What changed in this filing

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Item 1. Financial Statements

2022-08-05 compared with 2022-05-06 · 167 added, 138 removed, 568 unchanged (35% of the section changed)

74 unchanged sentences

Three months ended

$ 38,441  

$ 35,464  

Six months ended

Operating expenses:

14,779  

11,940  

Selling, general and administrative

10,649  

Depreciation, amortization and impairment

Total operating expenses

26,744  

23,444  

Operating income

11,697  

12,020  

Other income (expense):

3 unchanged sentences

Income before income taxes

11,433  

11,612  

Income tax provision

$ 8,539  

$ 9,232  

Provision for income taxes

Earnings Per Share of Common Stock:

Basic Earnings Per Share

$ 0.34  

$ 0.36  

Diluted Earnings Per Share

$ 0.34  

$ 0.36  

Weighted average shares and share equivalents outstanding:

25,251  

25,414  

25,390  

25,668  

See accompanying notes to condensed consolidated financial statements

3 unchanged sentences

Three months ended

$ 8,539  

$ 9,232  

Other comprehensive income:

Six months ended

Other comprehensive income (loss):

Foreign currency translation adjustment

Other comprehensive income

Other comprehensive income (loss)

Comprehensive Income

$ 8,590  

$ 9,288  

See accompanying notes to condensed consolidated financial statements.

14 unchanged sentences

$ 81,486  

Purchase of 427,329 shares treasury stock

Non-cash stock compensation expense

Dividends declared of $ 0.24 per common share

Other comprehensive income (loss), foreign currency translation adjustment

Balances at June 30, 2022

$ 174,561  

$ 68,624  

See accompanying notes to condensed consolidated financial statements.

14 unchanged sentences

$ 73,250  

Non-cash stock compensation expense

Dividends declared of $ 0.24 per common share

Other comprehensive income, foreign currency translation adjustment

Balances at June 30, 2021

$ 172,844  

$ 76,365  

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

(In thousands, unaudited)

Three months ended

Six months ended

Cash flows from operating activities:

6 unchanged sentences

Non-cash share-based compensation expense

Loss on disposal of property and equipment

Net changes in assets and liabilities:

9 unchanged sentences

18,111  

25,566  

Cash flows from investing activities:

12 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents

( 48 )  

Change in cash and cash equivalents

8 unchanged sentences

Interest expense, net of capitalized amounts

$ 5,790  

$ 3,432  

Supplemental disclosure of non-cash investing and financing activities:

83 unchanged sentences

We have elected the practical expedient to expense contract costs when incurred for any nonrenewable contracts with a term of one year or less.

We deferred incremental costs of obtaining a contract of $ 234,000 and $ 941,000 in the three months ended March 31, 2022 and 2021, respectively.

Deferred contract costs, net of accumulated amortization was $ 3.5 million and $ 3.8 million at March 31, 2022 and December 31, 2021, respectively.

Total amortization by expense classification for the three months ended March 31, 2022 and 2021 was as follows:

We deferred incremental costs of obtaining a contract of $ 108,000 and $ 605,000 in the three -month periods ended June 30, 2022 and 2021, respectively.

We deferred incremental costs of obtaining a contract of $ 342,000 and $ 1.5 million in the six -month periods ended June 30, 2022 and 2021, respectively.

Deferred contract costs, net of accumulated amortization was $ 3.2 million and $ 3.8 million at June 30, 2022 and December 31, 2021, respectively.

Total amortization by expense classification for the three and six -month periods ended June 30, 2022 and 2021 was as follows:

(In thousands)

2 unchanged sentences

Total amortization

Additional expense included in selling, general and administrative expenses for impairment of costs capitalized due to lost clients was $ 1,000 and $ 7,000 for the three months ended March 31, 2022 and 2021, respectively.

$ 1,436  

Additional expense included in selling, general and administrative expenses for impairment of costs capitalized due to lost clients was $ 400 and $ 15,000 for the three months ended June 30, 2022 and 2021, respectively and $ 1,000 and $ 22,000 in the six -month periods ended June 30, 2022 and 2021, respectively.

Trade Accounts Receivable

3 unchanged sentences

Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

The following table provides the activity in the allowance for doubtful accounts for the three months ended March 31, 2022 and 2021 (In thousands):

Three months ended March 31, 2022

Three months ended March 31, 2021

The following table provides the activity in the allowance for doubtful accounts for the six -month periods ended June 30, 2022 and 2021 (In thousands):

Six months ended June 30, 2022

Six months ended June 30, 2021

We determine whether a lease is included in an agreement at inception.

15 unchanged sentences

We have not been legally released from our primary obligations under the original lease and therefore we continue to account for the original lease separately.

We recorded an ROU asset impairment charge in the three months ended March 31, 2021 of $ 324,000 , which was the amount by which the carrying value of the Seattle office lease ROU asset exceeded the fair value.

We recorded an ROU asset impairment charge in the six months ended June 30, 2021 of $ 324,000 , which was the amount by which the carrying value of the Seattle office lease ROU asset exceeded the fair value.

We estimated the fair value based on the discounted cash flows of estimated net rental income for the office space subleased.

The ROU asset impairment charge is included in depreciation, amortization and impairment expenses.

There were no ROU asset impairment charges in the three months ended March 31, 2022.

There were no ROU asset impairment charges in the six months ended June 30, 2022.

Rent income from the sublessee are included in the statement of operations on a straight-line basis as an offset to rent expense associated with the original operating lease included in other expenses.

6 unchanged sentences

( 3 ) Level 3 Inputs—unobservable inputs.

The following details our financial assets within the fair value hierarchy at March 31, 2022 and December 31, 2021:

The following details our financial assets within the fair value hierarchy at June 30, 2022 and December 31, 2021:

(In thousands)

As of March 31, 2022

As of June 30, 2022

Money Market Funds

11 unchanged sentences

$ 6,306  

There were no transfers between levels during the three months ended March 31, 2022.

There were no transfers between levels during the six months ended June 30, 2022.

Our long-term debt described in Note 5 is recorded at historical cost.

11 unchanged sentences

We estimated the fair value of the Seattle office ROU using discounted cash flows of the sublease based on management’s most recent projections, which are considered level 3 inputs in the fair value hierarchy and recorded an ROU asset impairment charge of $ 324,000 during 2021.

As of March 31, 2022 and December 31, 2021, there was no indication of impairment related to these assets.

As of June 30, 2022 and December 31, 2021, there was no indication of impairment related to these assets.

Annually, we consider whether the recorded goodwill and indefinite lived intangibles have been impaired.

4 unchanged sentences

Legal fees, net of estimated insurance recoveries, are expensed as incurred.

We do not believe the final disposition of claims at March 31, 2022 will have a material adverse effect on our consolidated financial position, results of operations or liquidity.

We do not believe the final disposition of claims at June 30, 2022 will have a material adverse effect on our consolidated financial position, results of operations or liquidity.

Recent Accounting Pronouncements Not Yet Adopted  

10 unchanged sentences

The acquisition was accounted for as a business combination, using the acquisition method of accounting, which requires, among other things, certain assets acquired and liabilities assumed to be recognized at their fair values as of the acquisition date.

The financial results associated with the PatientWisdom assets we acquired and liabilities we assumed are included in our consolidated financial statements from the date of acquisition, although the amounts are insignificant for the three months ended March 31, 2022 and 2021.

CONTRACTS WITH CUSTOMERS

The following table disaggregates revenue for the three -month periods ended March 31, 2022 and 2021 based on timing of revenue recognition (in thousands):

The following table disaggregates revenue for the three - and six -month periods ended June 30, 2022 and 2021 based on timing of revenue recognition (in thousands):

Three months ended

Six months ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Subscription services recognized ratably over time

1 unchanged sentence

$ 34,215  

$ 70,930  

$ 67,269  

Services recognized at a point in time

4 unchanged sentences

$ 36,425  

$ 75,734  

$ 71,889  

The following table provides information about receivables, contract assets, and contract liabilities from contracts with customers (In thousands):

4 unchanged sentences

Deferred Revenue

Significant changes in contract assets and contract liabilities during the three -month periods ended March 31, 2022 and 2021 are as follows (in thousands):

Significant changes in contract assets and contract liabilities during the six -month periods ended June 30, 2022 and 2021 are as follows (in thousands):

Increase (Decrease)

1 unchanged sentence

Increases due to invoicing of client, net of amounts recognized as revenue

11,182  

12,318  

Increases due to acquisition

Decreases due to completion of services (or portion of services) and transferred to accounts receivable

Increases due to acquisition

Change due to cumulative catch-up adjustments arising from changes in expected contract consideration

1 unchanged sentence

We have elected to apply the practical expedient to not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.

Total remaining contract revenue for contracts with original duration of greater than one year expected to be recognized in the future related to performance obligations that are unsatisfied at March 31, 2022 approximated $ 2.8 million, of which $ 1.1 million, $ 1.1 million and $ 593,000 are expected to be recognized during 2022, 2023 and 2024, respectively.

The effective tax rate for the three months ended March 31, 2022 increased to 25.3 % expense compared to a 20.5 % expense for the same period in 2021 mainly due to decreased tax benefits of $ 456,000 from the exercise of share-based compensation awards and higher state income taxes.  

Total remaining contract revenue for contracts with original duration of greater than one year expected to be recognized in the future related to performance obligations that are unsatisfied at June 30, 2022 approximated $ 2.7 million, of which $ 1.1 million, $ 1.0 million, $ 621,000 and $ 15,000 are expected to be recognized during 2022, 2023, 2024 and 2025, respectively.

The effective tax rate for the three -month periods ended June 30, 2022 and 2021 was 24.8 %.

The effective tax rate for the six -month period ended June 30, 2022 increased to 25.1 % compared to 22.7 % for the same period in 2021 mainly due to decreased tax benefits from the exercise and vesting of share-based compensation awards of $ 455,000 in the six -month period ended June 30, 2022.

In addition, we have higher state income taxes due to filing in more states. 

In March 27, 2020, the U.S.

19 unchanged sentences

The Term Loan bears interest at a fixed rate per annum of 5 %.

Borrowings under the Line of Credit and the Delayed Draw Term Loan, if any, bear interest at a floating rate equal to the 30 -day London Interbank Offered Rate plus 225 basis points ( 2.40 % at March 31, 2022).

Interest on the Line of Credit accrues and is payable monthly.

Principal amounts outstanding under the Line of Credit are due and payable in full at maturity, in May 2023.

As of March 31, 2022, and December 31, 2021, the Line of Credit did not have a balance.

There were no borrowings on the Line of Credit for three months ended March 31, 2022.

As of June 30, 2022, and December 31, 2021, the Line of Credit did not have a balance.

There were no borrowings on the Line of Credit during the six months ended June 30, 2022.

There have been no borrowings on the Delayed Draw Term Loan since origination.

4 unchanged sentences

We are also required to maintain a cash flow leverage ratio of 3.00x or less for all testing periods throughout the term(s) of the Credit Facilities.

As of March 31, 2022, we were in compliance with our financial covenants.

As of June 30, 2022, we were in compliance with our financial covenants.

SHARE-BASED COMPENSATION

10 unchanged sentences

Vesting terms vary with each grant and option terms are generally five to ten years following the date of grant.

During the three months ended March 31, 2022 and 2021, we granted options to purchase 54,759 and 51,002 shares of Common Stock, respectively.

During the six -month periods ended June 30, 2022 and 2021, we granted options to purchase 127,227 and 101,091 shares of Common Stock, respectively.

Options to purchase shares of Common Stock are typically granted with exercise prices equal to the fair value of the common stock on the date of grant.

10 unchanged sentences

We consider groups of associates that have similar historical exercise behavior separately for valuation purposes.

The following table summarizes stock option activity under the 2006 Equity Incentive Plans and the 2004 Director Plan for the three months ended March 31, 2022:

The following table summarizes stock option activity under the 2006 Equity Incentive Plans and the 2004 Director Plan for the six -month periods ended June 30, 2022:

Outstanding at December 31, 2021

4 unchanged sentences

$ 36.67  

Outstanding at March 31, 2022

Outstanding at June 30, 2022

604,867  

1 unchanged sentence

$ 5,672  

Exercisable at March 31, 2022

Exercisable at June 30, 2022

346,721  

1 unchanged sentence

$ 5,195  

As of March 31, 2022, the total unrecognized compensation cost related to non-vested stock option awards was approximately $ 1.4 million which was expected to be recognized over a weighted average period of 3.36 years.

There was $ 162,000 cash received from stock options exercised for the three months ended March 31, 2021.

We recognized $ 257,000 and $ 11,000 of non-cash compensation for the three months ended March 31, 2022 and 2021, respectively, related to options, which is included in direct fixed and selling, general and administrative expenses.

We granted 12,698 non-vested shares of Common Stock under the 2006 Equity Incentive Plan during the three months ended March 31, 2021.

As of March 31, 2022, we had 12,698 non-vested shares of Common Stock outstanding under the 2006 Equity Incentive Plan.

As of June 30, 2022, the total unrecognized compensation cost related to non-vested stock option awards was approximately $ 1.7 million which was expected to be recognized over a weighted average period of 2.68 years.

There was $ 162,000 cash received from stock options exercised for the six months ended June 30, 2021.

There was no cash received from stock options exercised for the same period in 2022.

We recognized $ 307,000 and $ 176,000 of non-cash compensation for three months ended June 30, 2022 and 2021, respectively, and $ 564,000 and $ 186,000 of non-cash compensation for the six -month periods ended June 30, 2022 and 2021, respectively, related to options, which is included in direct fixed and selling, general and administrative expenses.

We granted 12,698 non-vested shares of Common Stock under the 2006 Equity Incentive Plan during the six months ended June 30, 2021.

No shares were granted during the six months ended June 30, 2022.

As of June 30, 2022, we had 12,698 non-vested shares of Common Stock outstanding under the 2006 Equity Incentive Plan.

These shares vest over five years following the date of grant and holders thereof are entitled to receive dividends from the date of grant, whether or not vested.

The fair value of the awards is calculated as the fair market value of the shares on the date of grant.

We recognized $ 27,000 and ($ 65,000 ) of non-cash compensation expense (benefit) for the three months ended March 31, 2022 and 2021, respectively, related to this non-vested stock, which is included in direct fixed and selling, general and administrative expenses.

The following table summarizes information regarding non-vested stock granted to associates under the 2006 Equity Incentive Plan for the three months ended March 31, 2022:

We recognized $ 27,000 of non-cash compensation for each of the three months ended June 30, 2022 and 2021, respectively, and $ 54,000 and ($ 37,000 ) of non-cash compensation for the six -month periods ended June 30, 2022 and 2021, respectively, related to this non-vested stock, which is included in direct fixed and selling, general and administrative expenses.

The following table summarizes information regarding non-vested stock granted to associates under the 2006 Equity Incentive Plan for the three months ended June 30, 2022:

Common Shares

3 unchanged sentences

$ 42.92  

Outstanding at March 31, 2022

Outstanding at June 30, 2022

12,698  

$ 42.92  

As of March 31, 2022, the total unrecognized compensation cost related to non-vested stock awards was approximately $ 409,000 and is expected to be recognized over a weighted average period of 3.75 years.

As of June 30, 2022, the total unrecognized compensation cost related to non-vested stock awards was approximately $ 382,000 and is expected to be recognized over a weighted average period of 3.5 years.

GOODWILL AND OTHER INTANGIBLE ASSETS

The following represents a summary of changes in the carrying amount of goodwill for the three months ended March 31, 2022:

The following represents a summary of changes in the carrying amount of goodwill for the three months ended June 30, 2022:

(In thousands)

Balance at March 31, 2022 and December 31, 2021

$ 62,328  

$ 61,614  

Balance at June 30, 2022 and December 31, 2021

Intangible assets consisted of the following:

2 unchanged sentences

Indefinite trade name

$ 1,191  

Amortizing intangible assets:

1 unchanged sentence

Total amortizing intangible assets

12,979  

12,976  

Accumulated amortization

Other intangible assets, net

$ 1,743  

$ 1,790  

PROPERTY AND EQUIPMENT

1 unchanged sentence

Property and equipment

$ 47,338  

$ 45,599  

Accumulated depreciation

Property and equipment, net

$ 12,853  

$ 12,391  

EARNINGS PER SHARE

3 unchanged sentences

The dilutive effect of outstanding stock options is reflected in diluted earnings per share by application of the treasury stock method.

We had 231,319 and 109,286 options of Common Stock for the three -month periods ended March 31, 2022 and 2021, respectively which have been excluded from the diluted net income per share computation because their inclusion would be anti-dilutive.

For the Three

March 31, 2022

For the Three

March 31, 2021

(In thousands)

We had 305,985 and 103,704 options of Common Stock for the three -month periods ended June 30, 2022 and 2021, respectively which have been excluded from the diluted net income per share computation because their inclusion would be anti-dilutive.

We had 287,655 and 108,343 options of Common Stock for the six -month periods ended June 30, 2022 and 2021, respectively which have been excluded from the diluted net income per share computation because their inclusion would be anti-dilutive.

For the Three Months Ended

For the Six Months Ended

(In thousands, except per share data)

Numerator for net income per share –

$ 8,539  

$ 9,232  

Allocation of distributed and undistributed income to unvested restricted stock shareholders

2 unchanged sentences

Weighted average common shares outstanding –

25,251  

25,414  

Net income per share –

$ 0.34  

$ 0.36  

Numerator for net income per share –

2 unchanged sentences

Weighted average common shares outstanding –

25,251  

25,414  

Weighted average effect of dilutive securities –

2 unchanged sentences

adjusted weighted average shares

25,390  

25,668  

Net income per share - diluted

( 10 )  

$ 0.36  

RELATED PARTY

Hays, our Chief Executive Officer and director, is an owner of approximately 13% of the equity interests of Nebraska Global Investment Company LLC (“Nebraska Global”). 

We purchased certain services from Don’t Panic Labs, LLC, which was a subsidiary of Nebraska Global for a portion of the three -and six -month periods ended June 30, 2022. 

The total value of these purchases were $ 196,000 in the three - and six -month periods ended June 30, 2022.

Management ’

15 unchanged sentences

Historically, we have relied on national travel as part of our sales efforts, but as a result of the pandemic we had placed a temporary hold on all company related travel.

We modified our travel policy and limited travel did resume in the third quarter of 2021.

We modified our travel policy and travel did resume in the third quarter of 2021.

The duration and severity of the COVID-19 pandemic and associated impacts on our business, including the impact on our revenue, expenses, and cash flows, cannot be predicted at this time.

5 unchanged sentences

Results of Operations

The following table sets forth, for the periods indicated, selected financial information derived from our consolidated financial statements and the percentage change in such items versus the prior comparable period, as well as other key financial metrics.

The following tables set forth, for the periods indicated, selected financial information derived from our consolidated financial statements and the percentage change in such items versus the prior comparable period, as well as other key financial metrics.

The discussion that follows the information should be read in conjunction with our consolidated financial statements.

Three Months Ended June 30, 2022, Compared to Three Months Ended June 30, 2021

(In thousands, except percentages)

Three Months Ended March 31,

Three Months Ended June 30,

2022 over 2021

7 unchanged sentences

Operating margin

Revenue in the 2022 period increased compared to the 2021 period, primarily due to new customer sales, as well as increases in sales to the existing client base.

This was partially offset by decreased Canadian revenue due to the scheduled closure of the Canadian office later this year.

Direct expenses .

Variable expenses decreased in the 2022 period compared to the 2021 period due to lower survey contracted services.

Variable expenses as a percentage of revenue were 12.9% and 14.1% in the 2022 and 2021 periods, respectively.

Fixed expenses increased primarily as a result of increased salary and benefit costs to attract and retain associates, contracted services to support our clients and invest in workforce automation and increased travel costs due to COVID travel restrictions being lifted.

Selling, general and administrative expenses .

Selling, general and administrative expenses increased in the 2022 period compared to the 2021 period primarily due to innovation investments to support further development of our Human Understanding Solutions, new marketing initiatives as well as increased travel costs due to COVID travel restrictions being lifted, partially offset by decreases in public company and other legal and accounting costs. 

Depreciation, amortization and impairment .

Depreciation, amortization and impairment expenses decreased in the 2022 period compared to the 2021 period primarily due to additional depreciation expense from shortening the estimated useful lives of certain building assets in 2021.

Operating income and margin .

Operating income and margin decreased in the 2022 period compared to the 2021 period due to growth in salary and benefit costs to attract and retain associates including a new benefit addition, as well as additional investments in our Human Understanding Solutions, workforce automation tools and new marketing initiatives, partially offset by an increase in revenue.

Total other income (expense ).

Total other income (expense) increased primarily due to revaluation on intercompany transactions due to changes in the Canadian to U.S.

dollar foreign exchange rate partially offset by lower interest expense due to the declining balance on our term loan.

Provision for income taxes and effective tax rate .

Provision for income taxes decreased in the 2022 period compared to the 2021 period primarily due to decreased taxable income as the effective tax rate remained consistent between periods.

Six Months Ended June 30, 2022, Compared to Six Months Ended June 30, 2021

(In thousands, except percentages)

Six Months Ended June 30,

2022 over 2021

Direct expenses

Selling, general, and administrative

Depreciation, amortization and impairment

Operating income

Total other income (expense)

Provision for income taxes

Effective Tax Rate

Operating margin

Recurring Contact Value

Cash provided by operating activities

Three Months Ended March 31, 2022, Compared to Three Months Ended March 31, 2021

Revenue in 2022 increased compared to 2021, primarily due to new customer sales, as well as increases in sales to the existing client base.

Revenue in the 2022 period increased compared to the 2021 period, primarily due to new customer sales, as well as increases in sales to the existing client base.

Conference revenue also increased due to an increase in conferences held as well as the shift to allow live or virtual attendance.

This was partially offset by decreased Canadian revenue due to the scheduled closure of the Canadian office later this year.

Direct expenses .

Variable expenses increased in 2022 compared to 2021 due to growth in conference expenses due to additional conferences being held in 2022 compared to 2021 and shift to allow live or virtual attendance at conferences.

Variable expenses as a percentage of revenue were 14.9% and 13.7% in 2022 and 2021, respectively.

Fixed expenses increased primarily as a result of increased salary and benefit costs to attract and retain associates and contracted services to support our clients and invest in workforce automation.

Variable expenses increased in the 2022 period compared to the 2021 period due to growth in conference expenses due to additional conferences being held in the 2022 period compared to the 2021 period and the shift to allow live or virtual attendance at conferences partially offset by lower survey contracted services.

Variable expenses as a percentage of revenue were 13.9% in both the 2022 and 2021 periods.

Selling, general and administrative expenses .

Selling, general and administrative expenses increased in 2022 compared to 2021 primarily due to innovation initiatives to support further development of our Human Understanding Solutions, as well as increases in state franchise taxes and building renovation costs.

Selling, general and administrative expenses increased in the 2022 period compared to the 2021 period primarily due to innovation investments to support further development of our Human Understanding Solutions, new coaching services provided as an associate benefit, new marketing initiatives, increased travel costs due to COVID travel restrictions being lifted as well as increased state franchise taxes and building renovation costs, partially offset by decreases in public company and other legal and accounting costs.

Depreciation, amortization and impairment .

Depreciation, amortization and impairment expenses decreased in 2022 compared to 2021 primarily due to additional depreciation and impairment expense from shortening the estimated useful lives of certain building assets and incurring an ROU asset impairment from subleasing a remote office location in 2021.

Depreciation, amortization and impairment expenses decreased in the 2022 period compared to the 2021 period primarily due to additional depreciation and impairment expense from shortening the estimated useful lives of certain building assets and incurring an ROU asset impairment from subleasing a remote office location in 2021.

Operating income and margin .

Operating income and margin decreased due to growth in salary and benefit costs to attract and retain associates including a new benefit addition in 2022 as well as additional investments in our Human Understanding Solutions, workforce automation tools and building renovations.

Operating income and margin decreased in the 2022 period compared to the 2021 period due to growth in salary and benefit costs to attract and retain associates including a new benefit addition, as well as additional investments in our Human Understanding Solutions, workforce automation tools, marketing initiatives and building renovation costs, partially offset by an increase in revenue.

Total other income (expense ).

Total other income (expense) decreased primarily due to lower interest expense due to the declining balance on our term loan.

Total other income (expense) decreased in the 2022 period compared to the 2021 period primarily due to lower interest expense due to the declining balance on our term loan partially offset by revaluation on intercompany transactions due to changes in the Canadian to U.S.

dollar foreign exchange rate.

Provision for income taxes and effective tax rate .

Provision for income taxes and effective tax rate grew in 2022 compared to 2021 primarily due to decreased tax benefits from share-based compensation awards and higher state income taxes.

Provision for income taxes and effective tax rate grew in the 2022 period compared to the 2021 period primarily due to decreased tax benefits from share-based compensation awards and higher state income taxes.

Recurring Contact Value .

Recurring contract value declined in part due to our strategy to focus on growing our digital core solutions, resulting in the elimination of certain legacy offerings.

Our core digital solutions did have positive recurring contract value growth at March 31, 2022 compared to March 31, 2021.

Recurring contract value declined in the 2022 period compared to the 2021 period in part due to our strategy to focus on growing our digital core solutions, resulting in the elimination of certain legacy offerings.

Our core digital solutions had 3.2% positive recurring contract value growth at June 30, 2022 compared to June 30, 2021.

In addition, sales declined due to the difficulties of selling to our clients during the COVID-19 pandemic as well as increased turnover within our sales force.

1 unchanged sentence

Cash provided by operating activities .

Cash provided by operating activities decreased mainly due timing of billing and cash collections on trades accounts receivable, a decrease in deferred revenue primarily due to timing of initial billings on new and renewal contracts and a decrease in accrued expenses, wages and bonuses mainly due timing and growth of year-end bonus payments.

Cash provided by operating activities decreased mainly due changes in deferred revenue primarily due to timing of initial billings on new and renewal contracts, a decrease in accrued expenses, wages and bonuses mainly due to timing and growth of the year-end bonus and decreased net income net of non-cash items.

Liquidity and Capital Resources

2 unchanged sentences

We believe that our existing sources of liquidity, including cash and cash equivalents, borrowing availability, and operating cash flows will be sufficient to meet our projected capital and debt maturity needs for the foreseeable future.

As of March 31, 2022, our principal sources of liquidity included $47.3 million of cash and cash equivalents, up to $30 million of unused borrowings under our line of credit and up to $15 million on our delayed draw term note.

As of June 30, 2022, our principal sources of liquidity included $33.0 million of cash and cash equivalents, up to $30 million of unused borrowings under our line of credit and up to $15 million on our delayed draw term note.

Of this cash, $3.1 million was held in Canada.

The delayed draw term note can only be used to fund permitted future business acquisitions or repurchasing our Common Stock.

Our cash flows from operating activities consist of net income adjusted for non-cash items including depreciation and amortization, deferred income taxes, share-based compensation and related taxes, reserve for uncertain tax positions and the effect of working capital changes.

Cash provided by operating activities decreased mainly due to timing of billing and cash collections on trade accounts receivable, a decrease in deferred revenue primarily due to timing of initial billings on new and renewal contracts and a decrease in accrued expenses, wages and bonuses mainly due to timing and growth of year-end bonus payments.

In addition, net income, depreciation, amortization and impairment and changes in deferred income taxes decreased cash flows from operating activities.

These were partially offset by changes in income taxes receivable and payable which increased cash flow from operating activities.

We had a working capital surplus of $27.4 million and $33.3 million on March 31, 2022 and December 31, 2021, respectively.

The change was primarily due to decreases in cash and cash equivalents and increases in income taxes payable and dividends payable, partially offset by increases in trade accounts receivable and decreases in accrued wages and bonuses and accrued expenses.

Trade accounts receivable will vary based on timing of invoicing and collections and income taxes receivable and payable will fluctuate based on the timing of payments.

Cash provided by operating activities decreased mainly due changes in deferred revenue primarily due to timing of initial billings on new and renewal contracts, a decrease in accrued expenses, wages and bonuses mainly due timing and growth of the year-end bonus, changes in income taxes receivable and payable and decreased net income net of non-cash items.

These were partially offset by changes in trade accounts receivable, deferred contract costs and accounts payable which increased cash flow from operating activities.

We had a working capital surplus of $12.2 million and $33.3 million on June 30, 2022 and December 31, 2021, respectively.

The change was primarily due to decreases in cash and cash equivalents and increases in dividends payable, partially offset by decreases in accrued expenses.

Cash and cash equivalents decreased mainly due to repurchase of shares of our Common Stock for treasury.

Dividends payable increased due to timing of declarations and payments of dividends.

Accrued expenses and accrued wages and bonuses decreased mainly due to payment of the deferred acquisition consideration and our annual bonuses.

Accrued expenses decreased mainly due to payment of the deferred acquisition consideration.

Our working capital is significantly impacted by our large deferred revenue balances which will vary based on the timing and frequency of billings on annual agreements.

1 unchanged sentence

Cash used in financing activities consisted of payments for borrowings under the term note and finance lease obligations.

We also used cash to pay the deferred acquisition consideration, repurchase shares for treasury, and to pay dividends on common stock.

We also used cash to pay the deferred acquisition consideration, repurchase shares of our Common Stock for treasury, and to pay dividends on Common Stock.

Our material cash requirements include the following contractual and other obligations:

Cash dividends of $3.0 million were paid in the three months ended March 31, 2022.

Dividends of $6.0 million were declared in the three months ended March 31, 2022 and paid in April 2022.The dividends were paid from cash on hand.

Cash dividends of $9.1 million were paid in the six months ended June 30, 2022.

Dividends of $5.9 million were declared in the three months ended June 30, 2022 and paid in July 2022.The dividends were paid from cash on hand.

Our board of directors considers whether to declare a dividend and the amount of any dividends declared on a quarterly basis.

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Capital Expenditures

We paid cash of $2.5 million for capital expenditures in the three months ended March 31, 2022.

These expenditures consisted mainly of computer software development for our Human Understanding solutions and building renovations to our headquarters of $662,000 and $480,000, respectively.

We paid cash of $3.9 million for capital expenditures in the six months ended June 30, 2022.

These expenditures consisted mainly of computer software development for our Human Understanding solutions and building renovations to our headquarters of $1.6 million and $1.5 million, respectively.

We estimate future costs related to our headquarters building renovations to be $10.0 million and $10.5 million in 2022 and 2023, respectively, which we expect to fund through operating cash flows.

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The Term Loan bears interest at a fixed rate per annum of 5%.

Borrowings under the Line of Credit and the Delayed Draw Term Loan, if any, bear interest at a floating rate equal to the 30-day London Interbank Offered Rate plus 225 basis points (2.40% at March 31, 2022).

Borrowings under the Line of Credit and the Delayed Draw Term Loan, if any, bear interest at a floating rate equal to the 30-day London Interbank Offered Rate plus 225 basis points (3.37% at June 30, 2022).

Interest on the Line of Credit accrues and is payable monthly.

Principal amounts outstanding under the Line of Credit are due and payable in full at maturity, in May 2023.

As of March 31, 2022, the Line of Credit did not have a balance.

There were no borrowings on the Line of Credit during the three-month periods ended March 31,2022 or 2021.

As of June 30, 2022, the Line of Credit did not have a balance.

There were no borrowings on the Line of Credit during the six-month periods ended June 30, 2022 or 2021.

There have been no borrowings on the Delayed Draw Term Loan since origination.

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All obligations under the Credit Facilities are guaranteed by our subsidiary.

As of March 31, 2022, we were in compliance with our financial covenants.

As of June 30, 2022, we were in compliance with our financial covenants.

The Credit Facilities are secured, subject to permitted liens and other agreed upon exceptions, by a first-priority lien on and perfected security interest in substantially all of our and our guarantors’

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We have lease arrangements for certain computer, office, printing and inserting equipment as well as office and data center space.

As of March 31, 2022, we had fixed lease payments of $564,000 and $473,000 for operating and finance leases, respectively payable within 12 months.

The liability for gross unrecognized tax benefits related to uncertain tax positions was $1.2 million as of March 31, 2022.

As of June 30, 2022, we had fixed lease payments of $566,000 and $468,000 for operating and finance leases, respectively payable within 12 months.

The liability for gross unrecognized tax benefits related to uncertain tax positions was $1.3 million as of June 30, 2022.

See Note 4, "Income Taxes", to the Consolidated Financial Statements contained in this report for income tax related information.

As of March 31, 2022, the balance of the deemed repatriation tax payable imposed by the U.S.

As of June 30, 2022, the balance of the deemed repatriation tax payable imposed by the U.S.

Tax Cuts and Jobs Act of 2017 (the Act”) was $175,000, which we expect to pay by the end of 2022.

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We enter into purchase orders in the normal course of business, but these purchase obligations do not exceed one year.

Stock Repurchase Program

Our Board of Directors authorized the repurchase of up to 2,250,000 shares of Common Stock in the open market or in privately negotiated transactions under a stock repurchase program.

We repurchase shares of our common stock from time to time after considering market conditions and in accordance with repurchase limits authorized by our Board.

During the three months ended March 31, 2022, we repurchased 166,692 shares of our Common Stock under this authorization for an aggregate of $6.7 million.

As of March 31, 2022, the remaining number of shares of Common Stock that could be purchased under this authorization was 1,981 shares.

Stock Repurchase Programs

In February 2006 and subsequently amended in May 2013, our Board of Directors authorized the repurchase of up to 2,250,000 shares of Common Stock in the open market or in privately negotiated transactions under a stock repurchase program (the “2006 Program”).

In May 2022 we repurchased all of the then remaining shares authorized for repurchase under the 2006 Program. 

On May 19, 2022 our Board of Directors approved a new stock repurchase authorization of 2,500,000 shares of Common Stock (the “2022 Program”).

Under the 2022 Program we are authorized to repurchase from time-to-time shares of our outstanding Common Stock on the open market or in privately negotiated transactions.

The timing and amount of stock repurchases will depend on a variety of factors, including market conditions as well as corporate and regulatory considerations.

The 2022 Program may be suspended, modified, or discontinued at any time and we have no obligation to repurchase any amount of Common Stock in connection with the 2022 Program.

The 2022 Program has no set expiration date.

During the three months ended June 30, 2022, we repurchased the remaining 1,981 shares under the 2006 Program and 425,348 shares of our Common Stock under the 2022 Program for an aggregate of $15.5 million.

As of June 30, 2022, the remaining number of shares of Common Stock that could be purchased under the 2022 Program was 2,074,652 shares.

Critical Accounting Estimates

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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-Q

Item 1. Financial Statements