IBEX Ltd (IBEX) FY 2023 MD&A

ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the audited Consolidated Financial Statements and accompanying notes thereto included elsewhere in this Form 10-K. Unless otherwise noted, all of the financial information in this Form 10-K is consolidated financial information for the Company. The forward-looking statements in this discussion regarding our industry and the industries we serve, our expectations regarding our future performance, liquidity and capital resources and other non-historical statements in this discussion are subject to numerous risks and uncertainties. See "Cautionary Note Regarding Forward-Looking Statements" and Part I, Item 1A of this Form 10-K. Our actual results may differ materially from those contained in any forward-looking statements.

This Form 10-K 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 fiscal year ended June 30, 2023 compared to the fiscal year ended June 30, 2022 and fiscal year ended June 30, 2022 compared to fiscal year ended June 30, 2021.

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 retail, e-commerce, healthcare, fintech, utilities and logistics. ibex

43

Table of Contents

leverages its diverse global team of approximately 30,000 employees together with industry-leading technology, including its WaveX platform, to manage nearly 176 million critical customer interactions, adding over $2.2B in lifetime customer revenue each year and driving a truly differentiated customer experience.

Business Highlights

During the fiscal year ended June 30, 2023, the Company continued to deliver strong financial growth, in particular, growth in our digital first solutions with leading clients in our HealthTech, e-commerce, and retail verticals, while optimizing on our geographic diversity for delivery of services to our clients. Despite macroeconomic trends modestly slowing our historical growth trends, the business performed well in several important metrics, including profit and margin expansion, strong free cash flows, new client wins with key clients in strategic verticals, and continued client and vertical diversification. Our thoughtful and deliberate changes in geographic strategy and investing in partnerships with digitally-focused clients continues to deliver results. Our integrated omni-channel and digital-first business represents 73% of our total business.

Recent Financial Highlights

The Company delivered revenues of $523.1 million, for 6% growth over the prior year, driven by increases in the HealthTech and Retail and E-commerce verticals, offset by the impact of the exit of a low margin legacy client in the Technology vertical; net income of $31.6 million increased from $21.5 million, driven by improved operational delivery, geographic mix, and the impact of pricing, which all positively impacted margins; and fully diluted earnings per share of $1.67 was up from $1.15. Despite the current macroeconomic uncertainty, these results were the strongest in our history.

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 in fiscal year 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 lower revenue growth rate in fiscal year 2023 compared to prior years. We expect that these factors to 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.

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 fiscal year ended June 30, 2023 was constrained as compared in prior fiscal years, due in large part to the aforementioned macroeconomic conditions and uncertainty around future impacts of generative AI on our industry.

Capacity Utilization

As a significant portion of our customer interaction services are performed by customer-facing agents located in delivery facilities, our margins are impacted by the level of capacity utilization in those facilities. We incur substantial fixed expenses in operating such facilities. The greater the volume of interactions handled, the

44

Table of Contents

higher the utilization level of workstations within those facilities and the revenues generated to cover those fixed costs, thus the greater the percentage operating margin.

As our geographic delivery location mix has continued to shift towards lower cost geographies in the last year, we have continued to invest in additional capacity in our nearshore and offshore regions, and expect this capacity to be absorbed quickly as we continue to see demand for these regions, as buyers look to relocate work to cost advantageous markets in the near term.

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. In fiscal 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 year ended June 30, 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”) leading to financial improvements. Furthermore, our overall labor cost as a percentage of revenue is impacted by the aforementioned shift in delivery location from onshore delivery centers to nearshore and 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 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 increased to 94% as of June 30, 2023, up from 89% as of June 30, 2022. 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 with our existing clients as a result of performance-based market share gains, as well as through 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 year over year. 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, sales cycles have lengthened recently resulting in growth slowing in our second half of fiscal year 2023. We believe that the sales activity will pick up pace throughout our fiscal year 2024.

Client Concentration

As a result of our track record of winning key new clients and rapidly expanding with them, we have been successful at diversifying our client base. In fiscal year 2023, our largest client accounted for 12.6% while our three largest clients accounted for 27.0% of our consolidated revenue. We now have over 55 clients with greater than $1 million in annual revenue. We believe client diversification is an important attribute in a challenging market.

45

Table of Contents

Pricing

Our revenues are dependent upon both volumes and unit pricing for our various CLX services. Client pricing is often expressed in terms of a base price per minute or hour as well as, in limited cases, with bonuses and occasionally penalties depending upon our achievement of certain client objectives. In fiscal year 2023, the tightening in the global labor market and corresponding wage inflation, as well as additional facilities expenses due to and increase in costs post-Pandemic, has resulted in us pursuing and successfully negotiating price increases or cost of living adjustments with many of our clients.

Within our customer engagement solution, 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 decline in absolute revenues; however, margins tend to increase, in percentage and often in absolute terms, as compared to onshore service delivery.

Attrition Among Customer Facing Agents

The outsourcing industry is generally characterized by high employee turnover. Such turnover has a significant impact upon profitability as recruiting and training expenses are incurred to replace departing agents. We closely monitor the markets where we operate and where we consider expanding operations as part of our efforts to stay competitive on wages. We believe our efforts to cultivate an environment conducive to employee engagement support lower attrition rates.

Increases in Expenses Related to Sourcing or Generating Leads

A key element of our customer acquisition solution is the generation or purchase of leads or projects. We either generate our leads ourselves, often through digital means, or purchase our leads from external sources. Any increase in the cost of sourcing or generating leads or changes in the rate of conversion of those leads could impact our profit margins. We occasionally experience some volatility in our internal lead generation costs, either due to competitive keyword bidding by other digital marketing agencies, or due to bidding restrictions imposed by our clients.

Increased Up-Front Costs Driven by Increased Demand

Aside from short-term increases in demand for which we tend to delay increases in headcount, an increase in demand for customer interaction services typically results in an up-front increase in employee compensation expenses, due to the in-advance need to hire and train additional employees, predominantly delivery center agents, to service client campaigns. As these expenses for hiring and training our employees are typically incurred in a period before the revenues associated with the increase in demand are recognized, it has the effect of causing an initial decrease in our operating profit margins prior to the full impact of the profitability from the additional demand.

Net Effect of Currency Exchange Rate Fluctuations

While substantially all of our revenues are generated in U.S. dollars, a significant portion of our operating expenses are incurred outside of the United States and paid for in the respective foreign currencies, principally the local currencies of the Philippines, Jamaica and Pakistan. During the fiscal year ended June 30, 2023, out of our total employee benefits expenses, 26.5% were incurred in the Philippine Pesos, 16.5% were incurred in the Jamaican Dollar and 9.2% were incurred in Pakistani Rupee. As a result, our operations are subject to the effects of changes in exchange rates against the U.S. dollar. See “Item 7A. Quantitative and Qualitative Disclosures about Market Risk.”

Seasonality

Our business performance is subject to seasonal fluctuations. Within our customer engagement solution, some of our retail-facing clients undergo an increase in activity during the calendar year-end holiday period. These seasonal effects cause differences in revenues and expenses among the various quarters of any financial year, which means that the individual quarters should not be directly compared with each other or be used to predict

46

Table of Contents

annual financial results. This intra-year seasonal fluctuation is common in the BPO industry, with increased volumes during the fourth calendar quarter of the year.

Within our customer acquisition solution, our revenues may increase during the summer period when households tend to move and activate telecommunications services in their new homes, as well as during the final quarter of the calendar year when the year-end holiday season begins.

Key Operational Metrics

We regularly prepare and review the following key operating indicators to evaluate our business, measure our performance, identify trends in our business, prepare financial projections, allocate resources and make strategic decisions:

Workstations

The number of workstations at all of our delivery centers is a key volume metric for our business. It is defined as the number of physical workstations at a delivery center location used for production (excluding, for example, workstations in training rooms or those used by supervisors). A single workstation will typically be used for multiple shifts, and therefore there will typically be more delivery center agents than utilized workstations. This metric can be used by investors as an indicator of how much capacity for work the Company has overall and in a certain region.

Work at home

The number of work at home seats is also a key volume metric for our business. It is defined as the number of production agents working at home (excluding, for example, management and corporate employees). Since 2020, we have enabled work at home seats, particularly onshore, which has allowed us to rationalize a number of delivery center locations, particularly in the United States. This metric may be useful for investors as they seek to understand the shifting dynamics and economics associated with onsite versus at-home work, specifically within our onshore market, as well as provide context for capacity growth without major capital expenditures.

Capacity Utilization

Capacity Utilization is an efficiency metric used within our business. We define Capacity Utilization as the number of on-site workstations in use plus the number of work at home seats divided by the number of on-site workstations, for the period under consideration, across all facilities in the region. This metric may help investors seeking to better understand how much room for revenue growth there is within the existing site footprint, as well as what future needs to capital expenditures may be associated with a need to support revenue growth. This metric also serves as a relative proxy for efficiency in terms of usage of existing space.

During fiscal year 2023, capacity utilization increased from 69% in the prior year to 77% as we continue to utilize capacity in nearshore and offshore geographies and optimize our onshore capacity. Capacity utilization was over 100% in the United States as we continued to migrate towards a work at home model.

The following table displays our capacity utilization by region for the fiscal years ended June 30, 2023, 2022, and 2021, respectively.

47

Table of Contents

Results of Operations

The following summarizes the results of our operations for the fiscal years ended June 30, 2023, 2022 and 2021:

Fiscal Years Ended June 30, 2023 and 2022

Revenue

Our revenue was $523.1 million in fiscal year 2023, an increase of $30.3 million, or 6.1%, compared to the prior year. This increase was driven by strong growth in the HealthTech vertical, which increased by $27.7 million, or 85.8% over the prior year, followed by the Retail and E-commerce vertical, which increased $26.3 million, or 27.7% over the prior year, offset by a decrease in the Technology vertical of $21.1 million, or 30.9% compared to the prior year, primarily due to the exit of a low margin legacy client.

As a percentage of total revenue, Retail and E-commerce increased to 23.2%, compared to 19.3% in the prior year. HealthTech, where we made strategic investments in early fiscal year 2020, increased to 11.5%, compared to 6.6% in the prior year. Conversely, telecommunications decreased to 16.3% compared to 18.1% in the prior year.

48

Table of Contents

Operating Expenses

Cost of services

Cost of services was $375.0 million in fiscal year 2023, an increase of $1.0 million, or 0.3%, compared to last year. The increase in cost of services was primarily due to an increases in payroll and related costs, facilities, IT and telecom expenses, partially offset by decreases in reseller commissions and lead expenses and local transportation expense.

Payroll and related costs were $287.2 million in fiscal year 2023, an increase of $0.4 million, or 0.1%, compared to the prior year. As a percent of revenue, payroll costs decreased to 54.9% compared to 58.2% in the prior year and is a reflection of the increasing utilization and higher margins in our nearshore and offshore regions.

Rent and utilities expenses were $33.2 million in fiscal year 2023, an increase of $2.3 million, or 7.3%, compared to the prior year. The increase was primarily due to the full year impact of delivery center expansions over the last two years and increased utilization of these expanded delivery centers in a post-Pandemic business model. IT and telecom expenses were $11.6 million, an increase $0.9 million which was also driven by facilities expansions. Local transportation expenses were $6.8 million, a decrease of $1.2 million, or 14.6% compared to the prior year as regional transportation service was restored to pre-Pandemic operations.

Reseller commissions and lead expenses were $11.4 million in the fiscal year ended June 30, 2023, a decrease of $1.5 million, or 11.4%, compared to the prior year. The decrease was primarily related to lower year-over-year revenue associated with this expense.

Selling, general, and administrative expense (“SG&A”)

SG&A was $88.7 million in fiscal year 2023, an increase of $8.5 million, or 10.6%, compared to last year. The increase in SG&A was primarily due to an increase in payroll and related costs, an increase in share-based compensation expense, an increase in IT expense, an increase in travel expense, an increase in legal and professional fees, offset by a decrease in insurance expense.

The increases in payroll and related costs of $2.5 million were driven by our continuing investments in our sales and marketing teams as we continue to drive revenue growth in our growth verticals such as HealthTech and FinTech. The increase in share-based compensation expense of $2.6 million is primarily due to the full year impact of performance grants made at the end of fiscal year 2022. Our IT expenses increased $1.3 million year over year as we continued to invest in our IT infrastructure related to cybersecurity and a scalable platform that will be capable of supporting the growth of the business. With Pandemic-era travel restrictions lifted, we saw an increase in travel expense of $1.7 million as our teams returned to pre-Pandemic travel levels. In fiscal year 2023, an increase in legal and professional fees of $2.3 million was primarily related to strategic project consulting expense. These increases were partially offset by a decrease in insurance expenses of $1.6 million.

Depreciation and amortization expense (“D&A”)

D&A expense increased $0.9 million or 4.9%, to $19.0 million in the current year compared to the prior year due to the full year impact of delivery center expansions in prior years. As a percentage of revenue, depreciation and amortization expense was 3.6%, down from 3.7% in the prior year.

Income from operations

Income from operations was $40.5 million compared to $20.6 million in the fiscal year ended June 30, 2022. The increase was primarily driven by margin expansion as we utilized available capacity in our nearshore and offshore regions, as well as geographical mix shifts from lower-margin onshore locations to more profitable nearshore and offshore locations. The operating margin was 7.7% for fiscal year 2023 compared to 4.2% for fiscal year 2022.

49

Table of Contents

Interest expense, net

Interest expense, net was $0.2 million in the fiscal year ended June 30, 2023, a decrease of $1.1 million compared to last year, primarily due to the payoff of our remaining debt.

Provision for Income Taxes

Income tax expense was $8.7 million in fiscal year ended June 30, 2023, an increase of $10.8 million compared to a $2.1 million income tax benefit in the prior year, primarily due to higher pre-tax income in the current year and approximately $4.1 million one-time benefit in the prior year related to previously unrecognized net operating losses.

Fiscal Years Ended June 30, 2022 and 2021

Revenue

Our revenue was $492.9 million in fiscal year 2022, an increase of $49.5 million, or 11.2%, compared to the prior year. This increase was driven by strong growth in the FinTech vertical, which increased by $48.8 million, or 103.5% over the prior year, followed by the Travel and logistics vertical, which increased by $20.9 million, or 46.3% over the prior year. HealthTech, where we made strategic investments in early fiscal year 2020, increased by $14.8 million, or 84.5%, compared to the prior year, while Retail and E-commerce increased $15.3 million, or 19.3% over the prior year. The growth in these verticals was offset by a decline in the Telecommunications vertical of $40.5 million, or 31.2%, compared to the prior year.

As a percentage of total revenue, Retail and E-commerce increased to 19.3%, compared to 18.0% in the prior year. FinTech and HealthTech, increased to 19.5% and 6.6%, respectively, compared to 10.6% and 4.0%, respectively, in the prior year. Conversely, telecommunications decreased to 18.1%, compared to 29.3% in the prior year.

Operating Expenses

Cost of services

Cost of services was $374.0 million in fiscal year 2022, an increase of $38.7 million, or 11.6%, compared to fiscal year 2021. The increase in cost of services was primarily due to an increases in payroll and related costs, facilities, IT and telecom expenses, partially offset by decreases in reseller commissions and lead expenses and local transportation expense.

Payroll and related costs were $286.8 million in fiscal year 2022, an increase of $39.1 million, or 15.8%, compared to the prior year. As a percentage of revenue, payroll costs increased to 58.2% compared to 55.9% in the prior year, and was primarily driven by upfront costs associated with ramping new clients during the year.

Reseller commissions and lead expenses were $12.9 million in the fiscal year ended June 30, 2022, a decrease of $0.8 million, or 6.1%, compared to the prior year. The decrease was primarily due to lower year-over-year revenue associated with this expense.

Rent and utilities expenses were $31.0 million in fiscal year 2022, an increase of $4.8 million, or 18.4%, compared to the prior year. The increase was primarily due to the expansion of existing and opening of new delivery centers primarily in the nearshore region. IT and telecom expenses were $10.7 million, an increase $1.1 million, which was also driven by facilities expansions. Local transportation expenses were $7.9 million, a decrease of $5.7 million compared to the prior year as the Pandemic impact on regional transportation services lessened significantly.

Selling, general, and administrative expense (“SG&A”)

SG&A was $80.2 million in fiscal year 2022, an increase of $3.2 million, or 4.1%, compared to last year. The increase in SG&A was primarily due to increases in payroll and related costs, IT and telecom, an increase in

50

Table of Contents

travel and other expenses, partially offset by decreases in legal and professional fees and share-based compensation expense.

Payroll and related costs were $55.8 million in fiscal year 2022, an increase of $6.4 million, or 13.0%, compared to the prior year. As a percentage of revenue, SG&A payroll costs increased slightly to 11.3% compared to 11.1% in the prior year, and was primarily driven by investments in sales and marketing. IT and telecom expenses were $6.8 million, an increase of $1.3 million, due to additional investments in technology. Travel expenses were $1.5 million, an increase of $0.9 million, as Pandemic restrictions began to lift in fiscal year 2022. Finally, other SG&A costs increased $0.7 million in conjunction with revenue growth. These increases were partially offset by decreases of $3.5 million in share-based compensation expense and $2.6 million in legal expenses due to higher expense in the prior year because of the initial public offering.

Depreciation and amortization expense (“D&A”)

Depreciation and amortization expense increased $4.0 million, or 28.2%, to $18.1 million in the current year compared to the prior year. The increase in depreciation and amortization was related to the expansion of existing and opening of new delivery centers primarily in the nearshore region. As a percentage of revenue, depreciation and amortization expense has increased to 3.7% in the current year compared to 3.2% in the prior year, as we have expanded capacity to meet the growing demand in our revenue pipeline.

Income from operations

Income from operations was $20.6 million compared to $17.0 million in the fiscal year ended June 30, 2021. Higher revenue in fiscal year 2022 was largely offset by higher operating expenses. The operating income increase which did occur was primarily due to lower costs related to the Pandemic and a decrease in share-based compensation expense offset by higher D&A related to our capacity expansion. The operating margin was 4.2% for fiscal year 2022 compared to 3.8% for fiscal year 2021.

Interest expense, net

Interest expense, net was $1.2 million in the fiscal year ended June 30, 2022, a decrease of $0.7 million compared to last year, primarily due to decreasing debt year-over-year.

Provision for Income Taxes

Income tax benefit was $2.1 million in fiscal year ended June 30, 2022, a decrease of $4.2 million compared to the $2.1 million income tax expense in the prior year, primarily due to a tax restructuring that allowed the Company to recognize approximately $4.1 million in tax benefits from previously unrecognized net operating losses.

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.

51

Table of Contents

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 domestic filer conversion, severance, legal and settlement, Pandemic, and listing costs, as applicable), warrant contra revenue, foreign currency gain or loss, share-based compensation expense, and gain or loss on lease terminations, 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.

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

1 The tax impact of each adjustment is calculated using the effective tax rate in the relevant jurisdictions.

52

Table of Contents

EBITDA, adjusted EBITDA, and adjusted EBITDA margin

EBITDA is a non-GAAP profitability measure that represents net income before the effect of the following items: interest expense, net, income tax expense, and depreciation and amortization. Adjusted EBITDA is a non-GAAP profitability measure that represents EBITDA before the effect of the following items: non-recurring expenses (including domestic filer conversion, severance, legal and settlement, Pandemic, and listing costs, as applicable), warrant contra revenue, foreign currency gain or loss, share-based compensation expense, gain on sale of subsidiaries, and gain or loss on lease terminations. Adjusted EBITDA margin is a non-GAAP profitability measure that represents adjusted EBITDA divided by revenue.

We use EBITDA, adjusted EBITDA, and adjusted EBITDA margin internally to establish forecasts, budgets and operational goals to manage and monitor our business, as well as evaluate our underlying historical performance. We may use adjusted EBITDA as a vesting trigger in some performance-based restricted stock units. We believe that EBITDA, adjusted EBITDA and adjusted EBITDA margin are meaningful indicators of the health of our business as they reflect our ability to generate cash that can be used to fund capital expenditures and growth. EBITDA, adjusted EBITDA and adjusted EBITDA margin also disregard non-cash or non-recurring charges that we believe are not reflective of our long-term performance. We also believe that EBITDA, adjusted EBITDA and adjusted EBITDA margin may be widely used by investors, securities analysts, and other interested parties as a supplemental measure of performance.

EBITDA, adjusted EBITDA and adjusted EBITDA margin may not be comparable to other similarly titled measures of other companies and have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our operating results as reported under U.S. GAAP. Some of these limitations are as follows:

•although depreciation and amortization expense is a non-cash charge, the assets being depreciated and amortized may have to be replaced in the future. EBITDA, adjusted EBITDA and adjusted EBITDA margin do not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;

•EBITDA, adjusted EBITDA and adjusted EBITDA margin are not intended to be a measure of free cash flow for our discretionary use, as they do not reflect: (i) changes in, or cash requirements for, our working capital needs; (ii) debt service requirements; (iii) tax payments that may represent a reduction in cash available to us; and (iv) other cash costs that may recur in the future;

•other companies, including companies in our industry, may calculate similarly titled measures differently, which reduces its usefulness as comparative measures.

Because of these and other limitations, you should consider EBITDA, adjusted EBITDA and adjusted EBITDA margin in conjunction with other U.S. GAAP financial performance measures, including cash flows from operating activities, investing activities and financing activities, net income, net income margin, and other financial results.

53

Table of Contents

The following table provides a reconciliation of net income to EBITDA, adjusted EBITDA and adjusted EBITDA margin for the years presented:

Net income margin

Net income margin was 6.0% for the year ended June 30, 2023 compared to 4.4% in the prior year. The improvement was primarily driven by stronger operating results from higher capacity utilization and an increased mix of higher margin nearshore and offshore delivery.

Net income margin was 4.4% for the year ended June 30, 2022 compared to 3.0% in the prior year. The improvement was primarily due to decreases in Pandemic related costs, share-based payments expense, and a deferred tax benefit, partially offset by higher depreciation related to our capacity expansion over the last two years.

Adjusted EBITDA margin

Adjusted EBITDA margin is a non-GAAP profitability measure that represents adjusted EBITDA divided by revenue. Adjusted EBITDA margin was 12.7% for the year ended June 30, 2023 compared to 9.1% in the prior year, and increased primarily due to stronger operating results from higher capacity utilization and an increased mix of higher margin nearshore and offshore delivery.

Adjusted EBITDA margin was 9.1% for the fiscal year ended June 30, 2022 compared to 10.6% in the prior year primarily due to upfront hiring and training costs associated with ramping new business during the year.

Free cash flow

Free cash flow is a non-GAAP liquidity measure that represents net cash provided by operating activities less capital expenditures. While we believe that free cash flow provides useful information to investors in understanding and evaluating our liquidity position in the same manner as our management, our use of free cash flow has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under U.S. GAAP. Further, other companies, including companies in our industry, may adjust their cash flows differently, which may reduce the value of free cash flow as a

54

Table of Contents

comparative measure. The following table reconciles net cash provided by operating activities to free cash flow, for the years presented:

Free cash flow between fiscal years 2023 and 2022 increased to $22.9 million from $14.1 million in the prior year, due to increased operating margins and decreased capital expenditures as we utilize capacity built out over the last two years.

Free cash flow between fiscal years 2022 and 2021 increased to $14.1 million from ($4.7) million in the prior year, driven by an increase in net cash provided by operating activities partially offset by an increase in capital expenditures as we continued to invest in primarily nearshore capacity expansion.

Net cash

Net cash is a non-GAAP liquidity measure that represents cash and cash equivalents less total debt. We believe that net cash provides useful information to investors in understanding and evaluating our ability to pay off debt. Our use of net cash has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our financial results as reported under GAAP. Further, other companies, including companies in our industry, may adjust their cash or debt differently, which may reduce the value of net cash as a comparative measure.

Net cash is calculated below:

The increase in net cash is primarily due to stronger operating results and operating cash flow which has allowed us to significantly pay down our debt in fiscal year 2023.

JOBS Act Accounting Election

We qualify as an emerging growth company pursuant to the provisions of the JOBS Act. The JOBS Act permits an emerging growth company like us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have 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. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements applicable to public companies.

Liquidity and Capital Resources

Our principal sources of liquidity are cash and cash equivalents, cash flows from operations, and the availability under our revolving line of credit, described in more detail below in “Financing Arrangements.” We use these resources to finance our operations, expand current delivery centers, open new delivery centers, invest in upgrades of technology, service offerings, and for other strategic initiatives, such as acquiring or investing in complementary businesses or intellectual property rights. Our future liquidity requirements will depend on many

55

Table of Contents

factors, including our growth rate and the timing and extent of spending to engage in the activities mentioned above. We believe that our existing cash balance together with cash generated from our operations, and availability under our existing credit facilities will be sufficient to meet our liquidity requirements for at least the next twelve months.

To the extent additional funds are necessary to meet our long-term liquidity needs as we execute on our business strategy, we anticipate that they will be obtained through the utilization of current availability under our revolving line of credit, additional indebtedness, additional equity financings or a combination of these potential sources of funds; however, such additional financing may not be available on favorable terms, or at all. If we are unable to raise additional funds when desired, our business, financial condition and results of operations could be adversely affected.

As of June 30, 2023 and 2022, the unused availability under our revolving credit facilities and line of credit was $71.9 million and $50.5 million, respectively.

The following discussion highlights our cash flow activities during the last three fiscal years.

Cash and cash equivalents

The Company manages a centralized global treasury function with a focus on safeguarding and optimizing the use of its global cash and cash equivalents. The majority of the Company’s cash is held in large U.S. banks in U.S. dollars and outside of the U.S. in U.S. dollars and foreign currencies in regional or local banks in the countries it operates in. The Company believes that its cash management policies and practices effectively mitigate its risk relating to its global cash. However, the Company can provide no assurances that it will not sustain losses.

As of June 30, 2023, we had cash and cash equivalents of $57.4 million, including $5.6 million located outside of the United States, and $1.7 million that is subject to certain local regulations on repatriation. As of June 30, 2022, we had cash and cash equivalents of $48.8 million, including $7.2 million located outside of the United States, and $4.2 million that is subject to certain local regulations on repatriation. Our cash position as of June 30, 2023 increased primarily due to higher cash flow from operations and lower capital expenditures which have allowed us to pay down our debt and further increase our cash balances.

Cash Flows from Operating Activities

Net cash inflow from operating activities during the fiscal year ended June 30, 2023 was $41.9 million compared to $40.0 million during the fiscal year ended June 30, 2022. The increase in net cash inflow from operating activities was primarily driven by stronger operating results offset by higher working capital requirements, primarily driven by an increase in days sales outstanding year over year.

Net cash inflow from operating activities during the fiscal year ended June 30, 2022 was $40.0 million compared to $16.1 million during the fiscal year ended June 30, 2021. The increase in net cash inflow from operating activities was primarily driven by stronger operating results, improved working capital, and lower cash taxes paid in fiscal year 2022.

56

Table of Contents

Cash Flows from Investing Activities

During the year ended June 30, 2023, we had net expenditures of $19.0 million on investing activities primarily related to capacity expansion in Jamaica and Pakistan and investments in information technology.

During the year ended June 30, 2022, we had expenditures of $25.9 million on investing activities as we continued to invest heavily in nearshore and offshore capacity expansion.

During the year ended June 30, 2021, we expended $20.8 million on investing activities, a significant portion of which related to the expansion of two existing delivery centers in Nicaragua and the Philippines and the opening of four new delivery centers in Jamaica, Nicaragua, and the Philippines.

Cash Flows from Financing Activities

During the year ended June 30, 2023, we expended $13.6 million on financing activities, primarily related to the repayment of debt, both term and revolving, offset by net cash receipts from stock transactions of $1.8 million.

During the year ended June 30, 2022, we expended $22.1 million on financing activities, primarily related to the repayment of debt, both term and revolving, in addition to $3.4 million in share buybacks.

Net cash inflow from financing activities of $40.9 million during the fiscal year ended June 30, 2021 was primarily related to net proceeds of $63.1 million from our IPO, payments of $1.1 million in listing costs, a net repayment of debt of $10.1 million, finance lease payments of $7.4 million and a dividend distribution of $4.0 million to our principal shareholder prior to the IPO.

Our cash resources could also be affected by various risks and uncertainties. For additional information, please see the section entitled “Risk Factors.”

Dividend to TRGI

On July 21, 2020, our board of directors approved a one-time dividend of $4.0 million to our shareholders reflecting a portion of the cash generation from the business during fiscal year 2020. The dividend was paid on July 24, 2020 to TRGI, the holder of our Series A preferred share (outstanding prior to its automatic conversion into common shares in connection with our initial public offering), which was entitled to a dividend preference that expired upon conversion of the Series A preferred share to common shares upon the completion of our initial public offering.

Financing Arrangements

We are party to a number of financing arrangements with banks, financial institutions and lessors that serve to meet our liquidity requirements. The following is a summary of our principal financing arrangements.

PNC Credit Facility

In November 2013, our subsidiary Ibex Global Solutions, Inc. (formerly known as TRG Customer Solutions, Inc.) entered into a three-year $35.0 million revolving credit facility (as amended, the “PNC Credit Facility”) with PNC Bank, N.A. (“PNC”). Between June 2015 and March 2021, the PNC Credit Facility was amended multiple times for increases to the maximum revolving advance amount and extension of the maturity date. In March 2021, the PNC Credit Facility was amended to join Digital Globe Services, LLC, TelSatOnline, LLC and 7 Degrees, LLC as borrowers, with the maximum revolving advance amount increased to $60 million. In September 2021, the PNC Credit Facility was amended to join iSky, LLC as a borrower. In June 2022, the PNC Credit Facility was amended to increase the maximum revolving advance amount to $80 million, with the ability to request increases, up to a maximum revolving advance amount of $95 million (contingent upon lender approval), change the reference rate used from LIBOR to Term SOFR and extend the maturity date to May 2026. Borrowings under the PNC Credit Facility bear interest at SOFR plus a margin of 1.75% and/or negative 0.5% of the PNC Commercial Lending Rate for domestic loans. The PNC Credit Facility also requires a commitment fee of 0.25% per annum of undrawn commitments to be paid quarterly in arrears. The PNC Credit Facility is guaranteed by IBEX Global Limited and secured by substantially all the assets of Ibex Global Solutions, Inc.,

57

Table of Contents

Digital Globe Services, LLC, TelSatOnline, LLC, 7 Degrees, LLC, and iSky, LLC. The PNC Credit Facility balance as of June 30, 2023, 2022, and 2021 was $0.1 million, $11.2 million, and $22.3 million, respectively.

JS Bank Limited Loans

In May 2020, the Company’s subsidiary, IBEX Global Solutions (Pvt) Limited entered into a loan agreement with JS Bank Limited for a loan of $1.0 million (PKR165 million) under a government-initiated wage and salary loan fund. The loan bore 3% interest per annum with a two-year term. Repayment of the loan commenced in January 2021, and was paid in full in December 2022. The balance of the loan was $0.2 million and $0.8 million as of June 30, 2022 and 2021, respectively.

In May 2020, the Company’s subsidiary, Virtual World (Pvt) Limited entered into a loan agreement with JS Bank Limited for a loan of $0.8 million (PKR 120 million) under a government-initiated wage and salary loan fund. The loan bore 3% interest per annum with a two-year term. Repayment of the loan commenced in January 2021, and was paid in full in December 2022. The balance of the loan was $0.1 million and $0.6 million, as of June 30, 2022 and 2021, respectively.

Contractual obligations

As of June 30, 2023, we have no material off-balance sheet transactions and we are not a guarantor of any other entities’ debt or other financial obligations. For further discussion of contractual obligations, such as debt, leases, and purchase obligations, please refer to our audited consolidated financial statements included in Item 8. “Financial Statements and Supplementary Data.”

The following table summarizes our contractual obligations as of June 30, 2023:

Purchase obligations

Purchase obligations mainly relate to long term telecommunications contracts and enterprise cloud solutions for the continuing operation of our business.

Future capital requirements

We expect capital expenditures in fiscal year 2024 to be between 2.5% and 4.0% of revenue. Because we have heavily invested in capacity expansion and growth over the last few years, we are expecting approximately 40% of fiscal year 2024 capital expenditures will be directed to additional growth in the business while 60% will be directed towards maintenance of existing assets.

Our capital expenditure requirements could increase materially in the event of an acquisition or the launch of large new client contracts, which generally require increased capital expenditures for equipment and working capital to support hiring and training activities.

Critical accounting estimates

The Company’s consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. Preparation of these financial statements requires the Company to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues

58

Table of Contents

and expenses, and related disclosure of contingent assets and liabilities. The Company’s most critical accounting estimates are those most important to the portrayal of its financial condition and results of operations which require the Company to make its most difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain. The Company has identified the following as its most critical accounting estimates. Although management believes that its estimates and assumptions are reasonable, they are based on information available when they are made and, therefore, may differ from estimates made under different assumptions or conditions.

The Company’s significant accounting policies are discussed in Note 1. “Overview and Summary of Significant Accounting Policies” and Note 2. “Revenue from Contracts with Customers”, included in Item 8. “Financial Statements and Supplementary Data,” and should be reviewed in connection with the following discussion.

Revenue

The Company recognizes revenues in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. 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, which are typically agreed to with our clients prior to recording the increase or decrease to revenue as a result of these provisions, however, in some cases, we may estimate these bonuses or penalties using the “most likely amount” method based on actual data and historical experience. 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. We estimate the life of the client program based on historical experience and may need to update our assumptions as new facts and circumstances with our clients arise. Changes to the estimates described above could have a material impact on the amount of revenue recognized in any period.

Leases

The Company determines whether an arrangement contains a lease under ASC 842, Leases, at inception. 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. The Company estimates the lease term and incremental borrowing rate; changes in these estimates could have a material impact on the amount of operating lease assets, liabilities and expense recognized in any period.

For purposes of calculating operating lease liabilities, the Company estimates the lease term, which may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise those options. The Company’s capital investment, relationships with clients serviced at the site, and employee recruitment potential are some of the factors it considers when determining whether it will exercise its option to extend a lease.

The Company determines the incremental borrowing rates based on information available at the lease commencement date. The incremental borrowing rate is the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Interest on finance leases is included in interest expense, net, in the consolidated statements of comprehensive income. The Company applies judgment in estimating the incremental borrowing rate including considering the term of the lease, the currency in which the lease is denominated, the impact of collateral, and our credit risk on the rate.

59

Table of Contents

Goodwill Impairment

Goodwill represents the excess of the cost of a business combination over the total acquisition date fair value of the identifiable assets, liabilities and contingent liabilities acquired. Goodwill is not amortized but is tested for impairment at the reporting unit level, on an annual basis or more frequently, if events occur or circumstances change indicating potential impairment. The Company annually tests goodwill for impairment on June 30. In evaluating goodwill for impairment, the Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. Qualitative factors that the Company considers include, but are not limited to, macroeconomic and industry conditions, overall financial performance and other relevant entity-specific events. If the Company bypasses the qualitative assessment, or if the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then the Company performs a quantitative goodwill impairment test to identify potential goodwill impairment and measures the amount of goodwill impairment it will recognize, if any.

Warrant to purchase common shares

The Company accounts for a warrant to purchase its common shares as an equity instrument in accordance with the provisions of ASU No. 2019-08, Compensation – Stock Compensation (Topic 718) and ASC 606, which requires entities to measure and classify share-based payment awards granted to a customer by applying the guidance under Topic 718, as of January 1, 2019.

On the grant date, the Company estimated the value of the warrant using a Black-Scholes option pricing model. The assumptions used in our Black-Scholes model were (1) expected term, which was estimated based on the term of the warrant, (2) the risk-free interest rate which is based on the U.S. Treasury yield curve, (3) expected volatility which we estimated based on peer group volatility, and (4) an expected dividend yield based on our anticipated future dividends on our common stock (estimated at zero). These estimates all have an impact on the value attributed to the warrant.

At each reporting period, the Company assesses the likelihood of additional vesting in accordance with service or performance conditions included in the warrant terms. The Company adjusts its estimates for additional contra-revenue when it is probable that additional shares will vest. The timing of any additional estimated vesting and the related fair value at the time of the change in estimate could have a material impact on the transaction price and therefore revenue recorded related to the Amazon contract.

Share-based compensation plans

The Company accounts for its share-based awards in accordance with provisions of ASC 718, Compensation - Stock Compensation. 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.

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, which we estimate based on financial projections.

The Company calculates the fair value of option awards using the Black-Scholes model. The assumptions used in our Black-Scholes model are (1) expected term, which was estimated based on the simplified method as we do not have requisite historical data, (2) the risk-free interest rate which is based on the U.S. Treasury yield curve, (3) expected volatility which we estimate based on peer group volatility, and (4) an expected dividend yield based on our anticipated future dividends on our common stock (currently estimated at zero). Changes in any of the estimates mentioned above could have a material impact on the share based compensation expense recorded in any period.

60

Table of Contents

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.

We recognize deferred tax assets to the extent that we determine that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing temporary differences, projected future taxable income, tax-planning strategies, carryback potential if permitted under the tax law, and results of recent operations. If we determine that we are able to realize our deferred tax assets in the future in excess of their net recorded amount, we will make an adjustment to the valuation allowance.

We record uncertain tax positions in accordance with ASC 740, Income Taxes, on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that met the more likely than not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. Changes in recognition or measurements are reflected in the period in which the change in estimate occurs.

Commitment and Contingencies

The Company is subject to claims and lawsuits filed in the ordinary course of business. Although management does not believe that any current 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. Legal fees are expensed as incurred.