 19.6%, and the revenue from our Telecommunications vertical decreased to 15.8% compared to 17.0% during the same prior year period.
Operating Expenses

Cost of services
Cost of services was $184.1 million during the six months ended December 31, 2023, a decrease of $11.9 million, or 6.1%, compared to the same prior year period. The decrease in cost of services was primarily due to decreases in payroll and related costs, facilities, telecom, printing and production related, and local transportation expenses, partially offset by an increase in lead costs.
Payroll and related costs were $141.1 million during the six months ended December 31, 2023, a decrease of $10.2 million, or 6.7%, compared to the same prior year period. As a percent of revenue, payroll costs decreased to 54.9% during the six months ended December 31, 2023 compared to 56.6% during the same period in the prior year driven by an increasing percentage of revenue generated from nearshore and offshore regions with lower labor costs.
Facilities expenses were $9.0 million during six months ended December 31, 2023, a decrease of $0.8 million, or 8.2%, compared to the same period in the prior year, local transportation expenses were $3.3 million during the three months ended December 31, 2023, a decrease of $0.3 million, or 9.0%, compared to the same period in the prior year, and telecom, printing and production related expenses were $4.3 million during the six months ended December 31, 2023, a decrease of $1.0 million, or 18.6%, compared to the same period in the prior year. These decreases were primarily due to the site optimization efforts completed in the fourth quarter of fiscal year 2023.
Lead expenses were $6.5 million during the six months ended December 31, 2023, an increase of $0.9 million, or 15.5%, compared to the same period in the prior year. These increases were primarily due to increases in the utilization of our third-party affiliates for inbound inquiries as well as search engine costs in connection with our digital sales and marketing efforts, which may continue throughout the remainder of fiscal year 2024.

Selling, general and administrative expense (“SG&A”)
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SG&A expense was $47.9 million during the six months ended December 31, 2023, an increase of $5.1 million, or 11.9%, compared to the same period in the prior year. The increase in SG&A expense was primarily due to increases in payroll and related costs, IT expenses, legal and professional fees, and travel and other expenses.

The increase in payroll and related costs of $2.2 million was primarily driven by continued investments in our technology, sales and marketing, and client service teams as we continue to focus on revenue growth. IT expenses increased $1.3 million due to continued investments in cybersecurity and core business management systems. The increase in legal and professional fees of $1.1 million was primarily related to strategic projects and higher compliance expenses. Travel and other expenses increased by $0.4 million as the business continues to expand in our offshore region.
Depreciation and amortization expense (“D&A”)
D&A expense was $10.0 million during the six months ended December 31, 2023, an increase of $0.7 million or 7.9%, compared to the same prior year period. As a percentage of revenue, depreciation and amortization expense increased to 3.9% during six months ended December 31, 2023 compared to 3.5% in the comparative period.
Income from operations

Income from operations was $15.3 million during the six months ended December 31, 2023 compared to $19.1 million compared to the same period in the prior year. The operating margin was 5.9% for six months ended December 31, 2023, down from to 7.2% for the six months ended December 31, 2022. The decrease was primarily driven by lower revenue, including training revenue recognized, and planned investments in our technology, sales and marketing, and client service functions as we continue to focus on revenue growth.

Interest income

Interest income during the six months ended December 31, 2023 was $1.1 million compared to $0.2 million for the six months ended December 31, 2022 as income on invested funds increased compared to the same period in the prior year.

Interest expense

Interest expense during the six months ended December 31, 2023 was $0.2 million, down from $0.4 million during the six months ended December 31, 2022 driven by lower borrowings.
Provision for Income Taxes

Income tax expense was $2.7 million during six months ended December 31, 2023, a decrease of $0.4 million when compared with the same period in the prior year, primarily due to lower pre-tax income in the current year.
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 provide a more helpful depiction of our performance of the business by encompassing only relevant and manageable 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, have limitations as analytical tools, and should not be considered in isolation or as a substitute for analysis of our operating results as reported in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). Non-GAAP financial measures and ratios are not measurements of our performance, financial condition or liquidity under U.S. GAAP 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 U.S. GAAP.
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Adjusted net income and adjusted earnings per share
Adjusted net income is a non-GAAP profitability measure that represents net income before the effect of the following items: non-recurring expenses (including legal and settlement costs), warrant contra revenue, foreign currency gains and losses, and share-based compensation expense, net of the tax impact of such adjustments. We define adjusted earnings per share as adjusted net income divided by weighted average diluted shares outstanding.
We use adjusted net income and adjusted earnings per share 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 net income and adjusted earnings per share are meaningful indicators of performance as it reflects what we believe is closer to the actual results of our business performance by removing items that we believe are not reflective of our underlying business. We also believe that adjusted net income and adjusted earnings per share may be widely used by investors, securities analysts and other interested parties as a supplemental measure of performance.
Adjusted net income and adjusted earnings per share 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 U.S. GAAP. Because of these limitations, you should consider adjusted net income and adjusted earnings per share in conjunction with other U.S. GAAP financial performance measures, including net income from operations and net income, among others.

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The following table provides a reconciliation of net income and net income margin to adjusted net income and adjusted net income margin, and diluted earnings per share to adjusted earnings per share for the periods presented:

($000s, except per share amounts)Three Months Ended
December 31,
Six Months Ended
December 31,
2023202220232022
Net income$6,075