ibex-20240930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________

FORM 10-Q

_______________________

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024


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 class

Trading Symbol(s)

Name of each exchange on which registered

Common shares, par value $0.0001

IBEX

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 filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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 October 31, 2024 was 16,764,808.

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IBEX LIMITED

Quarterly Report on Form 10-Q

For Quarterly Period Ended September 30, 2024

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		Page No.

	CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS	1



PART I.	FINANCIAL INFORMATION	2

Item 1.	Financial Statements	2

	Consolidated Balance Sheets (unaudited)	3

	Consolidated Statements of Comprehensive Income (unaudited)	4

	Consolidated Statements of Stockholders' Equity (unaudited)	5

	Consolidated Statements of Cash Flows (unaudited)	6

	Notes to the Consolidated Financial Statements (unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34

Item 4.	Controls and Procedures	35

PART II.	OTHER INFORMATION	36

Item 1.	Legal Proceedings	36

Item 1A.	Risk Factors	36

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36

Item 3.	Defaults Upon Senior Securities	37

Item 4.	Mine Safety Disclosures	37

Item 5.	Other Information	37

Item 6.	Exhibits	38

	Signatures	39

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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:

•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;

•General economic uncertainty in global markets and unfavorable global economic conditions, including inflation, rising interest rates, recession, foreign exchange fluctuations and supply-chain issues;

•Our ability to manage our international operations, particularly in the Philippines, Jamaica, Pakistan and Nicaragua;

•Natural events, health epidemics, geopolitical conditions, including developing or ongoing conflicts, widespread civil unrest, terrorist attacks and other attacks of violence involving any of the countries in which we or our clients operate;

•Our ability to anticipate, develop and implement information technology solutions, including Artificial Intelligence (“AI”), 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;

•Our ability to realize the anticipated strategic and financial benefits of our relationship with Amazon; and

•The impact of tax matters, including new legislation and actions by taxing authorities.

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, 2024. 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.

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

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IBEX LIMITED AND SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited)

(in thousands, except share data)


	September 30, 2024		June 30, 2024
Assets
Current assets
Cash and cash equivalents	$	62,305	$	62,720
Accounts receivable, net	106,043		98,366
Prepaid expenses	8,202		7,712
Due from related parties	256		192
Tax advances and receivables	10,153		9,080
Other current assets	1,571		1,888
Total current assets	188,530		179,958

Non-current assets
Property and equipment, net	33,202		29,862
Operating lease assets	58,806		59,145
Goodwill	11,832		11,832
Deferred tax asset, net	4,414		4,285
Other non-current assets	9,491		8,822
Total non-current assets	117,745		113,946
Total assets	$	306,275	$	293,904

Liabilities and stockholders' equity
Current liabilities
Accounts payable and accrued liabilities	$	19,797	$	16,719
Accrued payroll and employee-related liabilities	34,095		30,674
Current deferred revenue	4,873		4,749
Current operating lease liabilities	12,395		12,051
Current maturities of long-term debt	698		660
Due to related parties	25		60
Income taxes payable	5,889		6,083
Total current liabilities	77,772		70,996

Non-current liabilities
Non-current deferred revenue	1,083		1,128
Non-current operating lease liabilities	52,832		53,441
Long-term debt	802		867
Other non-current liabilities	2,695		1,673
Total non-current liabilities	57,412		57,109
Total liabilities	135,184		128,105

Stockholders' equity
Common stock: par value $0.0001, 108,057,967 shares authorized, 16,765,381 and 17,017,476 shares outstanding as of September 30, 2024 and June 30, 2024, respectively	2		2
Additional paid-in capital	210,872		210,200
Treasury stock at cost: 1,849,681 and 1,567,552 shares as of September 30, 2024 and June 30, 2024, respectively	(30,045)		(25,367)
Accumulated other comprehensive loss	(6,146)		(7,913)
Accumulated deficit	(3,592)		(11,123)
Total stockholders' equity	171,091		165,799
Total liabilities and stockholders' equity	$	306,275	$	293,904

See accompanying notes to unaudited consolidated financial statements.

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IBEX LIMITED AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(Unaudited)

(in thousands, except per share data)


	Three Months Ended September 30,
	2024		2023
Revenue	$	129,717	$	124,609

Cost of services (exclusive of depreciation and amortization presented separately below)	90,041		88,196
Selling, general and administrative	26,215		23,040
Depreciation and amortization	4,369		5,042
Total operating expenses	120,625		116,278
Income from operations	9,092		8,331

Interest income	583		586
Interest expense	(162)		(104)
Income before income taxes	9,513		8,813

Provision for income tax expense	(1,982)		(1,388)
Net income	$	7,531	$	7,425

Other comprehensive income
Foreign currency translation adjustments	$	1,388	$	(701)
Unrealized gain / (loss) on cash flow hedging instruments, net of tax	379		(194)
Total other comprehensive income / (loss)	1,767		(895)
Total comprehensive income	$	9,298	$	6,530

Net income per share
Basic	$	0.45	$	0.41
Diluted	$	0.43	$	0.39

Weighted average common shares outstanding
Basic	16,880		18,287
Diluted	17,490		18,898

See accompanying notes to unaudited consolidated financial statements.

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IBEX LIMITED AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity

(Unaudited)

(in thousands)


	Common shares			Treasury Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount		Amount
Balance, June 30, 2023	18,280	$	2	$	(3,682)	$	204,734	$	(6,312)	$	(44,778)	$	149,964
Net income	—	—		—		—		—		7,425		7,425
Foreign currency translation adjustment	—	—		—		—		(701)		—		(701)
Changes in fair value of cash flow hedges	—	—		—		—		(194)		—		(194)

Purchase of treasury shares	(134)	—		(2,044)		—		—		—		(2,044)
Provision for common stock warrants	—	—		—		287		—		—		287
Issuance of common shares	23	—		—		5		—		—		5
Share-based compensation expense	—	—		—		1,297		—		—		1,297
Balance, September 30, 2023	18,169	$	2	$	(5,726)	$	206,323	$	(7,207)	$	(37,353)	$	156,039


	Common shares			Treasury Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Income / (Loss)		Accumulated Deficit		Total Stockholders' Equity
	Shares	Amount		Amount
Balance, June 30, 2024	17,017	$	2	$	(25,367)	$	210,200	$	(7,913)	$	(11,123)	$	165,799
Net income	—	—		—		—		—		7,531		7,531
Foreign currency translation adjustment	—	—		—		—		1,388		—		1,388
Changes in fair value of cash flow hedges	—	—		—		—		379		—		379
Purchase of treasury shares	(282)	—		(4,678)		—		—		—		(4,678)
Provision for common stock warrants	—	—		—		—		—		—		—
Issuance of common shares	30	—		—		382		—		—		382
Share-based compensation expense	—	—		—		290		—		—		290
Balance, September 30, 2024	16,765	$	2	$	(30,045)	$	210,872	$	(6,146)	$	(3,592)	$	171,091

See accompanying notes to unaudited consolidated financial statements.

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IBEX LIMITED AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)


	Three Months Ended September 30,
	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	7,531	$	7,425
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	4,369		5,042
Noncash lease expense	3,326		3,225
Warrant contra revenue	—		287
Deferred income tax	(130)		244
Share-based compensation expense	670		848
Allowance of expected credit losses	83		11


Change in assets and liabilities:
Increase in accounts receivable	(7,649)		(3,792)
Increase in prepaid expenses and other current assets	(1,735)		(1,256)
Increase in accounts payable and accrued liabilities	4,574		206
Increase / (decrease) in deferred revenue	79		(372)
Decrease in operating lease liabilities	(3,356)		(3,184)
Net cash inflow from operating activities	7,762		8,684

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment	(3,630)		(2,052)
Net cash outflow from investing activities	(3,630)		(2,052)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit	60		37
Repayments of line of credit	(60)		(89)
Proceeds from the exercise of options	382		5
Principal payments on finance leases	(171)		(88)
Purchase of treasury shares	(4,807)		(1,832)
Net cash outflow from financing activities	(4,596)		(1,967)
Effects of exchange rate difference on cash and cash equivalents	49		(65)
Net (decrease) / increase in cash and cash equivalents	(415)		4,600
Cash and cash equivalents, beginning	62,720		57,429
Cash and cash equivalents, ending	$	62,305	$	62,029

Supplemental cash flow disclosures
Cash paid for interest	$	162	$	104
Cash paid for income taxes	$	3,383	$	1,086

Supplemental non-cash disclosures
Change in accounts payable related to fixed assets	$	3,677	$	(115)

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 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 customer experience ("CX") model, which integrates voice, email, chat, SMS, social media and other communication applications.

In addition, 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. We also have a small suite of what we call CX services which measures, monitors and manages our clients’ holistic customer experiences.

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.

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

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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, 2024 (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 September 30, 2024, its results of operations, comprehensive income, and shareholders’ equity for the three months ended September 30, 2024 and 2023, and cash flows for the three months ended September 30, 2024 and 2023. The consolidated balance sheet as of June 30, 2024 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.

Revenue recognition

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 Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers.

Trade receivables

In accordance with Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments - Credit Losses (Topic 326), the Company estimates its 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 after all means of collection have been exhausted and the potential for recovery is considered remote.

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.

Property and equipment, net

Property and equipment and assets leased under financing leases are carried at cost at the acquisition date and are depreciated using the straight-line method over their estimated useful lives.

Property and equipment assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is assessed by a comparison of the carrying amount of the asset to the estimated future undiscounted net cash flows expected to be generated by the asset. If estimated future undiscounted net cash flows are less than the carrying value of the asset, an impairment loss is recognized to the extent its carrying value exceeds its estimated fair value.

Leases

The Company determines whether an arrangement contains a lease at inception in accordance with the provisions of 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, net 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.

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 a 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

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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. Legal fees are expensed as incurred.

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.

Income taxes

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 respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are also recognized for the estimated future effects of tax loss carry forwards. The effect of changes in tax rates on deferred taxes is recognized in the period in which the enactment dates change. 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.

Share repurchase programs

The Company’s board of directors (the “Board”) may authorize share repurchases of the Company’s common shares. Purchases made pursuant to these authorizations may be carried out through open market transactions, negotiated purchases or otherwise, 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.

The Board will review the repurchase program periodically and may authorize adjustment of its terms and size, and suspend or discontinue the program. The Company has funded and expects to fund future repurchases with its existing cash balance. The share repurchase programs do not obligate the Company to acquire any particular amount of common shares. See Note 11. “Stockholders’ Equity” for more information on share repurchases.

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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 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 in 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, maintenance, and training are expensed as incurred.

The Company capitalized $0.8 million and $0.4 million during the three months ended September 30, 2024 and 2023, respectively.

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.

Recently Issued Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued 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.

In March 2024, the SEC issued its final climate disclosure rules, which require the disclosure of climate-related information in annual reports and registration statements. The rules require disclosure in the audited financial statements of certain effects of severe weather events and other natural conditions above certain financial thresholds, as well as amounts related to carbon offsets and renewable energy credits or certificates, if material. Disclosure requirements were set to begin phasing in for fiscal years beginning on or after January 1, 2025. On April 4, 2024, the SEC determined to voluntarily stay the final rules pending certain legal challenges. We are currently evaluating the impact of the new rules on the disclosures to our consolidated financial statements.

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2.REVENUE FROM CONTRACTS WITH CUSTOMERS

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 its revenue from clients based in the United States and other countries as shown below:


	Three Months Ended September 30,
($000s)	2024		2023
Revenue
United States	$	124,648	$	121,184
Other countries	5,069		3,425
Total	$	129,717	$	124,609

The following table presents the breakdown of the Company’s revenues by geographical location, based on where the services are provided:


	Three Months Ended September 30,
($000s)	2024		2023
Revenue
Onshore (United States)	$	31,099	$	31,536
Offshore (Philippines, Pakistan)	64,436		57,359
Nearshore (Jamaica, Nicaragua, Honduras)	34,182		35,714
Total	$	129,717	$	124,609

The following table presents the breakdown of the Company’s revenue by pattern of revenue recognition:


	Three Months Ended September 30,
($000s)	2024		2023
Pattern of Revenue recognition
Services transferred over time	$	120,938	$	115,338
Services transferred at a point in time	8,779		9,271
Total	$	129,717	$	124,609

The movement in deferred revenue was as follows:


	Three Months Ended September 30,
($000s)	2024		2023
Beginning balance	$	5,877	$	7,796
Revenue recognized	(2,161)		(2,672)
Revenue deferred	2,240		2,300
Ending balance	$	5,956	$	7,424

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3.ACCOUNTS RECEIVABLE AND SIGNIFICANT CLIENT

Accounts receivable, net in the accompanying consolidated balance sheets, consists of the following:


	September 30,		June 30,
($000s)	2024		2024
Accounts receivable	$	106,198	$	98,438
Less: Allowance for credit losses	(155)		(72)
Accounts receivable, net	$	106,043	$	98,366

The Company will write-off accounts receivable against the allowance when it determines a balance is uncollectible. The Company did not have any write-offs for the three months ended September 30, 2024 and 2023.

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


	Three Months Ended September 30,
($000s)	2024		2023
Beginning balance	$	72	$	120
Provision for credit losses	83		11



Ending balance	$	155	$	131

Significant Client

During the three months ended September 30, 2024 and 2023, the Company had one client that contributed approximately 11% and 12% 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 September 30, 2024.

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4.LEASES

The Company has operating lease obligations primarily for its delivery centers and finance lease obligations primarily for vehicles and other equipment. Leases typically have initial terms of two to 15 years and may include renewal options if the Company is reasonably certain to exercise such options.

The components of lease cost are as follows:


	Three Months Ended September 30,
($000s)	2024		2023
Operating lease cost:
Operating lease cost	$	4,870	$	4,886
Variable lease cost	733		781
Short-term lease cost	149		—
Total operating lease cost	$	5,752	$	5,667

Finance lease cost:
Amortization of right of use assets	$	221	$	100
Interest on lease liabilities	81		43
Total finance lease cost	$	302	$	143

The following table presents supplemental balance sheet information related to leases:


	September 30,		June 30,
($000s)	2024		2024
Operating lease assets	$	58,806	$	59,145

Operating lease liabilities, current	12,395		12,051
Operating lease liabilities, non-current	52,832		53,441
Total operating lease liabilities	$	65,227	$	65,492

Finance lease assets, net	$	1,623	$	1,697

Finance lease liabilities, current	$	698	$	660
Finance lease liabilities, non-current	802		867
Total finance lease liabilities	$	1,500	$	1,527

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


	Three Months Ended September 30,
($000s)	2024		2023
Cash paid for amounts included in the measurement of lease liabilities	$	3,356	$	3,184
Operating cash flows paid for interest portion of finance leases	$	81	$	43
Financing cash flows paid for principal portion of finance leases	$	171	$	88

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The following table presents supplemental noncash information related to leases:


	Three Months Ended September 30,
($000s)	2024		2023
Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	2,694	$	49
Finance leases	$	140	$	110


	September 30,		June 30,
	2024		2024
Weighted average remaining lease term (in years)
Operating leases	4.9		5.1
Finance leases	2.1		2.2

Weighted average discount rate
Operating leases	10.5	%	10.5	%
Finance leases	22.3	%	22.3	%

The following table presents the maturities of our lease liabilities as of September 30, 2024:


($000s)	Operating Leases		Finance Leases
2025-remainder of year	$	13,381	$	724
2026	16,778		763
2027	16,490		366
2028	14,905		7
2029	12,563		—
Thereafter	10,892		—
Total undiscounted lease payments	85,009		1,860
Less: liability accretion	(19,782)		(360)
Total lease liabilities	$	65,227	$	1,500

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5.DERIVATIVES

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. The Company has not experienced any material issues related to derivative counterparty defaults.

The following tables show the notional amount and fair value of our foreign exchange cash flow hedging instruments as of September 30, 2024 and June 30, 2024:


Settlement date	Hedged currency	Foreign currency rate	Notional amount ($000s)		Fair Value ($000s)
Foreign currency option contracts - assets
October 8, 2024 through June 19, 2025	PHP	54.00 - 58.00	$	15,248
Fair value as of June 30, 2024					$	—
Fair value as of September 30, 2024					$	218


Settlement date	Hedged currency	Foreign currency rate	Notional amount ($000s)		Fair Value ($000s)
Foreign currency option contracts - liabilities
October 8, 2024 through June 19, 2025	PHP	54.00 - 58.00	$	15,248
Fair value as of June 30, 2024					$	335
Fair value as of September 30, 2024					$	—

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 (loss) ("AOCI"). Amounts previously recognized in AOCI are reclassified to cost of services in the periods in which the hedged expenses occur.

Refer to Note 11. "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 months ended September 30, 2024 and 2023.

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6.DEBT

Debt consists of the following:


	September 30,		June 30,
($000s)	2024		2024
Debt
Finance leases	1,500		1,527
Total debt	$	1,500	$	1,527
Less: Current maturities of long-term debt and finance leases	(698)		(660)
Total long-term debt	$	802	$	867

As of September 30, 2024, the Company had $61.0 million of borrowing available under our $80 million revolving credit facility (as amended, the "PNC Credit Facility") with PNC Bank, N.A. ("PNC") 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 September 30, 2024.

7.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.

A total of 1,171,812 warrant shares vested on the satisfaction of specified milestones tied to Amazon’s purchase of services from the Company during a seven-and-a-half-year period ended on June 30, 2024. 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. To date, the warrant has not been exercised, expired or cancelled.

The Company did not record any warrant contra revenue during the three months ended September 30, 2024, and approximately $0.3 million during the three months ended September 30, 2023.

SEC Form 10-Q filed by IBEX Limited