Intapp, Inc. 10-Q

Item 1. Financial Statements Intapp, Inc. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) (unaudited) September 30, 2021 June 30, 2021 Assets Current assets: Cash and cash equivalents $ 54,937 $ 37,636 Restricted cash 3,727 3,827 Accounts receivable, net of allowance for doubtful accounts of $ 911 and $ 764 as of September 30, 2021 and June 30, 2021, respectively 31,699 48,573 Unbilled receivables, net 7,015 6,840 Other receivables, net 572 858 Prepaid expenses 8,605 9,591 Deferred commissions, current 7,519 6,551 Total current assets 114,074 113,876 Property and equipment, net 10,774 10,674 Goodwill 262,015 262,270 Intangible assets, net 49,040 52,349 Deferred commissions, noncurrent 11,076 10,414 Other assets 1,001 10,244 Total assets $ 447,980 $ 459,827 Liabilities, convertible preferred stock and stockholders’ equity (deficit) Current liabilities: Accounts payable $ 5,047 $ 2,198 Accrued compensation 20,517 29,218 Accrued expenses 7,303 9,953 Deferred revenue, net 109,437 107,893 Other current liabilities 28,382 22,621 Total current liabilities 170,686 171,883 Deferred tax liabilities 5,461 5,705 Long-term deferred revenue, net 938 1,908 Other liabilities 5,457 18,170 Debt, net — 275,593 Total liabilities 182,542 473,259 Commitments and contingencies (Note 7) Convertible preferred stock, $ 0.001 par value per share, zero and 19,870,040 shares authorized as of September 30, 2021 and June 30, 2021, respectively; zero and 19,034,437 shares issued and outstanding as of September 30, 2021 and June 30, 2021, respectively; liquidation preference of $ 0 and $ 203,340 as of September 30, 2021 and June 30, 2021, respectively — 144,148 Stockholders’ equity (deficit) Preferred stock, $ 0.001 par value per share, 50,000,000 and zero shares authorized as of September 30, 2021 and June 30, 2021, respectively; no shares issued or outstanding as of September 30, 2021 and June 30, 2021 — — Common stock, $ 0.001 par value per share, 700,000,000 and 65,000,000 shares authorized as of September 30, 2021 and June 30, 2021, respectively; 60,926,767 and 29,444,577 shares issued and outstanding as of September 30, 2021 and June 30, 2021, respectively 61 29 Additional paid-in capital 577,339 128,943 Accumulated other comprehensive loss ( 774 ) ( 494 ) Accumulated deficit ( 311,188 ) ( 286,058 ) Total stockholders’ equity (deficit) 265,438 ( 157,580 ) Total liabilities, convertible preferred stock and stockholders’ equity (deficit) $ 447,980 $ 459,827 See accompanying notes to unaudited condensed consolidated financial statements. 2 Table of Contents Intapp, Inc. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited) Three Months Ended September 30, 2021 2020 Revenues SaaS and support $ 43,489 $ 33,105 Subscription license 10,584 9,996 Total recurring revenues 54,073 43,101 Professional services 8,117 5,042 Total revenues 62,190 48,143 Cost of revenues SaaS and support 11,342 9,279 Total cost of recurring revenues 11,342 9,279 Professional services 11,034 7,704 Total cost of revenues 22,376 16,983 Gross profit 39,814 31,160 Operating expenses: Research and development 16,970 11,954 Sales and marketing 25,645 15,338 General and administrative 20,830 8,144 Total operating expenses 63,445 35,436 Operating loss ( 23,631 ) ( 4,276 ) Loss on debt extinguishment ( 2,407 ) — Interest expense ( 159 ) ( 6,279 ) Other income, net 879 268 Net loss before income taxes ( 25,318 ) ( 10,287 ) Income tax benefit (expense) 188 ( 120 ) Net loss ( 25,130 ) ( 10,407 ) Less: cumulative dividends allocated to preferred stockholders — ( 3,811 ) Net loss attributable to common stockholders $ ( 25,130 ) $ ( 14,218 ) Net loss per share attributable to common stockholders, basic and diluted $ ( 0.42 ) $ ( 0.55 ) Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted 60,085 25,984 See accompanying notes to unaudited condensed consolidated financial statements. 3 Table of Contents Intapp, Inc. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (in thousands) (unaudited) Three Months Ended September 30, 2021 2020 Net loss $ ( 25,130 ) $ ( 10,407 ) Other comprehensive income (loss): Foreign currency translation adjustments ( 280 ) 415 Other comprehensive income (loss) ( 280 ) 415 Comprehensive loss $ ( 25,410 ) $ ( 9,992 ) See accompanying notes to unaudited condensed consolidated financial statements. 4 Table of Contents Intapp, Inc. CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (in thousands, except share data) (unaudited) Three Months Ended September 30, 2021 Convertible Preferred Stock Common Stock Additional Paid-in Accumulated Other Comprehensive Accumulated Stockholders' Equity Shares Amount Shares Amount Capital Loss Deficit (Deficit) Balance as of June 30, 2021 19,034,437 $ 144,148 29,444,577 $ 29 $ 128,943 $ ( 494 ) $ ( 286,058 ) $ ( 157,580 ) Conversion of convertible preferred stock to common stock upon initial public offering ( 19,034,437 ) ( 144,148 ) 19,034,437 19 144,129 — — 144,148 Issuance of common stock upon initial public offering, net of offering costs of $ 9,767 — — 12,075,000 12 282,979 — — 282,991 Issuance of common stock upon exercise of stock options — — 372,753 1 2,260 — — 2,261 Stock-based compensation — — — — 19,028 — — 19,028 Foreign currency translation adjustments — — — — — ( 280 ) — ( 280 ) Net loss — — — — — — ( 25,130 ) ( 25,130 ) Balance as of September 30, 2021 — $ — 60,926,767 $ 61 $ 577,339 $ ( 774 ) $ ( 311,188 ) $ 265,438 Three Months Ended September 30, 2020 Convertible Preferred Stock Common Stock Additional Paid-in Accumulated Other Comprehensive Accumulated Stockholders' Shares Amount Shares Amount Capital Loss Deficit Deficit Balance as of June 30, 2020 19,034,437 $ 144,148 24,331,569 $ 24 $ 69,178 $ ( 1,667 ) $ ( 238,199 ) $ ( 170,664 ) Issuance of common stock, net of issuance costs of $ 169 — — 2,432,545 2 29,018 — — 29,020 Repurchase of shares — — ( 200,000 ) — ( 797 ) — ( 1,095 ) ( 1,892 ) Issuance of common stock upon exercise of stock options — — 1,436,086 2 5,703 — — 5,705 Stock-based compensation — — — — 4,590 — — 4,590 Foreign currency translation adjustments — — — — — 415 — 415 Net loss — — — — — — ( 10,407 ) ( 10,407 ) Balance as of September 30, 2020 19,034,437 $ 144,148 28,000,200 $ 28 $ 107,692 $ ( 1,252 ) $ ( 249,701 ) $ ( 143,233 ) See accompanying notes to unaudited condensed consolidated financial statements. 5 Table of Contents Intapp, Inc. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) Three Months Ended September 30, 2021 2020 Cash Flows from Operating Activities Net loss $ ( 25,130 ) $ ( 10,407 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 4,052 3,262 Amortization of deferred financing costs — 294 Provision for doubtful accounts 291 ( 49 ) Stock-based compensation 19,028 4,590 Loss on debt extinguishment 2,407 — Change in fair value of contingent consideration, including unrealized foreign exchange gain ( 955 ) — Deferred income taxes ( 244 ) ( 142 ) Other 36 — Changes in operating assets and liabilities: Accounts receivable 16,768 ( 10 ) Unbilled receivables, current ( 175 ) 435 Prepaid expenses and other assets 1,105 ( 42 ) Deferred commissions ( 1,630 ) ( 147 ) Accounts payable and accrued liabilities ( 5,481 ) ( 3,902 ) Deferred revenue, net 574 ( 2,038 ) Other liabilities ( 5,997 ) ( 2,671 ) Net cash provided by (used in) operating activities 4,649 ( 10,827 ) Cash Flows from Investing Activities Purchases of property and equipment ( 32 ) ( 398 ) Capitalized internal-use software costs ( 831 ) ( 346 ) Net cash used in investing activities ( 863 ) ( 744 ) Cash Flows from Financing Activities Payments on borrowings ( 278,000 ) ( 5,000 ) Proceeds from initial public offering, net of underwriting discounts 292,758 — Payments for deferred offering costs ( 3,389 ) — Proceeds from common stock issuance — 29,020 Proceeds from stock option exercises 2,261 5,705 Repurchase of common stock — ( 1,892 ) Net cash provided by financing activities 13,630 27,833 Effect of foreign exchange rates on cash and cash equivalents ( 215 ) 30 Net increase in cash, cash equivalents and restricted cash 17,201 16,292 Cash, cash equivalents and restricted cash - beginning of period 41,463 43,159 Cash, cash equivalents and restricted cash - end of period $ 58,664 $ 59,451 Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheets Cash and cash equivalents $ 54,937 $ 58,344 Restricted cash 3,727 1,107 Total cash, cash equivalents and restricted cash $ 58,664 $ 59,451 Supplemental Disclosures of Cash Flow Information Cash paid for interest $ 5,950 $ 6,579 Cash paid for income taxes 38 — Non-cash investing and financing activities Deferred offering costs in accounts payable and accrued liabilities 969 150 Conversion of convertible preferred stock to common stock upon initial public offering 144,148 — See accompanying notes to unaudited condensed consolidated financial statements. 6 Table of Contents Intapp, Inc. Notes to Unaudited Condensed Consolidated Financial Statements Note 1. Description of Business Intapp, Inc. (“Intapp” or the “Company”), formerly known as LegalApp Holdings, Inc., was incorporated in Delaware on November 27, 2012 to facilitate the acquisition of Integration Appliance, Inc., which became a wholly owned subsidiary of Intapp, Inc. on December 21, 2012. LegalApp Holdings, Inc. changed its name to Intapp, Inc. in February 2021. Intapp has no significant assets or operations other than the ownership of Integration Appliance, Inc. The Company is a leading provider of industry-specific, cloud-based software solutions for the professional and financial services industry globally. The Company empowers private capital, investment banking, legal, accounting, and consulting firms with the technology they need to meet rapidly changing client, investor, and regulatory requirements, deliver the right insights to the right professionals, replace legacy systems, and operate more competitively. The Company serves clients primarily in the United States, United Kingdom and Australian markets. References to “the Company,” “us,” “we,” or “our” in these unaudited condensed consolidated financial statements refer to the consolidated operations of Intapp and its consolidated subsidiaries. Initial public offering On July 2, 2021, the Company completed its initial public offering (“IPO”), in which it sold 10,500,000 shares of common stock at a public offering price of $ 26.00 per share for net proceeds of $ 244.8 million after deducting underwriting discounts of $ 18.4 million and offering costs of $ 9.8 million. Upon the closing of the IPO, all outstanding shares of Series A and Series A-1 convertible preferred stock automatically converted into 19,034,437 shares of common stock on a one-for-one basis. On July 8, 2021, the underwriters of the Company’s IPO exercised in full their right to purchase an additional 1,575,000 shares of common stock at the public offering price of $ 26.00 per share, resulting in additional net proceeds of $ 38.2 million after deducting underwriting discounts of $ 2.8 million. Prior to the IPO, deferred offering costs, which primarily consist of direct incremental legal and accounting fees relating to the IPO, were capitalized and recorded in other assets on the consolidated balance sheet as of June 30, 2021. Upon the consummation of the IPO, these costs were reclassified into additional paid-in capital as a reduction of the net proceeds received from the IPO during the three months ended September 30, 2021. Note 2. Summary of Accounting Policies Basis of presentation and principles of consolidation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and the requirements of the U.S. Securities and Exchange Commission (the “SEC”) for interim reporting. Certain information and disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2021 filed with the SEC on September 15, 2021. The unaudited condensed consolidated financial statements include accounts of the Company and its consolidated subsidiaries, after eliminating all inter-company transactions and balances. The interim unaudited condensed consolidated financial statements have been prepared on a basis consistent with the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal and recurring adjustments, necessary to state fairly the Company’s financial condition, its operations and cash flows for the periods presented. The historical results are not necessarily indicative of future results, and the results of operations for the three months ended September 30, 2021 are not necessarily indicative of the results to be expected for the full year or any other period. 7 Table of Contents Use of estimates The preparation of the accompanying unaudited condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported and disclosed in the unaudited condensed consolidated financial statements and accompanying notes. Those estimates and assumptions include, but are not limited to, revenue recognition including determination of the standalone selling price (“SSP”) of the deliverables included in multiple deliverable revenue arrangements; the depreciable lives of long-lived assets including intangible assets; the expected useful life of deferred commissions; the fair value of common stock used in stock-based compensation; the fair value of assets acquired and liabilities assumed in business combinations; goodwill and long-lived assets impairment assessment; the fair value of contingent consideration liabilities; valuation allowances on deferred tax assets and accounts receivable; uncertain tax positions; and loss contingencies. The Company evaluates estimates and assumptions on an ongoing basis using historical experience and other factors including those resulting from the impacts of the COVID-19 pandemic and adjusts those estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from these estimates, and those differences could be material to the unaudited condensed consolidated financial statements. Significant accounting policies The Company’s significant accounting policies are described in Note 2, Summary of Accounting Policies , to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021. There have been no material changes to the significant accounting policies during the three months ended September 30, 2021. Revenue recognition The Company’s revenues are derived from contracts with our clients. The majority of the Company’s revenues are derived from the sale of our software as a service (“SaaS”) solutions and subscriptions to our term software applications, including support services, as well as the provision of professional services for the implementation of our solutions. The Company accounts for revenues in accordance with Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606”), which the Company adopted on July 1, 2020 using the full retrospective method of adoption. The core principle of ASC 606 is to recognize revenues upon the transfer of control of services or products to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services or products. The Company applies the following framework to recognize revenues: Identification of the contract, or contracts, with our clients The Company considers the terms and conditions of written contracts and its customary business practices in identifying its contracts under ASC 606. The Company determines it has a contract with a client when the contract is approved, each party’s rights regarding the services and products to be transferred can be identified, payment terms for the services and products can be identified, the client has the ability and intent to pay, and the contract has commercial substance. The Company evaluates whether two or more contracts entered within close proximity with one another should be combined and accounted for as a single contract. The Company also evaluates the client’s ability and intent to pay, which is based on a variety of factors, including the client’s historical payment experience or, in the case of a new client, credit and financial information pertaining to the client. Identification of the performance obligation in the contract Performance obligations promised in a contract are identified based on the services or products that will be transferred to the client that are both: i . capable of being distinct, whereby the client can benefit from the service or product either on its own or together with other resources that are readily available from the Company or third parties, and ii. distinct in the context of the contract, whereby the transfer of the services or products is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised services or products, the Company applies judgment to determine whether promised services or products are capable of being distinct and distinct in the context of the contract. If these criteria are not met, the promised services or products are accounted for as a combined performance obligation. 8 Table of Contents The Company derives its revenues primarily from the following four sources, which represent the performance obligations of the Company: i . Sales of SaaS under subscription arrangements : revenue derived from subscriptions to our SaaS solutions; ii. Sales of subscriptions to our licenses: software revenues derived from the sale of term licenses to clients; iii. Support activities: support activities that consist of email and phone support, bug fixes, and rights to unspecified software updates and upgrades released on a when, and if, available basis during the support term; and iv. Sales of professional services: services related to the implementation and configuration of the Company’s SaaS offerings and software licenses. SaaS and subscription licenses are generally sold as annual or multi-year initial terms with automatic annual renewal provisions on expiration of the initial term. Support for subscription licenses follows the same contract periods as the initial or renewal term. Professional services related to implementation and configuration activities are typically time and materials contracts. Determination of the transaction price The transaction price is determined based on the consideration to which the Company expects to be entitled in exchange for transferring services and products to the client. Variable consideration is estimated and included in the transaction price if, in the Company’s judgment, it is probable that no significant future reversal of cumulative revenues under the contract will occur. In instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined that contracts generally do not include a significant financing component. The primary purpose of the Company’s invoicing terms is to provide clients with simplified and predictable ways of purchasing the Company’s products and services, not to receive financing from clients or to provide clients with financing. Allocation of the transaction price to the performance obligations in the contract If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on its relative SSP. The majority of the Company’s contracts contain multiple performance obligations, such as when subscription licenses are sold with support and professional services. Some of the Company’s performance obligations have observable inputs that are used to determine the SSP of those distinct performance obligations. Where SSP is not directly observable, the Company determines the SSP using information that may include market conditions and other observable inputs. Recognition of revenues when, or as, the Company satisfies a performance obligation The Company recognizes revenues as control of the services or products is transferred to a client, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services or products. The Company is principally responsible for the satisfaction of its distinct performance obligations, which are satisfied either at a point in time or over a period of time. The Company records revenues net of applicable sales taxes collected. Sales taxes collected from clients are recorded as part of accounts payable in the accompanying consolidated balance sheets and are remitted to state and local taxing jurisdictions based on the filing requirements of each jurisdiction. Performance obligations satisfied at a point in time Subscription licenses The Company has concluded that its sale of term licenses to clients (“subscription licenses”) provides the client with the right to functional intellectual property (“IP”) and are distinct performance obligations from which the client can benefit on a stand-alone basis. The transaction price allocated to subscription license arrangements is recognized as revenues at a point in time when control is transferred to the client, which generally occurs at the time of delivery or upon commencement of the renewal term. Subscription license fees are generally payable in advance on an annual basis over the term of the license arrangement, which is typically noncancelable. Performance obligations satisfied over a period of time SaaS and support as well as professional services arrangements comprise the majority of distinct performance obligations that are satisfied over a period of time. SaaS and support The transaction price allocated to SaaS subscription arrangements is recognized as revenues over time throughout the term of the contract as the services are provided on a continuous basis, beginning after the SaaS environment is provisioned and made available to clients. The Company’s SaaS subscriptions are generally one to three years in duration, with the majority being one year . Consideration from SaaS arrangements is typically billed in advance on an annual basis. 9 Table of Contents The Company’s subscription license sales include noncancelable support which entitle clients to receive technical support and software updates, on a when and if available basis, during the term of the subscription license agreement. Technical support and software updates are considered distinct from the related subscription licenses but accounted for as a single stand ready performance obligation as they each constitute a series of distinct services that are substantially the same and have the same pattern of transfer to the client. The transaction price allocated to support is recognized as revenue over time on a straight-line basis over the term of the support contract which corresponds to the underlying subscription license agreement. Consideration for support services is typically billed in advance on an annual basis. In some instances, the client may purchase premium support services which are generally priced as a percentage of the associated subscription license. Professional services The Company’s professional services revenues are primarily comprised of implementation, configuration and upgrade services. The Company has determined that professional services provided to clients represent distinct performance obligations. These services may be provided on a stand-alone basis or bundled with other performance obligations, including SaaS arrangements, subscription licenses, and support services. The transaction price allocated to these performance obligations is recognized as revenue over time as the services are performed. The professional services engagements are billed to clients on a time and materials basis and are recognized as invoiced. In instances where professional services arrangements are sold on a fixed price basis, revenues are recognized over time using an input measure of time incurred to date relative to total estimated time to be incurred at project completion. Professional services arrangements sold on a time and materials basis are generally invoiced monthly in arrears and those sold on a fixed fee basis are invoiced upon the achievement of project milestones. The Company records reimbursable out-of-pocket expenses associated with professional services contracts in both revenues and cost of revenues. Contract modifications Contracts may be modified to account for changes in contract scope or price. The Company considers contract modifications to exist when the modification either creates new rights or obligations or changes the existing enforceable rights and obligations of either party. Contract modifications are accounted for prospectively when it results in the promise to deliver additional products and services that are distinct and contract price does not increase by an amount that reflects standalone selling price for the new goods or services. Balance sheet presentation Contracts with our clients are reflected in the consolidated balance sheets as follows: • Accounts receivable, net represents amounts billed to clients in accordance with contract terms for which payment has not yet been received. It is presented net of the allowance for doubtful accounts as part of current assets in the consolidated balance sheets. • Unbilled receivables, net represents amounts that are unbilled due to agreed-upon contractual terms in which billing occurs subsequent to revenue recognition. This generally occurs in multi-year subscription license arrangements where control of the software license is transferred at the inception of the contract, but the client is invoiced annually in advance over the term of the license. Unbilled receivables are presented net of the allowance for doubtful accounts, if applicable, in the consolidated balance sheets with the long-term portion included in other assets. Under ASC 606, these balances represent contract assets. • Contract costs consist principally of client acquisition costs (sales commissions). The Company classifies deferred commissions as current or non-current on our consolidated balance sheets based on the timing of when the Company expects to recognize the expense. • Deferred revenue, net represents amounts that have been invoiced to the client for which the Company has the right to invoice, but that have not been recognized as revenues because the related products or services have not been transferred to the client. Deferred revenue that will be realized within twelve months of the balance sheet date is classified as current. The remaining deferred revenue is presented as non-current. Under ASC 606, these balances represent contract liabilities. The Company may receive consideration from its clients in advance of performance on a portion of the contract and, on another portion of the contract, perform in advance of receiving consideration. Contract assets and liabilities related to rights and obligations in a contract are interdependent. Therefore, contract assets and liabilities are presented net at the contract level, as either a single contract asset or a single contract liability, in the consolidated balance sheets. 10 Table of Contents Concentrations of credit risk and significant clients Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and accounts receivable. The Company maintains its cash with high quality financial institutions. The Company is exposed to credit risk for cash held in financial institutions in the event of a default to the extent that such amounts recorded on the balance sheet are in excess of amounts that are insured by the Federal Deposit Insurance Corporation (“FDIC”). No client individually accounted for 10% or more of the Company’s revenues for the three months ended September 30, 2021 and 2020. As of September 30, 2021, no client individually accounted for 10% or more of the Company’s total accounts receivable. As of June 30, 2021, one client individually accounted for 25 % of the Company’s total accounts receivable. Recent accounting pronouncements The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it is (i) no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, the consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. The JOBS Act does not preclude an emerging growth company from early adopting new or revised accounting standards. Recently issued accounting pronouncements not yet adopted In February 2016, the FASB issued ASU No. 2016-02, Leases . The guidance requires lessees to put most leases on their balance sheets but recognize the expenses on their income statements in a manner similar to current practice. The guidance states that a lessee would recognize a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset for the lease term. The new standard is effective for the Company for fiscal periods beginning after December 15, 2021 and early adoption is permitted. The Company expects to recognize lease liabilities and right-of-use assets related to its operating leases upon adoption of the standard. The Company is evaluating the impact of this ASU on its financial statements. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses , which requires the establishment of an allowance for estimated credit losses on financial assets, including trade and other receivables, at each reporting date. The guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is evaluating the impact of this ASU on its financial statements. In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (ASC 740): Simplifying the Accounting for Income Taxes , which is intended to simplify the accounting for income taxes by removing certain exceptions and by updating accounting requirements around franchise taxes, goodwill recognized for tax purposes, the allocation of current and deferred tax expense among legal entities, among other minor changes. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. This new standard will be effective for the Company for fiscal years beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted. The Company is currently assessing the impact of adopting this standard on its consolidated financial statements. Note 3. Revenues Disaggregation of revenues Revenues by geography were as follows (in thousands): Three Months Ended September 30, 2021 2020 United States $ 42,631 $ 34,199 United Kingdom 11,878 8,705 Rest of the world 7,681 5,239 Total $ 62,190 $ 48,143 No country other than those listed above accounted for more than 10% of revenues during the three months ended September 30, 2021 and 2020. 11 Table of Contents Client Contract - Related Balance Sheet Amounts Deferred commissions The following table summarizes activity related to the deferred commissions balance (in thousands): Three Months Ended September 30, 2021 2020 Beginning balance $ 16,965 $ 13,077 Additions 3,421 1,470 Recognition of deferred commissions ( 1,791 ) ( 1,324 ) Ending balance $ 18,595 $ 13,223 Contract balances The Company’s contract assets and liabilities were as follows (in thousands): September 30, 2021 June 30, 2021 Unbilled accounts receivable, net (1) $ 7,263 $ 6,925 Deferred revenue, net 110,375 109,801 (1) The long-term portion of $ 248 and $ 85 as of September 30, 2021 and June 30, 2021, respectively, is included in other assets. There was no allowance for doubtful accounts associated with unbilled receivables as of September 30, 2021 and June 30, 2021. During the three months ended September 30, 2021, the Company recognized $ 44.1 million in revenue pertaining to deferred revenue as of the beginning of the period. Performance obligations Remaining performance obligations represent non-cancellable contracted revenues that have not yet been recognized, which includes deferred revenue and amounts that will be invoiced and recognized as revenues in future periods. Subscription services are typically satisfied over one to three years, support services are generally satisfied within one year, and professional services are typically satisfied within one year. Professional services under time and material contracts are not included in the performance obligations amount as these arrangements can be cancelled at any time. As of September 30, 2021, approximately $ 236.5 million of revenues is expected to be recognized from remaining performance obligations with approximately 63 % over the next 12 months and the remainder thereafter. Note 4. Goodwill and Intangible Assets Goodwill and intangible assets acquired through business combinations consisted of the following (in thousands): September 30, 2021 Useful Life (In years) Gross Amount Accumulated Amortization Net Book Value Goodwill Indefinite $ 262,015 $ — $ 262,015 Client relationships 9 to 15 41,000 ( 16,848 ) 24,152 Noncompete agreements 3 to 5 4,107 ( 2,550 ) 1,557 Trademarks and trade names Indefinite 4,892 — 4,892 Trademarks and trade names 1 to 3 7,613 ( 3,171 ) 4,442 Core technology 3 to 5 47,019 ( 33,022 ) 13,997 Intangible assets, net $ 104,631 $ ( 55,591 ) $ 49,040 12 Table of Contents June 30, 2021 Useful Life (In years) Gross Amount Accumulated Amortization Net Book Value Goodwill Indefinite $ 262,270 $ — $ 262,270 Client relationships 9 to 15 41,000 ( 15,879 ) 25,121 Noncompete agreements 3 to 5 4,107 ( 2,442 ) 1,665 Trademarks and trade names Indefinite 4,892 — 4,892 Trademarks and trade names 1 to 3 7,613 ( 2,902 ) 4,711 Core technology 3 to 5 47,019 ( 31,059 ) 15,960 Intangible assets, net $ 104,631 $ ( 52,282 ) $ 52,349 The fair value of intangible assets was derived based on the income approach. This fair value measurement is based on significant inputs that are not observable in the market. Key assumptions utilized in management’s analysis included the following: • Revenues and expense forecasts were based on trends of historical performance and management’s estimate of future performance. • Cash flows utilized in the discounted cash flow analysis were estimated using a weighted-average cost of capital. Changes in the carrying amounts of goodwill were as follows (in thousands): Three Months Ended September 30, 2021 2020 Balance, beginning of period $ 262,270 $ 227,992 Foreign currency translation adjustment ( 255 ) 374 Balance, end of period $ 262,015 $ 228,366 Amortization expense related to acquired intangible assets was recognized as follows (in thousands): Three Months Ended September 30, 2021 2020 Cost of revenues $ 1,964 $ 1,752 Sales and marketing 1,239 992 General and administrative 106 — Total amortization expense $ 3,309 $ 2,744 As of September 30, 2021, the estimated future amortization expense of acquired intangible assets is as follows (in thousands): Fiscal Year Ending June 30, Amount 2022 (remaining 9 months) $ 9,928 2023 9,190 2024 7,707 2025 5,291 2026 3,111 2027 and thereafter 8,921 Total remaining amortization $ 44,148 Note 5. Fair Value Measurements The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows : Level 1 —Inputs are unadjusted, quoted prices in active markets for identical, assets or liabilities at the measurement date; Level 2 —Inputs are quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; Level 3 —Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). 13 Table of Contents The following tables set forth the Company’s financial liabilities that were measured at fair value on a recurring basis as of the dates indicated by level within the fair value hierarchy (in thousands): September 30, 2021 Level 1 Level 2 Level 3 Total Liabilities: Liability for contingent consideration, current portion $ — $ — $ 22,654 $ 22,654 Total $ — $ — $ 22,654 $ 22,654 June 30, 2021 Level 1 Level 2 Level 3 Total Liabilities: Term loan $ — $ 273,000 $ — $ 273,000 Revolving credit facility — 5,000 — 5,000 Liability for contingent consideration, current and non-current portion — — 23,502 23,502 Total $ — $ 278,000 $ 23,502 $ 301,502 In connection with the acquisition of Repstor, Limited (“Repstor”) in June 2021, the Company recorded contingent consideration liabilities representing the amounts payable to former Repstor shareholders based upon the achievement of certain performance measures. The current and non-current portions of these liabilities of $ 11.0 million and $ 12.5 million, respectively, were included in other current liabilities and other liabilities on the consolidated balance sheet as of June 30, 2021. The non-current portion was reclassified to the current portion during the three months ended September 30, 2021 and included in other current liabilities on the unaudited condensed consolidated balance sheet as of September 30, 2021. The fair value of the contingent consideration was initially estimated using the Monte Carlo simulation and included key assumptions used by management related to the estimated probability of occurrence and discount rates. Subsequent changes in the fair value of the contingent consideration liabilities, resulting from management’s revision of key assumptions and estimates, have been recorded in general and administrative expense in the unaudited condensed consolidated statement of operations. Gains and losses arising from exchange rate fluctuation on liabilities denominated in British Pounds have been included in other income on the unaudited condensed consolidated statements of operations. Changes in the fair value of contingent consideration liabilities during the three months ended September 30, 2021 were as follows: Amount Balance as of June 30, 2021 $ 23,502 Change in fair value of contingent consideration 337 Unrealized foreign currency gain ( 1,185 ) Balance as of September 30, 2021 $ 22,654 Based upon Level 2 inputs and the borrowing rates available to the Company for loans with similar terms and consideration of the Company’s credit risk, the carrying value of the Company’s term loan and revolving credit facility approximate their fair value. Other financial instruments consist of accounts receivable, accounts payable and accrued expenses and other current liabilities. Accounts receivable, accounts payable and accrued liabilities are stated at their carrying value, which approximates fair value due to the short time to expected receipt or payment. 14 Table of Contents Note 6. Property and Equipment Property and equipment consist of the following (in thousands): September 30, 2021 June 30, 2021 Computer equipment and software $ 1,710 $ 1,751 Capitalized software 7,674 6,843 Furniture and office equipment 2,189 2,189 Leasehold improvements 5,417 5,417 Construction in progress 31 — 17,021 16,200 Less: accumulated depreciation and amortization ( 6,247 ) ( 5,526 ) $ 10,774 $ 10,674 Depreciation expense, excluding the amortization of capitalized software development costs, was $ 0.3 million for the three months ended September 30, 2021 and 2020. The Company capitalized $ 0.8 million and $ 0.3 million of costs related to software developed for internal use during the three months ended September 30, 2021 and 2020, respectively, and amortized $ 0.4 million and $ 0.2 million during the three months ended September 30, 2021 and 2020, respectively. Note 7. Commitments and Contingencies There has been no material change in the Company’s contractual obligations and commitments other than in the ordinary course of business since the Company’s fiscal year ended June 30, 2021. See the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021 for additional information regarding the Company’s contractual obligations. Operating Leases The Company leases the majority of its office space in the U.S., U.K. and Ukraine under noncancelable operating leases, which have various expiration dates through fiscal 2031 . Minimum rent payments under operating leases are recognized on a straight-line basis over the term of the lease, including any periods of free rent and rent concessions. Total rent expense for the three months ended September 30, 2021 and 2020 was $ 2.2 million and $ 2.4 million, respectively. Software and Other In the ordinary course of business, the Company enters into commitments to purchase or subscribe to software that is required to conduct its business activities. The Company also has commitments towards its cloud hosting service providers. As of September 30, 2021, the Company had $ 5.3 million remaining on these commitments, including $ 2.6 million to be fully paid by June 2022 and $ 2.7 million by August 2023. Litigation In the ordinary course of business, the Company often includes standard indemnification provisions in its commercial arrangements. Pursuant to these provisions, the Company may be obligated to indemnify such parties for losses or claims suffered or incurred in connection with its products, services, breach of representations or covenants, intellectual property infringement or other claims made against such parties. It is not possible to determine the maximum potential amount under these indemnification obligations due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular arrangement. The Company has never incurred material amounts under these provisions. Accordingly, the Company has no liabilities recorded for these provisions as of September 30, 2021 and June 30, 2021. Note 8. Debt As of June 30, 2021, the Company had outstanding borrowings of $ 273.0 million under a term loan and $ 5.0 million under an associated revolving credit facility (together, the “Prior Credit Facility”). On July 12, 2021, amounts outstanding under the Prior Credit Facility were repaid in full from proceeds of the IPO. As a result of the extinguishment of the debt, a loss of $ 2.4 million related to the write-off of unamortized financing costs, has been recorded as a loss on debt extinguishment in the unaudited condensed consolidated statement of operations for the three months ended September 30, 2021. As of September 30, 2021, the Company had no outstanding borrowings under the Prior Credit Facility. 15 Table of Contents Debt-related interest expense for the three months ended September 30, 2021 and 2020 was $ 0.2 million and $ 6.0 million, respectively, net of amortization of deferred financing costs, and $ 5.8 million was accrued as interest payable on outstanding amounts under the Prior Credit Facility as of June 30, 2021. The weighted average interest rate for the three months ended September 30, 2021 and 2020 was 8.3 % and 8.4 %, respectively. On October 5, 2021, the Company entered into a Credit Agreement (the “Credit Agreement”) among the Company, the guarantors party thereto, the lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (“JPMorgan”). The Credit Agreement provides for a five-year , senior secured revolving credit facility of $ 100.0 million with a sub-facility for letters of credit in the aggregate amount of up to $ 10.0 million (the “JPMorgan Credit Facility”). No amounts have been borrowed under the JPMorgan Credit Facility. See Note 13, Subsequent Events , for additional details. Note 9. Stockholders’ Equity On July 2, 2021, in conjunction with the closing of the IPO, the Company’s Amended and Restated Certificate of Incorporation became effective, pursuant to which the Company’s authorized capital stock was increased to 700,000,000 shares of common stock, par value $ 0.001 per share, and 50,000,000 shares of preferred stock, par value $ 0.001 per share. On July 2, 2021, upon the closing of the IPO, all outstanding shares of Series A and Series A-1 convertible preferred stock were automatically converted into 19,034,437 shares of the Company’s common stock on a one -for-one basis. There were 60,926,767 shares of common stock outstanding as of September 30, 2021. As of September 30, 2021, shares of common stock have been reserved for the following: Outstanding stock options 14,300,833 Unvested performance stock units and restricted stock units 4,682,428 Reserved for ESPP 1,466,996 Reserved for future stock award grants 2,108,651 22,558,908 Note 10 . Stock-Based Compensation Stock awards The Company has granted time-based and performance-based stock options, time-based restricted stock units (“RSUs”) and performance-based restricted stock units (“PSUs”), collectively referred to as “Stock Awards”. The Company accounts for stock-based compensation using the fair value method which requires the Company to measure stock-based compensation based on the grant-date fair value of the awards and recognize compensation expense over the requisite service or performance period. Awards that contain only service conditions, are generally earned over four years and expensed on a straight-line basis over that term. Compensation expense for awards that contain performance conditions is calculated using the graded vesting method and the portion of expense recognized in any period may fluctuate depending on changing estimates of the achievement of the performance conditions. Stock option activity under the Company’s equity incentive plans during the three months ended September 30, 2021 was as follows: Number of Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Outstanding as of June 30, 2021 14,684,809 $ 10.11 7.3 $ 262,762 Granted 91,410 33.42 Exercised ( 372,753 ) 6.06 Forfeited ( 102,633 ) 12.96 Outstanding as of September 30, 2021 14,300,833 $ 10.34 7.2 $ 221,285 Vested and exercisable as of September 30, 2021 8,969,425 $ 7.33 6.1 $ 165,275 Unvested and early exercised as of September 30, 2021 150,000 $ 14.77 Vested and expected to vest as of September 30, 2021 14,450,833 $ 10.39 7.2 $ 222,933 16 Table of Contents The weighted-average grant date fair value of options granted during the three months ended September 30, 2021 was $ 13.08 . The total intrinsic value of options exercised during the three months ended September 30, 2021 was $ 10.0 million. The proceeds from option exercises totaled $ 2.3 million during the three months ended September 30, 2021. Performance stock unit activity during the three months ended September 30, 2021 was as follows: Stock Awards Outstanding Weighted- Average Grant Date Fair Value Balance as of June 30, 2021 3,950,000 $ 26.00 Granted 163,527 38.18 Vested — — Forfeited — — Balance as of September 30, 2021 4,113,527 $ 26.48 Restricted stock unit activity during the three months ended September 30, 2021 was as follows: Stock Awards Outstanding Weighted- Average Grant Date Fair Value Balance as of June 30, 2021 46,150 $ 26.00 Granted 522,751 38.03 Vested — — Forfeited — — Balance as of September 30, 2021 568,901 $ 37.05 Stock-based compensation expense Total stock-based compensation during the three months ended September 30, 2021 and 2020 included in the unaudited condensed consolidated statements of operations was $ 19.0 million and $ 4.6 million, respectively. During the three months ended September 30, 2020, the Company also recognized additional stock-based compensation expense of $ 0.5 million relating to the buy-back of shares of common stock, which represents the excess between the repurchase price and the fair value of common stock at the date of repurchase. The Company recorded stock-based compensation expense in the unaudited condensed consolidated statements of operations as follows (in thousands): Three Months Ended September 30, 2021 2020 Cost of revenues Cost of SaaS and support $ 168 $ 42 Cost of professional services 580 204 Research and development 4,350 1,026 Sales and marketing 6,469 1,585 General and administrative 7,461 2,239 Total stock-based compensation $ 19,028 $ 5,096 As of September 30, 2021, there was approximately $ 141.6 million of unrecognized compensation cost related to unvested stock-based awards granted, which is expected to be recognized over the weighted-average period of approximately 2.7 years. The calculated fair value of stock option grants was estimated using the Black-Scholes option pricing model with the following weighted-average assumptions: Three Months Ended September 30, 2021 2020 Expected dividend yield 0 % 0 % Risk-free interest rate 1 % 0.3 % Expected volatility 40 % 37 % Expected life (in years) 6 6 17 Table of Contents Note 11. Income Taxes The Company determines its income tax provision for interim periods using an estimate of its annual effective tax rate adjusted for discrete items occurring during the periods presented. The primary difference between its effective tax rate and the federal statutory rate is the full valuation allowance the Company has established on its federal and state net operating losses and credits. Income taxes from international operations were not material for the three months ended September 30, 2021 and 2020. The Company files income tax returns in the U.S. federal jurisdiction, various state jurisdictions and various foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities. The Company is not currently under audit by the Internal Revenue Service or other similar tax authorities. The Company’s tax returns remain open to examination as follows: U.S. federal and states, all tax years; and significant foreign jurisdictions, generally 2017 through 2021. Note 12. Net Loss Per Share The following table sets forth the computation of basic and diluted net loss per share for the periods indicated (in thousands, except per share data): Three Months Ended September 30, 2021 2020 Numerator Net loss $ ( 25,130 ) $ ( 10,407 ) Less: cumulative dividends allocated to preferred stockholders — ( 3,811 ) Net loss attributable to common stockholders $ ( 25,130 ) $ ( 14,218 ) Denominator Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted 60,085 25,984 Net loss per share attributable to common stockholders Basic and diluted $ ( 0.42 ) $ ( 0.55 ) Basic net loss per share is the same as diluted net loss per share because the Company reported net losses for all periods presented. The Company excluded the following potential shares of common stock from the calculation of diluted net loss per share attributable to common stockholders because these would be anti-dilutive: As of September 30, 2021 2020 Convertible preferred stock (on an if-converted basis) — 19,034,437 Outstanding stock options to purchase common stock 14,300,833 12,829,872 Unvested stock options exercised early 150,000 — Unvested performance stock units and restricted stock units 4,682,428 — Total 19,133,261 31,864,309 18 Table of Contents Note 13. Subsequent Events On October 5, 2021, the Company entered into the Credit Agreement with a group of lenders led by JPMorgan. The Credit Agreement provides for a five-year , senior secured revolving credit facility of $ 100.0 million with a sub-facility for letters of credit in the aggregate amount of up to $ 10.0 million. The Credit Agreement also provides that the Company may seek additional revolving credit commitments in an aggregate amount not to exceed $ 50.0 million. Proceeds of borrowings under the JPMorgan Credit Facility will be used for working capital and general corporate purposes of the Company and its subsidiaries, including acquisitions. No amounts have been borrowed under the JPMorgan Credit Facility. Future borrowings under the JPMorgan Credit Facility will bear interest, at the Company’s election, at an annual rate of either (a) LIBOR plus a percentage spread (ranging from 1.75 % to 2.50 %) or (b) an alternate base rate (as described in the Credit Agreement) plus a percentage spread (ranging from 0.75 % to 1.50 %), in each case based on the Company’s total net leverage ratio. In addition, a commitment fee accrues with respect to the unused amount of the JPMorgan Credit Facility at an annual rate ranging from 0.25 % to 0.40 %, based on the Company’s total net leverage ratio. In connection with the execution of the Credit Agreement, the Company also entered into a pledge and security agreement (the “Security Agreement”) dated as of October 5, 2021 with the subsidiaries of the Company identified therein and JPMorgan, as collateral agent for the secured parties identified therein. Under the Security Agreement, borrowings under the JPMorgan Credit Facility are secured by a first priority pledge of all of the capital stock of each first-tier subsidiary of the Company and the subsidiary guarantors, subject to customary limitations with respect to foreign subsidiaries, and substantially all of the assets (excluding real estate interests) of the Company and the subsidiary guarantors. 19 Table of Contents