What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-09-09 compared with 2021-09-15 · 221 added, 300 removed, 313 unchanged (62% of the section changed)

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Unless otherwise noted, any reference to a year preceded by the word “fiscal” refers to the fiscal year ended June 30 of that year.

Intapp is a leading provider of industry-specific, cloud-based software solutions for the professional and financial services industry globally.

Intapp is a leading provider of industry-specific, cloud-based software solutions for the global professional and financial services industry.

We empower the world’s premier 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, and operate more competitively.

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We sell our software through a direct enterprise sales model, which targets clients based on end market, geography, firm size, and business need.

Historically, most of our clients hosted our software on-premises.

However, as we saw the potential for the cloud to impact the professional and financial services industry, we invested in developing a multi-tenant cloud version of our platform and launched our initial software-as-a-service (“SaaS”) solutions in 2017.

We recognize revenues from SaaS subscriptions ratably over the term of the contract, while we recognize revenues from the license component of on-premises subscriptions upfront and the support component of such subscriptions ratably over the support term.

We invested in developing a multi-tenant cloud version of our platform and launched our initial software-as-a-service (“SaaS”) solutions in 2017.

We recognize revenues from SaaS subscriptions ratably over the term of the contract, while we recognize revenues from the license component of on-premise subscriptions upfront and the support component of such subscriptions ratably over the support term.

We generally price our subscriptions based on the modules deployed as well as the number of users adopting our solution.

We expect substantially all of our new ARR growth in the future to be from the sale of SaaS subscriptions.

We expect the vast majority of our new ARR growth in the future to be from the sale of SaaS subscriptions.

We generate a majority of our non-recurring revenues from professional services.

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Net losses attributable to us for fiscal years 2022, 2021 and 2020 were $99.7 million, $46.8 million and $45.9 million, respectively.

Recent Developments

On July 2, 2021, immediately prior to the closing of the IPO, our amended and restated Certificate of Incorporation became effective, pursuant to which our authorized capital stock was increased to 700 million shares of common stock and 50 million shares of preferred stock.

On July 2, 2021, we completed our IPO and sold 10,500,000 shares of our common stock at a public offering price of $26.00 per share.

The net proceeds to us were $245.2 million, after deducting the underwriters’ discounts and offering expenses payable by us.

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 our common stock on a one-for-one basis.

On July 8, 2021, the underwriters of our IPO exercised in full the ir right to purchase an additional 1,575,000 shares of our common stock at the public offering price of $26.00 per share.

The net proceeds to us were $38.2 million, after deducting the underwriters’ discounts.

On July 12, 2021, we repaid the outstanding $273.0 million borrowing under the term loan and $5.0 million borrowing under the revolving credit facility from the proceeds of the IPO.

As a result, we will recognize a loss on extinguishment of debt of $2.4 million on this date for the unamortized financing costs related to the term loan.

Factors affecting our performance

Key Factors Affecting Our Performance

Market Adoption of our Cloud Platform.

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From a sales perspective, our ability to add new clients and expand within existing accounts depends upon a number of factors, including the quality and effectiveness of our sales personnel and marketing efforts, and our ability to convince key decision makers within professional and financial services firms to embrace the Intapp Platform over point solutions, internally developed solutions, and horizontal solutions.

Long-term ARR expansion.

A key element of our growth strategy is expanding within our existing client base.

We typically land new clients by selling an application suite or capability to address a desired business outcome.

From there, we seek to grow with the client, encouraging them to adopt our end-to-end platform capabilities across more of their organization until they reach full adoption of our platform.

We believe the historical ARR expansion within our existing client base illustrates our success in executing our land and expand strategy over the long term.

To measure ARR expansion, we categorize clients by the year in which they first contracted for any of our platform modules, which we call an annual cohort.

For each annual cohort, we measure the cohort’s aggregate ARR for our most recently completed fiscal year and divide it by the cohort’s aggregate ARR at the end of the previously completed fiscal year.

We refer to the resulting quotient as ARR expansion.

Net Revenue Retention .

We measure our ability to grow and retain ARR from existing clients using a metric we refer to as net revenue retention.

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We then divide the current period ARR by the prior period ARR to calculate the net revenue retention.

This metric accounts for changes in our recurring revenue base from capability increases or decreases, seat increases or decreases, price increases or decreases, and client attrition.

We have averaged a net revenue retention rate of over 110% for fiscal years 2021 and 2020 due to a steady increase in client adoption of our platform’s capabilities and a low level of client attrition.

This metric accounts for changes in our recurring revenue base from cross-sell (additional solution capabilities sold), upsell (additional seats sold), price changes, and client attrition (including contraction of solution capabilities, contraction of seats and client churn).

We have averaged a net revenue retention rate of more than 114% and 110% in fiscal years 2022 and 2021, respectively, due to a steady increase in ARR from upsell and cross-sell motions.

However, if our clients do not continue to see the ability of our platform to generate return on investment relative to other software alternatives, net revenue retention could suffer and our operating results may be adversely affected.

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We intend to continue to invest in research and development to build new capabilities and maintain the core technology underpinning our differentiated platform.

In addition, we expect to increase investment in sales and marketing to broaden our reach with new clients in the United States and abroad and deepen our penetration with existing clients.

We are in the process of increasing our general and administrative spending to support our growing operations and prepare for operating as a public company.

In addition, we expect to invest in sales and marketing to broaden our reach with new clients in the United States and abroad and deepen our penetration with existing clients.

With our revenue growth objectives, we expect to continue to make such investments for the foreseeable future.

To complement our organic growth engine, we continue to evaluate acquisition opportunities that will help us extend our platform, broaden and deepen our market leadership, and add new clients, and we have a track record of successfully identifying and integrating complementary businesses within the professional and financial services industry.

COVID-19 effects on demand for our platform.

In light of the onset of COVID-19 in the third quarter of fiscal year 2020, we experienced lower demand and longer sales cycles from some of our clients than we would have anticipated going into the second half of fiscal year 2020.

Over recent months, we have seen demand for our platform solutions begin to recover.

However, given the ongoing nature of the COVID-19 pandemic and the risks it poses for business operations and demand for services across all sectors, there is no guarantee with respect to the timing or magnitude of demand recovery in the economy, or in the industry sectors that we serve, which may adversely impact our operating results.

We are continuing to gradually increase our general and administrative spending to support our growing operational needs.

We have a track record of successfully identifying and integrating complementary businesses within the professional and financial services industry.

To complement our organic investment in innovation and accelerate our growth, we will continue to evaluate acquisition opportunities that help us extend our platform, broaden and deepen our market leadership, and add new clients.

COVID-19 Expenses.

In March 2020, in response to the COVID-19 pandemic to ensure the safety of our employees, we implemented a global work from home policy and suspended international and domestic travel.

We began easing these restrictions as we entered fiscal year 2022, including by re-opening offices and resuming some essential business travel and in-person marketing events.

As a result, we have seen an increase in travel-related and marketing expenses.

In March 2022, we announced a broad return to office on a voluntary basis and in the long term, we expect to adopt a hybrid work model to allow flexibility for our employees.

We continue to closely monitor the status of COVID-19 cases in the community to ensure the health and safety of our employees and clients and may reinstate travel and meeting restrictions from time to time in response to future COVID surges.

Business Impact of Russia’s Invasion of Ukraine.

In March 2022, in response to Russia’s invasion of Ukraine, we implemented contingency plans to ensure the safety of personnel and continuity of our contract research and development activity located in Ukraine, Russia and Belarus, including relocation of certain resources to other geographic locations and transitioning work previously performed by such teams to other teams outside of the conflict zone in the European Union, U.K.

and Americas.

We have officially ended all work performed by our contract resources in Russia and Belarus.

As a result, we expect a minor increase in research and development expenses due to increased labor rates pertaining to contract resources and relocation costs in connection with such resources, from Ukraine, Russia, and Belarus, to other jurisdictions and backfilling positions in other jurisdictions for those not willing or able to relocate.

Any such increase is expected to be offset in part by cost reductions in future discretionary spending.

Key Business Metrics

We review a number of operating and financial metrics, including the following key metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions.

Annual recurring revenues (“ARR”)

ARR represents the annualized recurring value of all active SaaS and on-premises subscription contracts at the end of a reporting period.

Annual R ecurring R evenues ( “ A RR ” )

ARR represents the annualized recurring value of all active SaaS and on-premise subscription contracts at the end of a reporting period.

Contracts with a term other than one year are annualized by taking the committed contract value for the current period divided by number of days in that period then multiplying by 365.

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These clients have the financial and operating resources needed to purchase, deploy, and successfully use the full capabilities of our software platform, and as such, we believe the number of our clients with contracts greater than $100,000 of ARR is an important metric for highlighting our progress on the path to full adoption of our platform by our professional and financial services clients.

As of June 30, 2021 and 2020, we had 420 and 356 clients, respectively, with contracts greater than $100,000 of ARR, of which 31 and 17 clients, respectively, with contracts greater than $1.0 million of ARR.

As of June 30, 2022 and 2021, we had 506 and 420 clients, respectively, with contracts greater than $100,000 of ARR, of which 41 and 31 clients, respectively, had contracts greater than $1.0 million of ARR.

Components of Our Results of Operations

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However, over time as we focus on new sales of our SaaS solutions and encourage existing subscription license clients to migrate to SaaS solutions, we expect revenues from support to decrease as a percentage of total revenues.

Subscription license

Subscription L icense

Our subscription licenses provide the client with the right to functional intellectual property and are distinct performance obligations as the client can benefit from the subscription licenses on their own.

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Our professional services primarily consist of implementation, configuration and upgrade services provided to clients.

The majority of professional services engagements are billed to clients on a time and materials basis and revenues are recognized as invoiced.

These engagements are billed to clients either on a time and materials or milestone basis;

revenues are recognized as invoiced or in proportion to the work performed, respectively.

We expect the demand for our professional services to increase due to client growth and the need for implementation, upgrade, and migration services for new and existing clients.

This demand will be affected by the mix of professional services that are provided by us versus provided by our third-party implementation partners.

Our professional services are currently loss making (after allocated overhead for facilities and IT) and accounted for 11%, 13% and 14% of our total revenues during fiscal years 2021, 2020 and 2019, respectively.

Our professional services are currently loss making (after allocated overhead costs for facilities and IT) and accounted for 13%, 11% and 13% of our total revenues during fiscal years 2022, 2021 and 2020, respectively.

Cost of Revenues

Our cost of revenues consists primarily of expenses related to providing SaaS subscription, support and professional services to our clients, including personnel costs (salaries, bonuses, benefits, and stock-based compensation) and related expenses for client support and services personnel, as well as cloud infrastructure costs, third-party expenses, depreciation of fixed assets, amortization of capitalized internal-use software costs and acquired intangible assets, and allocated overhead.

Our cost of revenues consists primarily of expenses related to providing SaaS subscription, support and professional services to our clients, including personnel costs (salaries, bonuses, benefits and stock-based compensation) and related expenses for client support and services personnel, as well as cloud infrastructure costs, third-party expenses, amortization of capitalized internal-use software costs and acquired intangible assets, and allocated overhead costs.

We do not have any cost of revenues related to our subscription licenses.

We recognized expenses in fiscal year 2020 related to our April 2020 restructuring plan for the organizational integration of the DealCloud acquisition and some COVID-19-related headcount reductions that impacted our cost of revenues.

We expect our cost of revenues to increase in absolute dollars as we expand our SaaS client base over time as this will result in increased cloud infrastructure costs and increased costs for additional personnel to provide technical support services to our growing client base.

Cost of SaaS and Support

Our cost of SaaS and support revenues comprises the direct costs to deliver and support our products, including salaries, bonus, benefits, stock-based compensation, as well as allocated overhead for facilities and IT, third-party hosting fees related to cloud services, amortization of capitalized internal-use software development costs and amortization of acquired intangible assets.

Our cost of SaaS and support revenues comprises the direct costs to deliver and support our products, including salaries, bonuses, benefits, stock-based compensation, as well as allocated overhead costs for facilities and IT, third-party hosting fees related to cloud services, amortization of capitalized internal-use software development costs and amortization of acquired intangible assets.

Cost of Professional Services

Our cost of professional services revenues comprises the personnel-related expenses for our professional services employees and contractors responsible for delivering implementation, upgrade and migration services to our clients.

This includes salaries, benefits, stock-based compensation, and allocated overhead for facilities and IT.

Our cost of professional services revenues comprises the personnel-related costs for our professional services employees and contractors responsible for delivering implementation, upgrade and migration services to our clients.

This includes salaries, bonuses, benefits, stock-based compensation, and allocated overhead costs for facilities and IT.

We expect the cost of professional services revenues to increase in absolute dollars as we continue to hire personnel to provide implementation, upgrade and migration services to our growing client base.

Operating Expenses

Research and development expense

Our research and development expenses comprise costs associated with the development of our software products for sale.

The major components of research and development costs include salaries and employee benefits, costs of third-party services, and allocations of various overhead and occupancy costs.

Research and Development

Our research and development expenses consist primarily of personnel-related costs for engineering and product development employees, costs of third-party services, and allocations of various overhead, cloud hosting costs and facilities costs.

We expect our research and development expenses to continue to increase in absolute dollars for the foreseeable future as we continue to dedicate substantial internal resources to develop, improve and expand the functionality of our solutions.

Sales and marketing expense

Our sales and marketing expenses consist primarily of costs incurred for personnel-related expenses for our sales and marketing employees as well as commission payments to our sales employees, costs of marketing events and online advertising, allocations of various overhead and occupancy costs and travel and entertainment expenses.

As noted above, we also expect a minor increase in research and development expenses in connection with the relocation of contract resources primarily from Russia and Belarus to other geographic locations and transitioning work previously performed by such teams to other teams outside of the conflict zone in the European Union, U.K.

and Americas.

Sales and M arketing

Our sales and marketing expenses consist primarily of costs incurred for personnel-related costs for our sales and marketing employees as well as commission payments to our sales employees, costs of marketing events and online advertising, allocations of various overhead and facilities costs and travel and entertainment expenses.

We capitalize client acquisition costs (principally commissions paid to sales personnel) and subsequently amortize these costs over the expected period of benefit.

We expect in the long-term we will see an increase of our sales and marketing expense as we continue to expand our direct sales force to capitalize on opportunities for growth and resume in-person conferences and attendance at trade shows once the COVID-19 pandemic has been brought under control.

General and administrative expense

Our general and administrative expenses consist primarily of personnel-related expenses as well as professional services and facilities costs related to our executive, finance, human resources, information technology and legal functions.

In the medium-term, we expect to see an increase in sales and marketing expense as we continue to expand our direct sales force to take advantage of opportunities for growth and resume in-person meetings, conferences, and attendance at trade shows as the COVID-19 pandemic wanes.

General and Administrative

Our general and administrative expenses consist primarily of personnel-related costs as well as professional services and facilities costs related to our executive, finance, human resources, information technology and legal functions.

Being a new public company, we expect to incur significant additional accounting and legal costs related to compliance with rules and regulations enacted by the SEC, including the additional costs of achieving and maintaining compliance with the Sarbanes-Oxley Act, as well as additional insurance, investor relations and other costs associated with being a public company.

Restructuring

Restructuring expenses relate to our April 2020 restructuring plan for the organizational integration of the DealCloud acquisition and some COVID-19-related headcount reductions across all functions.

These charges have been classified in cost of revenues or operating expenses according to the nature of the expenses.

Loss on Debt Extinguishment

Loss on debt extinguishment consists of the write-off of unamortized deferred financing costs upon the repayment of our debt obligations.

Interest Expense

Interest expense, net primarily consists of the interest on our debt, which was paid in full in July 2021.

Interest expense consists primarily of the interest on our debt, which was repaid in full in July 2021, and the amortization of deferred financing costs.

Other Income (Expense), Net

Other income (expense), net consists primarily of realized and unrealized foreign exchange gains and losses resulting from fluctuations in foreign exchange rates on monetary assets and liabilities denominated in currencies other than the U.S.

Other income (expense), net consists primarily of realized and unrealized foreign exchange gains and losses resulting from fluctuations in foreign currency exchange rates on monetary assets and liabilities denominated in currencies other than the U.S.

Income Tax Benefit (Expense)

Our income tax provision consists of an estimate of federal, state, and foreign income taxes based on enacted federal, state, and foreign tax rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in the valuation of our deferred tax assets and liabilities, and changes in tax laws.

We maintain a full valuation allowance on our federal and state deferred tax assets as we have concluded that it is not more likely than not that the deferred tax assets will be realized.

Results of O perations

Our income tax benefit (expense) consists of an estimate of federal, state, and foreign income taxes based on enacted federal, state, and foreign tax rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in the valuation of our deferred tax assets and liabilities, and changes in tax laws.

We maintain a full valuation allowance on our federal and state deferred tax assets as we have concluded that it is more likely than not that the deferred tax assets will not be realized.

Results of Operations

The following tables set forth our results of operations for the periods presented, expressed in total dollar terms and as a percentage of total revenues (percentages may not add up due to rounding):

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Operating loss

Loss on debt extinguishment

Interest expense

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Income tax benefit (expense)

As adjusted to reflect the impact of the full retrospective adoption of ASC 606.

See Note 2 to our consolidated financial statements for a summary of adjustments.

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(1) Amounts include stock-based compensation expense as follows:

Year Ended June 30,

Cost of SaaS and support

Cost of professional services

Research and development

Sales and marketing

General and administrative

Total stock-based compensation expense

Includes acquisition-related transaction costs of $1.9 million and $1.6 million for fiscal years 2022 and 2021, respectively.

Comparison of the Fiscal Years Ended June 30, 2021 and 2020

Comparison of the Fiscal Y ears E nded June 30, 20 2 2 and 202 1

Year Ended June 30,

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Recurring revenues from the sale of our SaaS solutions, from subscriptions to our term software solutions, and from providing support for these solutions increased by $47.1 million, or 25%, compared to the prior year.

Our SaaS and support revenues grew $30.0 million, or 26%, in fiscal year 2021 compared to fiscal year 2020, principally due to increased sales to new clients and additional orders and renewals by existing clients.

Subscription license revenues decreased $2.5 million, or 5%, in fiscal year 2021 compared to the prior year, primarily due to fewer multi-year deals originating or renewing in fiscal year 2021 compared to the prior year and our trend to migrate subscription clients to cloud.

We anticipate subscription license revenues as a percentage of our total revenues may vary quarter to quarter and will continue to decrease as we continue to emphasize the sale of SaaS solutions to our clients and cloud migration .

Our SaaS and support revenues grew $48.9 million, or 34%, in fiscal year 2022 compared to fiscal year 2021, due to sales to new clients and expansion of existing clients from both cross-selling and upselling sales motions.

The continuation of clients migrating from using our on-premise solutions to our cloud solutions also contributed to the growth.

Subscription license revenues decreased $1.8 million, or 4%, in fiscal year 2022 compared to fiscal year 2021.

This reflects our continued emphasis on selling new subscriptions as SaaS and migrating our existing on-premise clients to our SaaS solutions.

Professional Services

Professional services revenues increased by $10.3 million, or 42%, for fiscal year 2022 compared to fiscal year 2021.

In the early part of fiscal year 2021, we saw a slowdown in new sales and related demand for implementation services as well as reduced demand for upgrade services due to COVID-19.

We saw a recovery in demand for implementation, upgrade and migration services in the second half of the fiscal year which helped offset the impact of the COVID-19 slowdown experienced earlier.

This reflects a continuation in demand for implementation, upgrade and migration services, which were adversely impacted by COVID-19 during fiscal year 2021.

Cost of Revenues and Gross Profit

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Professional services

Restructuring

Total cost of revenues

Gross profit:

SaaS and support

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Total gross profit - recurring revenues

Professional services (including restructuring of $0 and $765)

Professional services

Cost of SaaS and Support

Cost of SaaS and support revenues increased by $10.5 million, or 26%, for fiscal year 2022 compared to fiscal year 2021.

The increase can be attributed primarily to an increase in cost of hosting services as we expanded our cloud offerings and royalty expenses associated with third-party products in our software offerings.

The increase can be attributed primarily to increases in personnel-related costs of $4.5 million mainly due to annual pay raises and headcount increases, amortization expense of $2.4 million relating to capitalized software development costs and intangible assets, royalty expense of $1.5 million relating to third-party products, allocated overhead costs of $1.1 million and hosting costs of $0.9 million to support our growth as we scale our business.

Cost of Professional Services

Cost of professional services revenues increased by $0.9 million, or 3%, for fiscal year 2021 compared to fiscal year 2020, primarily due to an increase in headcount-related costs due to new hires and an increase in the annual bonus, partially offset by a decrease in travel related costs due to the impact of COVID-19.

Gross profit increased by $24.7 million, or 21%, driven by the growth in SaaS and support revenues together with cost savings due to reduced travel related costs as a result of the COVID-19 pandemic, which was offset by a reduction in subscription license revenues and an increase in royalty expenses and professional services costs.

Cost of professional services revenues increased by $14.2 million, or 42%, for fiscal year 2022 compared to fiscal year 2021, primarily due to an increase in personnel-related costs by $8.2 million due to annual raises and increased headcount, subcontractor costs of $3.6 million, and other allocated overhead costs of $2.4 million as we expanded our teams to provide implementation and migration services to our growing client base.

Gross profit increased by $32.7 million, or 23%, primarily driven by the growth in SaaS and support revenues, which was partially offset by increases in professional services costs as we invested in headcount to support our implementation, upgrade and migration services, and royalty expenses incurred on sales of third-party products.

Operating Expenses

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General and administrative

Restructuring

Total operating expenses

Research and development expense

Research and development expense increased by $8.8 million, or 21%, for fiscal year 2021 compared to fiscal year 2020, primarily due to headcount-related costs as we continued to invest in the development of our future product offerings.

Of this amount, $5.9 million was attributable to a combination of increased headcount, the impact of annual pay raises and an increase in accrued bonus, and $1.0 million was attributable to contract labor costs.

Stock-based compensation expense increased by $2.9 million due to an increase in option grants made in fiscal year 2021 combined with an increase in the fair value of the common stock underlying such grants.

These increases were partially offset by a decrease in travel related costs of $0.9 million due to COVID-19 related restrictions.

Sales and marketing expense

Sales and marketing expenses increased by $11.1 million, or 19%, for fiscal year 2021 compared to fiscal year 2020, primarily driven by increased headcount-related costs, partially offset by reduced travel and marketing expenses.

Personnel costs increased by $9.4 million due to an increase in headcount, the impact of annual pay raises and higher commission expense due to new sales growth.

Stock-based compensation expense increased by $5.8 million due to an increase in option grants made in fiscal year 2021 combined with an increase in the fair value of the common stock underlying such grants.

These increases were partially offset by a decrease of $4.8 million in travel related costs and marketing expenses resulting from the curtailment of business travel and in-person corporate marketing events caused by COVID-19.

General and administrative expense

Research and Development

Research and development expenses increased by $23.6 million, or 46%, for fiscal year 2022 compared to fiscal year 2021.

Stock-based compensation expense increased by $13.1 million, primarily due to an increase in stock awards granted combined with an increase in the grant date fair value of such awards.

Personnel-related costs increased by $5.4 million primarily due to increased headcount and salary raises, and relocation costs for subcontractors in Ukraine, Russia, and Belarus to other locations.

Contractor costs increased by $2.9 million due to incremental development activities related to our cloud offerings.

Cloud hosting costs increased by $1.5 million due to increased usage in support of development activities.

Allocated overhead costs increased by $0.7 million due to increased facility costs and headcount.

Sales and Marketing

Sales and marketing expenses increased by $42.0 million, or 60%, for fiscal year 2022 compared to fiscal year 2021.

Stock-based compensation expense increased by $18.6 million, primarily due to an increase in stock awards granted combined with an increase in the grant date fair value of such awards.

Personnel-related costs increased by $15.1 million due to increased headcount, salary raises, and higher sales commissions driven by increased sales.

Marketing expenses increased by $5.9 million due to marketing research, company events and a modest return to in-person activities resulting from the easing of Covid-19-related restrictions on travel and our IPO.

Allocated overhead costs increased by $1.3 million due to increased headcount and overall costs to support the growth in our business.

Amortization expense relating to intangible assets increased by $1.1 million.

General and A dministrative

General and administrative expense increased by $43.7 million, or 103%, for fiscal year 2022 compared to fiscal year 2021.

The increase was primarily driven by personnel expenses and costs associated with our preparations to go public.

Stock-based compensation expense increased by $5.3 million due to an increase in option grants made in fiscal year 2021 combined with an increase in the fair value of the common stock underlying such grants.

Personnel expenses increased by $2.8 million, primarily due to an increased bonus accrual in fiscal year 2021.

We also incurred increased expenditures for consultants and professional services of $6.1 million.

These increases were partially offset by a $1.4 million decrease in travel and entertainment and company event related expenses resulting from the suspension of business travel and in-person company events due to COVID-19.

Restructuring

Restructuring expense decreased by $2.9 million in fiscal year 2021 compared to fiscal year 2020.

The decrease was as a result of a re-organization and restructuring plan undertaken by management in April 2020 and consists of severance and employee benefit costs.

There were no such activities in fiscal year 2021.

The increase was primarily driven by personnel-related costs associated with being a public company.

Stock-based compensation expense increased by $24.0 million mainly due to an increase in stock awards granted combined with an increase in the grant date fair value of such awards.

Personnel-related costs increased by $8.5 million, primarily due to increased headcount and salary raises.

Third-party professional fees increased by $8.6 million and insurance expense increased by $5.6 million, in each case largely due to the costs associated with being a public company.

Facility and software license costs increased by $1.8 million driven by higher headcount and the impact of a one-time rent credit which was received in the prior year.

These increases were partially offset by an increase of $4.8 million in costs allocated to other functions due to proportionate increases in headcount within other functions.

Loss on Debt Extinguishment

Year Ended June 30,

(in thousands, except for percentages)

Loss on debt extinguishment

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Loss on debt extinguishment of $2.4 million during fiscal year 2022 related to the write-off of unamortized deferred financing costs upon the full repayment of our debt under the Prior Credit Facility in July 2021.

Interest Expense

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Interest expense decreased by $24.3 million in fiscal year 2022 compared to fiscal year 2021.

The reduction was primarily driven by a decrease in the variable interest rate on our debt.

The decrease was mainly due to the full repayment of our debt under the Prior Credit Facility in July 2021.

Other Income (Expense), Net

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Other income (expense), net

The increase in other income (expense), net for fiscal year 2021 compared to fiscal year 2020 was primarily attributable to unrealized and realized foreign exchange gains arising on our cash and accounts receivable balances denominated in British Pound as a result of the British Pound strengthening against the U.S.

Dollar during fiscal year 2021.

Our cash and accounts receivable balances denominated in other currencies were immaterial.

Income tax expense

The change in other income (expense), net, was primarily due to the impact of fluctuations in foreign currency rates on our monetary asset and liability balances denominated in currencies other than the U.S.

Dollar, primarily British Pounds.

We had foreign exchange losses on our net monetary asset position as a result of the British Pound weakening against the U.S.

Dollar during fiscal year 2022 compared to foreign exchange gains in fiscal year 2021.

Income Tax Benefit (Expense)

Year Ended June 30,

(in thousands, except for percentages)

Income tax expense

Income tax expense was $0.5 million for fiscal year 2021 compared to an income tax expense of $0.4 million recorded during fiscal year 2020.

The income tax expense for fiscal years 2021 and 2020 are primarily attributable to taxes in foreign jurisdictions.

Comparison of the Fiscal Years Ended June 30, 2020 and 2019

Income tax benefit (expense)

Income tax benefit was $3.4 million for fiscal year 2022 compared to an income tax expense of $0.5 million recorded during fiscal year 2021.

The change in our income tax benefit (expense) was primarily due to a reduction in deferred tax liability in a foreign subsidiary in fiscal year 2022.

The income tax benefit (expense) for fiscal years 2022 and 2021 are primarily attributable to taxes in a number of foreign jurisdictions.

Comparison of the Fiscal Y ears E nded June 30, 20 21 and 2020

Year Ended June 30,

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Recurring revenues from the sale of our SaaS solutions, from subscriptions to our term software solutions, and from providing support for these solutions increased by $27.5 million, or 17%, compared to the prior year.

Our SaaS and support revenues grew $40.1 million, or 54%, in fiscal year 2020 compared to fiscal year 2019.

This increase was principally due to the full year of revenues recognized from initial SaaS subscription and support services sold to new and existing clients in fiscal year 2019 and from renewals of such services in fiscal year 2020, the full year of revenues from the three fiscal year 2019 acquisitions, DealCloud, gwabbit and OnePlace, and revenues from initial sales to new and existing clients in fiscal year 2020.

Subscription license revenues decreased $0.5 million, or 1%, in fiscal year 2020 compared to the prior year, as we emphasized new sales of SaaS solutions to our clients.

We anticipate that the percentage of subscription license revenues as a percentage of our total revenues will continue to decrease.

Professional Services

Professional services revenues increased by $0.3 million, or 1%, for fiscal year 2021 compared to fiscal year 2020.

The increase was primarily driven by an increase in implementation agreements as we performed implementation, upgrade and migration services to on-board new clients and expanded our offerings to our existing clients.

In the early part of fiscal year 2021, we saw a slowdown in new sales and related demand for implementation services as well as reduced demand for upgrade services due to COVID-19.

We saw a recovery in demand for implementation, upgrade and migration services in the second half of the fiscal year which helped offset the impact of the COVID-19 slowdown experienced earlier.

Cost of Revenues and Gross Profit

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Total cost of revenues

Gross profit:

SaaS and support

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Total gross profit - recurring revenues

Professional services (including restructuring of $765 and $0)

Professional services

Cost of SaaS and Support

Cost of SaaS and support revenues increased by $3.0 million, or 8%, for fiscal year 2021 compared to fiscal year 2020.

The increase can be attributed primarily to increases in headcount, hosting and facilities costs to support our growth as we scale our business.

Specifically, our payroll-related costs increased by $5.1 million, our facility and technology costs increased by $4.8 million, and amortization of acquired technology and capitalized software increased by $2.7 million.

Cost of Professional Services

Cost of professional services revenues increased by $11.1 million, or 51%, for fiscal year 2020 compared to fiscal year 2019.

The increase was primarily driven by an increase of $9.6 million in our personnel-related expenses for our professional services employees and consultants as we expanded our teams to provide implementation services to our growing client base.

Restructuring

Restructuring expense, which was primarily related to professional services, was $0.8 million in fiscal year 2020 as a result of a re-organization and restructuring plan undertaken by management in April 2020 and consists of severance and employee benefit costs.

Our gross profit increased by $17.2 million, primarily due to growth in our recurring revenues, which was partially offset by an increase in professional services costs as we invested in implementation, upgrade and migration services to on-board new clients and to expand our subscription revenues within our existing client base, and additional SaaS and support costs due to increased investment in our cloud operations.

Operating Expenses

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Total operating expenses

Research and development expense

Research and development expense increased by $13.3 million, or 46%, for fiscal year 2020 compared to fiscal year 2019.

The increase was driven in part by an additional $6.1 million in payroll and related costs, including $0.6 million of stock-based compensation, as a result of increased headcount, along with an increase of $4.3 million in costs for consultants and contractors in order to support the development of our products and an increase of $2.2 million in the allocation of various overhead and occupancy costs to support our increased headcount.

Sales and marketing expense

Sales and marketing expense increased by $14.0 million, or 31%, for fiscal year 2020 compared to fiscal year 2019.

The increase was primarily driven by an additional $12.3 million in payroll and related costs, including $0.4 million of stock-based compensation, and an increase of $2.9 million in the allocation of various overhead and occupancy costs to support our increased headcount.

Additionally, there was an increase of $0.8 million in amortization for our tradename and client relationships that we acquired as part of our acquisitions in fiscal year 2019.

These increases were partially offset by a decrease of $2.5 million in marketing and sales expenses as we canceled all in-person marketing and sales events in early 2020 in response to the COVID-19 pandemic.

General and administrative expense

General and administrative expense decreased by $0.2 million, or 1%, for fiscal year 2020 compared to fiscal year 2019.

While we had an increase in certain expenses to support the growth of our business, such as an increase of $3.9 million in payroll and related costs due to increased headcount, the increase was offset by a decrease in transaction costs of $3.1 million, and a decrease of $0.6 million in recruiting costs, a decrease of $0.3 million in travel and entertainment expenses and a decrease of $0.3 million in costs related to conferences and events which were related to cost reduction measures taken in response to the COVID-19 pandemic.

Research and Development

Research and development expenses increased by $8.8 million, or 21%, for fiscal year 2021 compared to fiscal year 2020, primarily due to headcount-related costs as we continued to invest in the development of our future product offerings.

These increases were partially offset by a decrease in travel related costs of $0.9 million due to COVID-19 related restrictions.

Sales and Marketing

Personnel costs increased by $9.4 million due to an increase in headcount, the impact of annual pay raises and higher commission expense due to new sales growth.

General and A dministrative

General and administrative expenses increased by $13.9 million, or 49%, for fiscal year 2021 compared to fiscal year 2020.

The increase was primarily driven by personnel expenses and costs associated with our preparations to go public.

Personnel expenses increased by $2.8 million, primarily due to an increased bonus accrual in fiscal year 2021.

We also incurred increased expenditures for consultants and professional services of $6.1 million.

Restructuring

Restructuring expense was $2.9 million in fiscal year 2020 as a result of a re-organization and restructuring plan undertaken by management in April 2020 and consists of severance and employee benefit costs.

Restructuring expense decreased by $2.9 million in fiscal year 2021 compared to fiscal year 2020.

The decrease was as a result of a re-organization and restructuring plan undertaken by management in April 2020 and consists of severance and employee benefit costs.

There were no such activities in fiscal year 2021.

Interest Expense

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Interest expense

Interest expense increased by $7.9 million for fiscal year 2020 compared to fiscal year 2019.

The change was primarily driven by an increase in our term loan in May 2019, resulting in interest being paid on a higher balance for the entire fiscal year 2020 compared to only a partial period during fiscal year 2019.

Additionally, we increased our borrowings on the credit facility during the twelve months ended June 30, 2020.

Income tax benefit (expense)

Interest expense decreased by $3.2 million in fiscal year 2021 compared to fiscal year 2020.

The reduction was primarily driven by a decrease in the variable interest rate on our debt.

Other Income (Expense), Net

Year ended June 30,

(in thousands, except for percentages)

Income tax benefit (expense)

Income tax expense was $0.4 million for fiscal year 2020 compared to an income tax benefit of $7.8 million recorded during fiscal year 2019.

Our income tax benefit during fiscal year 2019 was primarily attributable to a partial release of the valuation allowance against our deferred tax assets in the U.S.

due to acquisitions that were completed during the year.

The valuation allowance release was the result of net deferred tax liabilities originating from the acquisitions that were an available source of income to realize a portion of our deferred tax assets.

Quarterly results of operations

The following tables set forth our unaudited quarterly consolidated statements of operations data for each of the eight quarters ended June 30, 2021, as well as the percentage that each line item represents of total revenues.

The information for each of these quarters has been prepared on the same basis as the audited annual consolidated financial statements included elsewhere in this Annual Report on Form 10-K, and, in the opinion of management, reflects all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of this data.

These historical quarterly operating results are not necessarily indicative of the results to be expected for a full year or any future period.

Three months ended

September 30,

(in thousands)

SaaS and support

Subscription license

Total recurring revenues

Professional services

Total revenues

Cost of revenues

SaaS and support

Total cost of recurring revenues

Professional services

Restructuring

Total cost of revenues

Operating expenses:

Research and development

Sales and marketing

General and administrative

Restructuring

Total operating expenses

Operating loss

Interest expense

Other income (expense), net

Net loss before income taxes

Dollar during fiscal year 2021.

Our cash and accounts receivable balances denominated in other currencies were immaterial.

Income Tax Expense

Quarterly trends as a percentage of total revenues (percentages may not add up due to rounding):

Three months ended

September 30,

(as a percentage of total revenues)

SaaS and support

Subscription license

Total recurring revenues

Professional services

Total revenues

Cost of revenues

SaaS and support

Total cost of recurring revenues

Professional services

Restructuring

Total cost of revenues

Operating expenses:

Research and development

Sales and marketing

General and administrative

Restructuring

Total operating expenses

Operating loss

Interest expense

Other income (expense), net

Net loss before income taxes

Year ended June 30,

(in thousands, except for percentages)

Income tax expense

Quarterly trends in revenues

Our quarterly SaaS and support revenues increased sequentially for each period presented, primarily due to sales to new clients and additional orders and renewals placed by existing clients.

We cannot assure you that this pattern of sequential growth in SaaS and support revenues will continue.

Sales of our subscription licenses are recognized at a point-in-time, generally upon delivery of the license or commencement of the renewal term, rather than over the license term, which causes our quarterly subscription license revenues to fluctuate depending on the timing of new sales and renewals of existing contracts.

As we have emphasized sales of SaaS solutions to our clients, our quarterly subscription license revenues have generally decreased each quarter, except the third and fourth quarters of fiscal year 2021 and the third quarter of fiscal year 2020, when there was an increase caused largely by the number of subscription license deals contracted in those quarters.

We anticipate that subscription license revenues will generally continue to decrease as we focus on sales of our SaaS solutions but may fluctuate quarter to quarter depending on the pattern of existing annual and multi-year contract renewals.

Our professional services revenues declined over the periods presented except the third and fourth quarters of fiscal year 2021 as a result of a few large implementation projects, upgrade, and migration services by our new and existing clients in those quarters.

The proportion of our total revenues derived from SaaS and support increased over the first six quarters presented as we continued to focus on new sales of our SaaS solutions and encouraged existing subscription license clients to migrate to SaaS solutions.

Although revenues from SaaS and support increased in absolute dollars during the third and fourth quarters of fiscal year 2021, they decreased as a proportion of our total revenues due to an increase in subscription license and professional services revenues.

Gross profit as a percentage of total revenues increased sequentially for each period presented since the second quarter of fiscal year 2020, as we experienced increased economies of scale as we grew.

Quarterly trends in cost of revenues

Our quarterly total cost of revenues increased sequentially from the first to the third quarter of fiscal year 2020, primarily due to an increase in cost of SaaS and support as we invested in supporting our growing client base and product offerings.

We completed a re-organization and restructuring plan in the fourth quarter of fiscal year 2020 as well as some COVID-19-related headcount reductions which resulted in a restructuring charge of $0.8 million for severance and employee benefits.

We also implemented cost reduction measures in response to the COVID-19 pandemic, including ceasing all travel and in-person events.

The reduction in headcount as a result of the restructuring combined with the cost reduction measures resulted in decreased cost of revenues starting in the fourth quarter of fiscal year 2020.

Our cost of revenues started to increase again starting in the second quarter of fiscal year 2021 as we eased the cost reduction measures and hired additional personnel to provide technical support services to our growing client base.

Quarterly trends in operating expenses

Our quarterly total operating expenses, as well as quarterly research and development, sales and marketing and general and administrative expenses, increased sequentially during the first three quarters of fiscal year 2020, primarily due to increases in employee compensation-related costs driven by increase in headcount in each of these functions.

In the fourth quarter of fiscal year 2020, we completed a restructuring plan for the organizational integration of the DealCloud acquisition and some COVID-19-related headcount reductions across all functions, and we cancelled all in-person meetings and events in response to the COVID-19 pandemic, resulting in a restructuring charge of $2.9 million and a decline in operating expense across all functions.

During fiscal year 2021, our quarterly total operating expenses increased across all functions primarily as a result of stock-based compensation expense associated with a new grant of performance-based equity awards and an increase in salary costs due to annual salary raises and new hires.

In addition, our general and administrative costs increased during each quarter in fiscal year 2021 as we increased expenditures on consultants and incurred higher professional services fees in preparation for becoming a public company.

Liquidity and capital resources

Income tax expense was $0.5 million for fiscal year 2021 compared to an income tax expense of $0.4 million recorded during fiscal year 2020.

The income tax expense for fiscal years 2021 and 2020 are primarily attributable to taxes in foreign jurisdictions.

Liquidity and C apital R esources

Sources of Liquidity

As of June 30, 2021, we had cash, cash equivalents, and restricted cash of $41.5 million and had financed our operations primarily through collections from clients, borrowings under our credit facility and the issuance of convertible preferred and common stock.

As of June 30, 2022, we had cash, cash equivalents, and restricted cash of $54.3 million.

We finance our liquidity needs primarily through collections from clients and the issuance of equity securities.

We generally bill and collect from our clients annually in advance.

Our billings are subject to seasonality, with billings in the second and fourth quarters substantially higher than in the first and third quarters.

We expect that operating losses and negative cash flows from operations could continue in the future as we continue to invest in the growth of our business.

We believe our existing cash and cash equivalents and restricted cash as of June 30, 2021 will be sufficient to meet our working capital and capital expenditure needs for at least the next twelve months.

Our billings are subject to seasonality with billings in the fourth quarter higher than the other quarters.

In July 2021, we received net proceeds of $283.0 million upon the completion of our IPO.

We used $278.0 million of the net proceeds from the offering to fully repay the $273.0 million outstanding under our term loan and the $5.0 million outstanding under our revolving credit facility.

We used $278.0 million of the net proceeds from the offering to fully repay amounts outstanding under our Prior Credit Facility, consisting of $273.0 million outstanding under the term loan and $5.0 million outstanding under the revolving credit facility.

The remainder of the proceeds was used in operations.

We expect that operating losses could continue in the future as we continue to invest in the growth of our business.

We believe our existing cash, cash equivalents and restricted cash as of June 30, 2022, along with our JPMorgan Credit Facility described below, will be sufficient to meet our working capital and capital expenditure needs for at least the next twelve months.

On October 5, 2021, we entered into a 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.

As of June 30, 2022, no amounts have been borrowed under the JPMorgan Credit Facility.

See Note 9 to our consolidated financial statements for additional information.

Our future capital requirements will depend on many factors, including, but not limited to, our ability to grow our revenues and the timing and extent of investment across our organization necessary to support growth in our business.

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If we are unable to raise additional capital when desired, or on terms that are acceptable to us, our business, financial condition and results of operations could be adversely affected.

We continue to assess the effect of the COVID-19 pandemic on our operations.

The extent to which the COVID-19 pandemic will impact our business and operations will depend on future developments that are highly uncertain and cannot be predicted with confidence, such as the continuing spread of the infection, the duration of the pandemic, and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.

The following table summarizes our cash flows from operating, investing, and financing activities for the periods indicated (in thousands):

Year Ended June 30,

Cash flow data:

Net cash used in operating activities (1)

Net cash provided by (used in) operating activities (1)

Net cash used in investing activities

Net cash provided by financing activities

Effect of foreign exchange rates on cash and cash equivalents

Effect of foreign currency exchange rate changes on cash and cash equivalents

Net increase (decrease) in cash, cash equivalents and restricted cash

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Operating Activities

During fiscal year 2022, net cash provided by operating activities was $14.2 million, as our operating loss of $99.7 million was reduced by $113.9 million of adjustments.

These adjustments consisted of $90.1 million of non-cash charges (principally comprising stock-based compensation expense and depreciation and amortization) and net cash inflow of $23.8 million from net changes in operating assets and liabilities.

The net cash inflow from changes in operating assets and liabilities was primarily driven by an increase in deferred revenues of $35.3 million due to our revenue growth, an increase in accounts payable and accrued liabilities of $15.6 million due to an increase in accrued bonuses and timing of payments, and a decrease of $1.3 million in unbilled receivables.

These changes were partially offset by an increase in accounts receivable of $18.2 million due to growth in our revenues and the timing of

collections from our clients , an increase in deferred commissions of $ 8.0 million consistent with our revenue growth and a de crease in other liabilities of $ 3.

1 million , primarily due to a decrease in our accrued interest as our debt under the Prior Credit Facility was repaid in full in July 2021 .

During fiscal year 2021, net cash used in operating activities was $9.7 million, primarily resulting from our operating loss of $46.8 million, which was offset by $37.1 million of adjustments.

These adjustments consisted of $32.6 million of non-cash charges (principally comprising depreciation and amortization and stock-based compensation expense), and net cash inflow of $4.5 million from net changes in operating assets and liabilities.

The net cash inflow from changes in operating assets and liabilities was primarily driven by an increase in accounts payable and other accrued liabilities of $10.7 million due to an increase in accrued bonuses and timing of payments, and an increase in deferred revenues of $28.8 million consistent with our revenue growth.

These adjustments consisted of $32.6 million of non-cash charges (principally comprising stock-based compensation expense and depreciation and amortization), and net cash inflow of $4.5 million from net changes in operating assets and liabilities.

The net cash inflow from changes in operating assets and liabilities was primarily driven by an increase in accounts payable and accrued liabilities of $10.7 million due to an increase in accrued bonuses and timing of payments, and an increase in deferred revenues of $28.8 million consistent with our revenue growth.

These changes were partially offset by an increase in accounts and other receivable of $26.0 million due to the timing of billing and collections on our outstanding receivables, an increase in prepaid expenses of $4.7 million and an increase in deferred commissions of $3.9 million consistent with our revenue growth.

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The net cash inflow from changes in operating assets and liabilities was primarily driven by a decrease in accounts and other receivable of $7.7 million as we increased collections on our outstanding receivables, an increase in deferred revenues of $18.0 million consistent with our revenue growth and an increase in other liabilities of $9.0 million which primarily related to accrued interest on our debt and deferred rent.

These changes were partially offset by an increase in unbilled revenues of $3.8 million and deferred commissions of $3.4 million consistent with our revenue growth and a decrease in accounts payable and other accrued liabilities of $1.3 million due to timing of payments.

During fiscal year 2019, net cash used in operating activities was $5.1 million, primarily resulting from our operating loss of $17.1 million, which was offset by $12.0 million of adjustments.

These adjustments consisted of non-cash charges of $5.8 million and net cash inflow of $6.2 million from net changes in operating assets and liabilities, net of business combinations.

The net cash inflow from changes in operating assets and liabilities was primarily driven by an increase in deferred revenues of $18.9 million due to our revenue growth and an increase in accounts payable and accrued liabilities of $10.0 million due to timing of payments.

These changes were partially offset by an increase in unbilled revenues of $3.8 million and deferred commissions of $3.8 million consistent with our revenue growth and an increase in accounts and other receivables of $14.0 million due to the timing of collections from our clients.

These changes were partially offset by an increase in unbilled revenues of $3.8 million and deferred commissions of $3.4 million consistent with our revenue growth and a decrease in accounts payable and accrued liabilities of $1.3 million due to timing of payments.

Investing Activities

Net cash used in investing activities consists of business acquisitions, purchases of property and equipment, leasehold improvements, and capitalization of internal-use software costs.

During fiscal year 2021, net cash used in investing activities was $25.6 million, consisting of $20.6 million of cash consideration (net of cash acquired) paid for our acquisition of Repstor, Limited (“Repstor”), capitalized internal-use software costs of $2.5 million and capital expenditures of $2.5 million on property and equipment consisting largely of leasehold improvements to our facilities in Charlotte.

During fiscal year 2022, net cash used in investing activities was $7.3 million, consisting of $2.5 million of cash consideration paid for our acquisition of Billstream, capitalized internal-use software costs of $4.2 million and capital expenditures of $0.6 million.

During fiscal year 2020, net cash used in investing activities was $5.1 million, consisting of capitalized internal-use software costs of $2.5 million and capital expenditures of $2.6 million on property and equipment.

During fiscal year 2019, net cash used in investing activities was $194.6 million, consisting of $190.3 million of cash consideration (net of cash acquired) paid for our acquisitions of DealCloud, gwabbit and OnePlace, capital expenditures of $2.4 million on property and equipment including $1.8 million in leasehold improvements, and $1.9 million of capitalized internal-use software.

Financing Activities

During fiscal year 2021, net cash provided by financing activities was $32.4 million, primarily comprised of $29.0 million from the issuance of common stock and $15.7 million proceeds from option exercises, partially offset by $5.4 million of payments related to deferred offering costs in connection with our IPO, $5.0 million for the repayment of borrowings on our revolving line of credit and $1.9 million of payments for the repurchase of common stock.

During fiscal year 2022, net cash provided by financing activities was $6.6 million, primarily comprised of $292.8 million in net proceeds from our IPO completed in July 2021, $10.2 million of proceeds from stock option exercises and $1.2 million of proceeds from employee stock purchase plan, partially offset by $278.0 million used for the repayment of borrowings, $10.4 million of payment for contingent consideration related to the acquisition of Repstor, $4.4 million of payments related to deferred offering costs in connection with our IPO, $3.9 million of payments related to tax withholding for vested equity awards and $0.8 million of payments related to deferred financing costs in connection with our JPMorgan Credit Facility.

During fiscal year 2021, net cash provided by financing activities was $32.4 million, primarily comprised of $29.0 million from the issuance of common stock and $15.7 million proceeds from option exercises, partially offset by $5.4 million of payments related to offering costs in connection with our IPO, $5.0 million for the repayment of borrowings on our revolving line of credit and $1.9 million of payments for the repurchase of common stock.

During fiscal year 2020, net cash provided by financing activities was $27.2 million, primarily resulting from $16.5 million net proceeds for the issuance of convertible preferred stock, $3.6 million proceeds from option exercises and shareholder contribution and $10.0 million of net proceeds from borrowings on our revolving line of credit , offset by payments of $2.8 million to repurchase shares and options in the tender offer in October 2019.

During fiscal year 2019, net cash provided by financing activities was $204.3 million, primarily resulting from $281.0 million of proceeds from borrowings, $5.9 million from stock option exercises and the issuance of common stock, partially offset by payments on borrowings of $78.0 million and $4.6 million of debt financing costs.

Other non-cash items

As of June 30, 2021, in connection with the acquisition of Repstor, we are obligated to make certain earn-out payments for an amount up to $28.4 million if certain performance measures are achieved.

The earn-out payments are expected to be paid in the next two fiscal years.

We also are obligated to make a cash holdback payment of $2.1 million in the second quarter of fiscal year 2024.

See Note 5 for a discussion of the liabilities recorded.

Non-GAAP financial measures

We report our financial results in accordance with accounting principles generally accepted in the United States (“GAAP”);

however, management believes evaluating the Company’s ongoing operating results may be enhanced if investors have additional non-GAAP financial measures.

Specifically, management reviews non-GAAP gross profit, non-GAAP recurring gross profit, and non-GAAP operating profit each of which is a non-GAAP financial measure, to manage our business, make planning decisions, evaluate our performance and allocate resources and, for the reasons described below, considers them to be effective indicators, for both management and investors, of our financial performance over time.

Material Cash Requirements

Our material cash commitments as of June 30, 2022 were as follows:

(in thousands)

Operating lease obligations

Purchase obligations

Acquisition-related obligations:

Deferred purchase consideration

Acquisition holdbacks

Contingent consideration - earned

Total cash requirements

Operating lease obligations consist of obligations under non-cancelable operating leases for office space with expiration through June 2030.

See Note 8 to our consolidated financial statements for additional information.

Purchase obligations primarily consist of non-cancelable obligations under third-party cloud hosting and support service agreements and software subscriptions.

See Note 8 to our consolidated financial statements for additional information.

Acquisition-related obligations consist of deferred purchase consideration for the Billstream acquisition in June 2022, contingent consideration associated with the Repstor acquisition in June 2021 under which certain performance measures have been achieved, and holdbacks associated with these acquisitions.

See Note 4 to our consolidated financial statements for additional information.

In addition to the obligations described above, in connection with the acquisition of Billstream, we are also obligated to pay contingent consideration up to a maximum of $5.0 million in the second quarter of fiscal year 2024, if certain performance measures are achieved.

See Note 6 to our consolidated financial statements for additional information.

Non-GAAP F inancial M easures

We report our financial results in accordance with GAAP, however, management believes evaluating our ongoing operating results may be enhanced if investors have additional non-GAAP financial measures.

Specifically, management reviews non-GAAP gross profit, non-GAAP recurring gross profit, and non-GAAP operating profit (loss), each of which is a non-GAAP financial measure, to manage our business, make planning decisions, evaluate our performance and allocate resources and, for the reasons described below, considers them to be useful indicators, for both management and investors, of our financial performance over time.

These non-GAAP financial measures, which may be different than similarly-titled measures used by other companies, should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

Non-GAAP Gross Profit

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Year Ended June 30,

Gross profit*

Adjusted to exclude the following (as related to cost of revenues):

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Non-GAAP gross profit

As adjusted to reflect the impact of the full retrospective adoption of ASC 606.

See Note 2 to our consolidated financial statements for a summary of adjustments.

Non-GAAP Recurring Gross Profit

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Recurring gross profit

Adjusted to exclude the following (as related to recurring cost of revenues)

Adjusted to exclude the following (as related to cost of recurring revenues)

Stock-based compensation

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Non-GAAP recurring gross profit

As adjusted to reflect the impact of the full retrospective adoption of ASC 606.

See Note 2 to our consolidated financial statements for a summary of adjustments.

Non-GAAP operating profit

We define non-GAAP operating profit as GAAP operating loss excluding stock-based compensation expense, amortization of intangible assets, certain acquisition-related transaction costs and restructuring costs.

We believe non-GAAP operating profit provides investors and other users of our financial information consistency and comparability with our past financial performance and facilitates period-to-period comparisons of GAAP operating loss.

The following table provides a reconciliation of GAAP operating loss to non-GAAP operating profit (in thousands):

Non-GAAP Operating Profit (Loss)

We define non-GAAP operating profit (loss) as GAAP operating loss excluding stock-based compensation expense, amortization of intangible assets, change in fair value of contingent consideration, acquisition-related transaction costs and restructuring costs.

We believe non-GAAP operating profit (loss) provides investors and other users of our financial information consistency and comparability with our past financial performance and facilitates period-to-period comparisons of GAAP operating loss.

The following table provides a reconciliation of GAAP operating loss to non-GAAP operating profit (loss) (in thousands):

Year Ended June 30,

Operating loss

Adjusted to exclude the following (including the portion related to cost of revenues):

Adjusted to exclude the following (including the portion related to total cost of revenues):

Stock-based compensation

Amortization of intangible assets

Change in fair value of contingent consideration

Acquisition-related transaction costs

Restructuring costs

Non-GAAP operating profit

As adjusted to reflect the impact of the full retrospective adoption of ASC 606.

See Note 2 to our consolidated financial statements for a summary of adjustments.

Contractual obligations and commitments

The following table summarizes our contractual obligations as of June 30, 2021 and the effects that such obligations are expected to have on our liquidity and cash flows in future periods (in thousands):

Payments due by period

Operating lease obligations

Credit facility

Software and other

Excludes interest payments on the term loan which are based on a variable interest rate as discussed below under “Indebtedness.”

In connection with the acquisition of Repstor in June 2021, we entered into a contingent consideration arrangement, consisting of earn-out payments to the former shareholders of Repstor of up to $28.4 million.

The earn-out payments are expected to be paid in cash of up to $11.1 million in the third quarter of fiscal year 2022 and up to $17.3 million in the first quarter of fiscal year 2023, if the performance measures are achieved.

We have not included these potential contingent payment obligations in the table above as the likelihood and amount of the payments is uncertain.

See Note 4 to our consolidated financial statements for additional information.

On July 12, 2021, we repaid the full $273.0 million borrowing under our term loan and $5.0 million borrowing under our credit facility.

Unamortized financing costs of $2.4 million will be recognized as a loss on extinguishment of debt on that date.

In September 2013, we obtained a revolving and term credit facility (as amended in 2018 and 2019, the “credit facility”) from a lender, which provides for a total borrowing capacity of $283.0 million, consisting of a $273.0 million term loan and a $10.0 million revolving line of credit.

Amounts drawn under the revolving line of credit may be repaid and reborrowed at any time during the term of the agreement.

The outstanding principal amount of the draws, together with any accrued and unpaid interest are due and payable on the maturity date or, if earlier, on the date on which they are declared due and payable pursuant to the credit facility.

We may prepay the term loans at any time with an applicable prepayment premium.

Any principal amount of the term loans that is repaid or prepaid may not be reborrowed.

The credit facility and term loans bear a floating rate of interest, which we select at the beginning of a period between (i) a LIBOR loan, for which the interest rate is calculated as the then-current LIBOR rate, with a floor of 1.00%, plus 7.25%, and (ii) an index loan, for which the interest rate is calculated as the then-current Wall Street Journal Prime rate, with a floor of 2.00%, plus 6.25%.

The credit facility is collateralized by substantially all of our assets.

The maturity date of the credit facility is August 2023.

The credit facility contains certain restrictive covenants which, among other things, requires us to meet a defined financial ratio as well as maintain a specified minimum liquidity amount.

Non-GAAP operating profit (loss)

As of June 30, 2021, we had an outstanding balance under our Prior Credit Facility of $273.0 million under a term loan and $5.0 million under the associated revolving credit facility.

The balance was fully repaid in July 2021 using proceeds from the IPO.

On October 5, 2021, we entered into a 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.

Future borrowings under the JPMorgan Credit Facility will bear interest, at our 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 our 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 our total net leverage ratio.

Subject to certain exceptions, our total net leverage ratio as of the end of each fiscal quarter may not exceed 3.50 to 1.00.

We were in compliance with all of the covenants as of June 30, 2022.

Failure to be in compliance with these covenants could adversely affect our business, including requiring all or a portion of our outstanding obligations to become due and payable.

As of June 30, 2021, we had an outstanding balance of $273.0 million under the term loan and $5.0 million under the credit facility.

On July 12, 2021, we repaid the outstanding $273.0 million borrowing under the term loan and $5.0 million borrowing under the revolving credit facility from the proceeds of the IPO.

We incurred $4.6 million of costs directly related to obtaining the credit facility which have been recorded as deferred financing fees and are being amortized to interest expense, using the effective interest method, over the term of the facility.

As of June 30, 2022, no amounts have been borrowed under the JPMorgan Credit Facility.

Critical Accounting Policies and Estimates

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We calculate compensation expense related to stock option awards made to employees, consultants and directors based on the fair value of stock-based awards on the date of grant.

We determine the grant date fair value of our stock option awards using the Black-Scholes option pricing model and for awards without performance condition the related stock-based compensation is recognized on a straight-line basis, over the period in which a participant is required to provide service in exchange for the stock-based award, which is generally four years.

We recognize stock-based compensation expense in the consolidated statements of operations based on awards ultimately expected to vest, and we recognize forfeitures of stock-based awards as they occur.

We determine the grant date fair value of our stock option awards using the Black-Scholes option pricing model and for awards without performance conditions the related stock-based compensation is recognized in the consolidated statements of operations on a straight-line basis, over the period in which a participant is required to provide service in exchange for the stock-based award, which is generally four years.

We recognize forfeitures of stock-based awards as they occur.

Determining the fair value of stock-based awards at the grant date requires significant judgement.

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Expected Volatility.

As we do not have trading history for our common stock, the selected volatility used is representative of expected future volatility.

As we have limited trading history for our common stock, the selected volatility used is representative of expected future volatility.

We base expected future volatility on the historical and implied volatility of comparable publicly traded companies over a similar expected term.

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We measure stock-based compensation expense for performance-based stock options based on the estimated grant date fair value determined using the Black-Scholes valuation model, and we recognize compensation expense for such awards in the period in which it becomes probable that the performance target will be achieved.

On December 30, 2020, we entered into a director service agreement with Mr.

Charles Moran, where he was engaged as a special advisor to us for a 12-month term for financial advice and advice in connection with our initial public offering.

As consideration for Mr.

Moran’s services, we granted him an option to purchase up to 300,000 shares of our common stock, one-half of which vested upon the pricing of the IPO on June 29, 2021 and the remaining one-half will vest on the first anniversary of that date.

The aggregate fair value on the grant date of this stock option award to Mr.

Moran was $1.8 million, and we recognized $1.2 million during fiscal year 2021.

The unrecognized compensation cost of $0.6 million will be recognized over the remaining service period.

Goodwill represents the excess purchase price over fair value of net tangible and identifiable intangible assets acquired in our business combinations.

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We have determined that we have one reporting unit for purposes of our annual impairment evaluation.

As part of the annual goodwill impairment test, we first perform a qualitative assessment to determine whether further impairment testing is necessary.

If, as a result of this qualitative assessment, it is more-likely-than-not that the fair value of our reporting unit is less than its carrying amounts, the quantitative impairment test will be required.

We account for income taxes using the asset and liability method.

Under this method, deferred income tax assets and liabilities are recorded based on the estimated future tax effects of differences between the financial statement and income tax basis of existing assets and liabilities.

These differences are measured using the enacted statutory tax rates that are expected to apply to taxable income for the years in which differences are expected to reverse.

We recognize the effect on deferred income taxes of a change in tax rates in the period that includes the enactment date.

We record a valuation allowance to reduce its deferred tax assets to the net amount that it believes is more-likely-than-not to be realized.

Management considers all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing tax planning strategies in assessing the need for a valuation allowance.

As part of the annual goodwill impairment test, we perform a quantitative assessment to determine whether a goodwill impairment shall be recognized.

If, as a result of this quantitative assessment, the carrying amount of our reporting unit is more than its fair value, an impairment charge in the amount of such excess is recorded to goodwill.

Recent Accounting Pronouncements

See Note 2 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for more information regarding recent accounting pronouncements and our assessment of their impact.

Emerging Growth Company Status

In April 2012, the JOBS Act was enacted.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis