What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-11-03 compared with 2021-08-04 · 133 added, 128 removed, 365 unchanged (42% of the section changed)

87 unchanged sentences

Our revenue has grown from $98.0 million in 2017 to $291.8 million in 2020, representing a compound annual growth rate of 44%.

During the six months ended June 30, 2021 foreign revenue as a percent of total revenue increased to 28% compared to 26% during the year ended December 31, 2020.

During the nine months ended September 30, 2021 foreign revenue as a percent of total revenue increased to 28% compared to 26% during the year ended December 31, 2020.

Revenue Recognition in the notes to our unaudited condensed consolidated financial statements for more information regarding our revenue as it relates to domestic and foreign operations.

1 unchanged sentence

This will expand our product families, customer base, and market access resulting in increased benefits of scale.

Consistent with our growth strategy, we have made twenty-nine acquisitions from February 2012 through June 30, 2021.

Consistent with our growth strategy, we have made twenty-nine acquisitions from February 2012 through September 30, 2021.

COVID-19 Impact

8 unchanged sentences

During the second, third and fourth quarters of 2020 we paused our acquisition activity in order to gauge the overall economic impact of the pandemic and focus on evaluating our pipeline of opportunities.

This resulted in a steady decrease in acquisition

related expenses over this period.

With acquisition activity picking up again starting in the first quarter of 2021, including the acquisitions of Panviva, BlueVenn and Second Street to date in 2021, acquisition-related expenses picked up again starting in the first quarter of 2021 and these quarterly acquisition related expenses will vary quarter to quarter in proportion to the size, timing and complexity of future acquisitions.

This resulted in a steady decrease in acquisition related expenses over this period.

With acquisition activity picking up again in the first quarter of 2021, including the acquisitions of Second Street, BlueVenn, and Panviva to date in 2021, acquisition-related expenses picked up again starting in the first quarter of 2021 and these acquisition related expenses will vary quarter to quarter in proportion to the size, timing and complexity of current and future acquisitions.

In addition to the GAAP financial measures described below in “Components of Operating Results,” we regularly review the following key metrics to evaluate and identify trends in our business, measure our performance, prepare financial projections and make strategic decisions.

4 unchanged sentences

The following table represents a reconciliation of net loss from continuing operations, the most comparable GAAP measure, to Adjusted EBITDA for each of the periods indicated.

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

27 unchanged sentences

The period-to-period comparisons of results of operations are not necessarily indicative of results for future periods.

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

34 unchanged sentences

(1) Includes stock-based compensation detailed under Share-based Compensation in Note 9 — Stockholders' Equity.

(2) Includes General and administrative stock-based compensation of $10.4 million and $8.5 million for the three months June 30, 2021 and June 30, 2020, respectively, and $26.0 million and $16.3 million for the six months ended June 30, 2021 and June 30, 2020, respectively.

General and administrative expense excluding stock-based compensation as a percentage of total revenues was 11% and 13% for the three months ended June 30, 2021 and June 30, 2020, respectively, and 12% and 13% for the six months ended June 30, 2021 and June 30, 2020, respectively.

(3) Includes depreciation and amortization of $2.9 million and $2.6 million for the three months ended June 30, 2021 and June 30, 2020, respectively, and $5.6 million and $5.1 million for the six months ended June 30, 2021 and June 30, 2020, respectively.

Comparison of the Three and Six Months Ended June 30, 2021 and 2020

Three Months Ended June 30, Six Months Ended June 30,

(2) Includes General and administrative stock-based compensation of $9.2 million and $8.4 million for the three months September 30, 2021 and September 30, 2020, respectively, and $35.2 million and $24.7 million for the nine months ended September 30, 2021 and September 30, 2020, respectively.

General and administrative expense excluding stock-based compensation as a percentage of total revenues was 11% and 11% for the three months ended September 30, 2021 and September 30, 2020, respectively, and 12% and 12% for the nine months ended September 30, 2021 and September 30, 2020, respectively.

(3) Includes depreciation and amortization of $3.0 million and $2.6 million for the three months ended September 30, 2021 and September 30, 2020, respectively, and $8.6 million and $7.7 million for the nine months ended September 30, 2021 and September 30, 2020, respectively.

Comparison of the Three and Nine Months Ended September 30, 2021 and 2020

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 % Change 2021 2020 % Change

11 unchanged sentences

Total revenue 100% 100% 100% 100%

For the Three Months Ended June 30, 2021

Total revenue was $76.3 million in the three months ended June 30, 2021, compared to $71.3 million in the three months ended June 30, 2020, an increase of $5.0 million, or 7%.

The acquisitions not fully in the comparative period contributed $7.2 million to the increase after the reduction of $0.6 million purchase accounting deferred revenue discount in the three months ended June 30, 2021.

For the Three Months Ended September 30, 2021

Total revenue was $76.1 million in the three months ended September 30, 2021, compared to $74.2 million in the three months ended September 30, 2020, an increase of $1.9 million, or 3%.

The acquisitions not fully in the comparative period contributed $8.2 million to the increase after the reduction of $1.3 million purchase accounting deferred revenue discount in the three months ended September 30, 2021.

Total revenue related to the divestiture and sunset of certain minor non-strategic customer contracts and related website management and analytics assets (collectively referred to as “Sunset Assets”) declined by $0.3 million as a result of decreased sales and marketing focus on those Sunset Assets.

1 unchanged sentence

Therefore, total revenue for our Organic Business decreased by $6.0 million.

The three months ended June 30, 2020 included $3.6 million of CXM usage revenue from US election-year presidential campaigns which did not repeat in the current period and will not repeat for the remainder of 2021.

Subscription and support revenue was $72.4 million in the three months ended June 30, 2021, compared to $67.7 million in the three months ended June 30, 2020, an increase of $4.7 million, or 7%.

The acquisitions not fully in the comparative period contributed $6.3 million to the increase in subscription and support revenue after the reduction of $0.6 million purchase accounting deferred revenue discount in the three months ended June 30, 2021.

The three months ended September 30, 2020 included $6.0 million of CXM usage revenue from US election-year presidential campaigns which did not repeat in the current period and will not repeat for the remainder of 2021.

Subscription and support revenue was $72.3 million in the three months ended September 30, 2021, compared to $71.0 million in the three months ended September 30, 2020, an increase of $1.3 million, or 2%.

The acquisitions not fully in the comparative period contributed $7.8 million to the increase in subscription and support revenue after the reduction of $1.3 million purchase accounting deferred revenue discount in the three months ended September 30, 2021.

Subscription and support revenue related to our Sunset Assets decreased $0.3 million as a result of decreased sales and marketing focus on those Sunset Assets.

Subscription and support revenue for our Organic Business decreased to $65.7 million from a basis of $66.9 million for the three months ended June 30, 2020.

Perpetual license revenue was $0.4 million in the three months ended June 30, 2021, compared to $0.5 million in the three months ended June 30, 2020.

Professional services revenue was $3.4 million in the three months ended June 30, 2021, compared to $3.1 million in the three months ended June 30, 2020, an increase of $0.3 million, or 10%.

The acquisitions not fully in the comparative period contributed $0.9 million to the increase in professional services revenue in the three months ended June 30, 2021.

Subscription and support revenue for our Organic Business decreased to $64.2 million from a basis of $70.4 million for the three months ended September 30, 2020.

Perpetual license revenue was $0.7 million in the three months ended September 30, 2021, compared to $0.4 million in the three months ended September 30, 2020.

Professional services revenue was $3.1 million in the three months ended September 30, 2021, compared to $2.8 million in the three months ended September 30, 2020, an increase of $0.3 million, or 12%.

The acquisitions not fully in the comparative period contributed $0.4 million to the increase in professional services revenue in the three months ended September 30, 2021.

Professional services revenue for our Organic Business decreased by $0.1 million.

For the Six Months Ended June 30, 2021

Total revenue was $150.2 million in the six months ended June 30, 2021, compared to $139.3 million in the six months ended June 30, 2020, an increase of $10.9 million, or 8%.

The acquisitions not fully in the comparative period contributed $12.7 million to the increase after the reduction of $1.0 million purchase accounting deferred revenue discount in the six months ended June 30, 2021.

For the Nine Months Ended September 30, 2021

Total revenue was $226.3 million in the nine months ended September 30, 2021, compared to $213.5 million in the nine months ended September 30, 2020, an increase of $12.8 million, or 6%.

The acquisitions not fully in the comparative period contributed $20.3 million to the increase after the reduction of $2.3 million purchase accounting deferred revenue discount in the nine months ended September 30, 2021.

Total Revenue related to Sunset Assets decreased by $1.1 million as a result of decreased sales and marketing focus on those Sunset Assets.

Therefore, total revenue for the Organic Business decreased by $6.4 million.

The six months ended June 30, 2020 included $5.7 million of CXM usage revenue from US election-year presidential campaigns which did not repeat in the current period and will not repeat for the remainder of 2021.

Subscription and support revenue was $143.1 million in the six months ended June 30, 2021, compared to $131.6 million in the six months ended June 30, 2020, an increase of $11.5 million, or 9%.

The acquisitions not fully in the comparative period contributed $11.8 million to the increase in subscription and support revenue after the reduction of $1.0 million purchase accounting deferred revenue discount in the six months ended June 30, 2021.

The nine months ended September 30, 2020 included $11.6 million of CXM usage revenue from US election-year presidential campaigns which did not repeat in the current period and will not repeat for the remainder of 2021.

Subscription and support revenue was $215.3 million in the nine months ended September 30, 2021, compared to $202.6 million in the nine months ended September 30, 2020, an increase of $12.7 million, or 6%.

The acquisitions not fully in the comparative period contributed $18.9 million to the increase in subscription and support revenue after the reduction of $2.3 million purchase accounting deferred revenue discount in the nine months ended September 30, 2021.

Subscription and support revenue related to our Sunset Assets decreased $1.2 million as a result of decreased sales and marketing focus on those Sunset Assets.

Subscription and support revenue for our Organic Business increased to $123.6 million from a basis of $122.9 million for the six months ended June 30, 2020.

Perpetual license revenue was $0.8 million in the six months ended June 30, 2021, compared to $0.9 million in the six months ended June 30, 2020, a decrease of $0.1 million.

Professional services revenue was $6.4 million in the six months ended June 30, 2021, compared to $6.9 million in the six months ended June 30, 2020, a decrease of $0.5 million, or 7%.

The acquisitions not fully in the comparative period contributed $1.0 million to the increase in professional services revenue in the six months ended June 30, 2021.

Subscription and support revenue for our Organic Business decreased to $183.7 million from a basis of $188.7 million for the nine months ended September 30, 2020.

Perpetual license revenue was $1.5 million in the nine months ended September 30, 2021, compared to $1.3 million in the nine months ended September 30, 2020, an increase of $0.2 million.

Professional services revenue was $9.5 million in the nine months ended September 30, 2021, compared to $9.7 million in the nine months ended September 30, 2020, a decrease of $0.2 million, or 2%.

The acquisitions not fully in the comparative period contributed $1.4 million to the increase in professional services revenue in the nine months ended September 30, 2021.

Therefore, professional services revenue from our Organic Business decreased by $1.6 million due primarily to COVID-19 related travel impacts.

Cost of Revenue and Gross Profit Percentage

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 % Change 2021 2020 % Change

16 unchanged sentences

Stock Compensation $ 539 $ 624 $ 1,544 $ 1,512

For the Three Months Ended June 30, 2021

Cost of subscription and support revenue was $23.2 million in the three months ended June 30, 2021, compared to $21.2 million in the three months ended June 30, 2020, an increase of $2.0 million, or 9%.

The acquisitions not fully in the comparative period contributed $1.8 million to the increase to cost of subscription and support revenue, primarily related to

costs associated with the delivery of the Second Street, BlueVenn, & Panviva products.

For the Three Months Ended September 30, 2021

Cost of subscription and support revenue was $23.0 million in the three months ended September 30, 2021, compared to $23.6 million in the three months ended September 30, 2020, a decrease of $0.6 million, or 3%.

The acquisitions not fully in the

comparative period contributed $2.6 million to cost of subscription and support revenue, primarily related to costs associated with the delivery of the Second Street, BlueVenn, & Panviva products.

Cost of subscription and support revenue related to our Sunset Assets decreased $0.2 million.

Therefore, cost of subscription and support revenue for our Organic Business increased by $0.4 million, primarily related to personnel and related expenses and infrastructure and hosting costs, which were partially offset by a decrease in telecom messaging costs related to a year over year reduction in CXM usage as a result of cyclical highs in 2020 related to US election-year presidential campaigns.

Cost of professional services and other revenue was $1.9 million in the three months ended June 30, 2021, compared to $2.5 million in the three months ended June 30, 2020, a decrease of $0.6 million, or 25%.

The acquisitions not fully in the comparative period contributed $0.4 million to the increase in the cost of professional services revenue.

Therefore, cost of subscription and support revenue for our Organic Business decreased by $3.0 million, primarily related to a decrease in telecom messaging costs related to a year over year reduction in CXM usage as a result of cyclical highs in 2020 related to US election-year presidential campaigns.

Cost of professional services and other revenue was $1.8 million in the three months ended September 30, 2021, compared to $2.0 million in the three months ended September 30, 2020, a decrease of $0.2 million, or 9%.

The acquisitions not fully in the comparative period contributed $0.3 million in the cost of professional services revenue.

Therefore, cost of professional services revenue for our Organic Business decreased by $0.5 million, primarily related to personnel and related costs, most of which were the result of our planned operating efficiencies.

For the Six Months Ended June 30, 2021

Cost of subscription and support revenue was $45.8 million in the six months ended June 30, 2021, compared to $41.1 million in the six months ended June 30, 2020, an increase of $4.7 million, or 11%.

For the Nine Months Ended September 30, 2021

Cost of subscription and support revenue was $68.8 million in the nine months ended September 30, 2021, compared to $64.7 million in the nine months ended September 30, 2020, an increase of $4.1 million, or 6%.

The acquisitions not fully in the comparative period contributed $6.3 million to the increase to cost of subscription and support revenue, primarily related to costs associated with the delivery of the Localytics, Second Street, BlueVenn, and Panviva products.

Cost of subscription and support revenue related to our Sunset Assets decreased $0.6 million primarily related to hosting and infrastructure costs.

Therefore, cost of subscription and support revenue for the organic portion of our business increased by $1.3 million, primarily related to personnel and related costs and infrastructure and hosting costs, which were partially offset by a decrease in telecom messaging costs related to a year over year reduction in CXM usage as a result of cyclical highs in 2020 related to US election-year presidential campaigns.

Cost of professional services revenue was $3.6 million in the six months ended June 30, 2021, compared to $4.7 million in the six months ended June 30, 2020, a decrease of $1.1 million, or 24%.

The acquisitions not fully in the comparative period contributed $0.4 million to the increase to cost of professional services revenue, primarily related to an increase in personnel and related costs.

Therefore, cost of subscription and support revenue for the organic portion of our business decreased by $1.6 million, primarily related to a year over year reduction in CXM usage as a result of cyclical highs in 2020 related to US election-year presidential campaigns, which were partially offset by an increase in infrastructure and hosting costs.

Cost of professional services revenue was $5.4 million in the nine months ended September 30, 2021, compared to $6.8 million in the nine months ended September 30, 2020, a decrease of $1.4 million, or 19%.

The acquisitions not fully in the comparative period contributed $0.6 million to cost of professional services revenue, primarily related to an increase in personnel and related costs.

Therefore, cost of professional services revenue for our Organic Business decreased by $2.0 million, primarily related to personnel and related costs, most of which were the result of our planned operating efficiencies.

1 unchanged sentence

Sales and Marketing Expense

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 % Change 2021 2020 % Change

5 unchanged sentences

Stock Compensation $ 1,636 $ 968 $ 4,392 $ 2,415

For the Three Months Ended June 30, 2021

Sales and marketing expense was $14.3 million in the three months ended June 30, 2021, compared to $11.8 million in the three months ended June 30, 2020, an increase of $2.5 million, or 21%.

For the Three Months Ended September 30, 2021

Sales and marketing expense was $14.4 million in the three months ended September 30, 2021, compared to $11.8 million in the three months ended September 30, 2020, an increase of $2.6 million, or 22%.

The acquisitions not fully in the comparative period contributed $1.3 million to the increase in sales and marketing expense, primarily consisting of personnel and related costs.

Sales and marketing expense for our Organic Business increased $1.3 million in the comparative periods, primarily attributable to personnel and related costs associated with our continued go-to-market investments.

For the Six Months Ended June 30, 2021

Sales and marketing expense was $26.7 million in the six months ended June 30, 2021, compared to $22.8 million in the six months ended June 30, 2020, an increase of $3.9 million, or 17%.

The acquisitions not fully in the comparative period contributed $1.0 million to the increase in sales and marketing expense, primarily consisting of personnel and related costs in the six months ended June 30, 2021.

For the Nine Months Ended September 30, 2021

Sales and marketing expense was $41.1 million in the nine months ended September 30, 2021, compared to $34.5 million in the nine months ended September 30, 2020, an increase of $6.6 million, or 19%.

The acquisitions not fully in the comparative period contributed $2.4 million to the increase in sales and marketing expense, primarily consisting of personnel and related costs in the nine months ended September 30, 2021.

Therefore, sales and marketing expense for the organic portion of our business increased by $4.2 million, primarily attributable to personnel and related costs associated with our continued go-to-market investments.

Research and Development Expense

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 % Change 2021 2020 % Change

5 unchanged sentences

Stock Compensation $ 671 $ 1,005 $ 2,327 $ 2,639

For the Three Months Ended June 30, 2021

Research and development expense was $11.1 million in the three months ended June 30, 2021, compared to $10.3 million in the three months ended June 30, 2020, an increase of $0.8 million, or 8%.

For the Three Months Ended September 30, 2021

Research and development expense was $10.4 million in the three months ended September 30, 2021, compared to $10.0 million in the three months ended September 30, 2020, an increase of $0.4 million, or 5%.

The acquisitions not fully in the comparative period contributed $1.1 million to the increase in research and development expense primarily consisting of personnel and related costs.

Therefore, research and development expense related to our Organic Business remained flat.

For the Six Months Ended June 30, 2021

Research and development expense was $22.1 million in the six months ended June 30, 2021, compared to $19.4 million in the six months ended June 30, 2020, an increase of $2.7 million, or 14%.

Therefore, research and development expense related to our Organic Business decreased by $0.7 million primarily related to personnel costs, including a reduction in non-cash stock compensation.

For the Nine Months Ended September 30, 2021

Research and development expense was $32.5 million in the nine months ended September 30, 2021, compared to $29.4 million in the nine months ended September 30, 2020, an increase of $3.1 million, or 11%.

The acquisitions not fully in the comparative period contributed $2.5 million to the increase in research and development expense primarily consisting of personnel and related costs.

Research and development costs related to our Sunset Assets decreased $0.2 million.

Therefore, research and development costs for our Organic Business increased by $0.8 million primarily related to personnel and related costs.

General and Administrative Expense

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 % Change 2021 2020 % Change

5 unchanged sentences

Stock Compensation $ 9,201 $ 8,366 $ 35,158 $ 24,697

For the Three Months Ended June 30, 2021

General and administrative expense was $19.2 million in the three months ended June 30, 2021, compared to $17.7 million in the three months ended June 30, 2020, an increase of $1.5 million, or 9%.

An increase in general administrative expense of $0.1 million was due to the acquisitions not fully in the comparative period Therefore, general and administrative expense for our Organic Business increased by $1.4 million, which was driven primarily by increased non-cash stock compensation expense.

For the Six Months Ended June 30, 2021

General and administrative expense was $43.6 million in the six months ended June 30, 2021, compared to $34.3 million in the six months ended June 30, 2020, an increase of $9.3 million, or 27%.

For the Three Months Ended September 30, 2021

General and administrative expense was $17.7 million in the three months ended September 30, 2021, compared to $16.9 million in the three months ended September 30, 2020, an increase of $0.8 million, or 5%.

An increase in general administrative expense of $0.2 million was due to the acquisitions not fully in the comparative period.

Therefore, general and administrative expense for our Organic Business increased by $9.0 million, which was driven primarily by increased non-cash stock compensation expense, including a one-time increase in non-cash stock compensation expense related to the departure of our former co-President and Chief Operating Officer, and also includes investment in our new go-to-market leadership team and other personnel related costs.

Therefore, general and administrative expense for our Organic Business increased by $0.6 million, which was driven primarily by increased non-cash stock compensation expense.

For the Nine Months Ended September 30, 2021

General and administrative expense was $61.3 million in the nine months ended September 30, 2021, compared to $51.2 million in the nine months ended September 30, 2020, an increase of $10.1 million, or 20%.

An increase in general administrative expense of $0.2 million was due to the acquisitions not fully in the comparative period.

Therefore, general and administrative expense for our Organic Business increased by $9.9 million, which was driven primarily by increased non-cash stock compensation expense, including a one-time increase in non-cash stock compensation expense related to the departure of our former co-President and Chief Operating Officer in March 2021, and also includes investment in our new go-to-market leadership team and other personnel related costs.

Depreciation and Amortization Expense

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 % Change 2021 2020 % Change

8 unchanged sentences

Total depreciation and amortization 14% 12% 14% 13%

For the Three Months Ended June 30, 2021

Depreciation and amortization expense was $10.3 million in the three months ended June 30, 2021, compared to $9.0 million in the three months ended June 30, 2020, an increase of $1.3 million, or 14%.

For the Three Months Ended September 30, 2021

Depreciation and amortization expense was $10.8 million in the three months ended September 30, 2021, compared to $9.1 million in the three months ended September 30, 2020, an increase of $1.7 million, or 18%.

The acquisitions not fully in the comparative period increased depreciation and amortization expense by $1.9 million, primarily related to acquired intangible assets such as customer relationships, developed technology and tradenames.

For the Six Months Ended June 30, 2021

Depreciation and amortization expense was $20.0 million in the six months ended June 30, 2021, compared to $18.3 million in the six months ended June 30, 2020, an increase of $1.7 million, or 9%.

This increase was partially offset by a decrease of $0.2 million in depreciation and amortization expense from assets becoming fully depreciated and amortized.

For the Nine Months Ended September 30, 2021

Depreciation and amortization expense was $30.8 million in the nine months ended September 30, 2021, compared to $27.4 million in the nine months ended September 30, 2020, an increase of $3.4 million, or 12%.

The acquisitions not fully in the comparative period increased depreciation and amortization expense by $4.2 million, primarily related to acquired intangible assets such as customer relationships, developed technology and tradenames.

Therefore, depreciation and amortization expense for our Organic Business decreased by $0.6 million in the comparative periods.

This increase was partially offset by a decrease of $0.8 million in depreciation and amortization expense from assets becoming fully depreciated and amortized.

Acquisition-related Expenses

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 % Change 2021 2020 % Change

2 unchanged sentences

Percentage of total revenue 5% 5% 9% 11%

Acquisition-related expenses are one-time expenses typically incurred for up to four quarters after each acquisition, with the majority of these costs being incurred within 6 to 9 months, to transform the acquired business into the Company's unified operating platform.

Acquisition-related expenses are typically one-time expenses incurred for up to four quarters after each acquisition, with the majority of these costs being incurred within 6 to 9 months, to transform the acquired business into the Company's unified operating platform.

These expenses can vary based on the size, timing and location of each acquisition.

2 unchanged sentences

Generally, without new acquisition activity, acquisition related expenses decline in subsequent sequential quarters and are no longer incurred after the first anniversary of the last closed acquisition.

For the Three Months Ended June 30, 2021

Acquisition-related expense was $5.5 million in the three months ended June 30, 2021, compared to $5.8 million in the three months ended June 30, 2020, a decrease of $0.3 million, or 4%.

During the three months ended June 30, 2021 and June 30, 2020 transaction related expenses were $2.0 million and $0.2 million, respectively, and transformational expenses were $3.5 million and $5.6 million, respectively.

Transaction costs increased compared to the same period in 2020 as a result of the resumption of our acquisition activity in 2021 after halting acquisitions activity beginning in early 2021 as a result of the COVID-19 pandemic.

We closed one transaction during the three months ended June 30, 2021 compared to zero transactions during the same period in prior year.

For the Three Months Ended September 30, 2021

Acquisition-related expense was $3.7 million in the three months ended September 30, 2021, compared to $3.6 million in the three months ended September 30, 2020, an increase of $0.1 million, or 3%.

During the three months ended September 30, 2021 and September 30, 2020 transaction related expenses were $0.1 million and $0.0 million, respectively, and transformational expenses were $3.6 million and $3.6 million, respectively.

The transformational expenses in both the current and year ago periods were primarily related to temporary transitional personnel and related costs along with accelerated rent related expenses incurred in conjunction with the closures of offices of our acquired companies as we consolidate and integrate these acquisitions.

Transformation expenses in 2020 include expenses related to the five acquisitions closed in 2019 as well as the one acquisition closed in 2020 compared to transformation expenses in 2021 related to the three acquisitions closed in 2021 and one acquisition closed in 2020.

In addition, Acquisition-related expense for the three months ended June 30, 2021 includes a gain of $2.7 million related to a decrease in the fair value of earnout liabilities due to sellers related to the BlueVenn and Second Street acquisitions which was partially offset by a loss on sublease of $1.9 million related to the change in underlying assumptions related to a subtenant.

For the Six Months Ended June 30, 2021

Acquisition related expense was $15.1 million the six months ended June 30, 2021, compared to $20.9 million in the six months ended June 30, 2020 a decrease of $5.8 million, or 28%.

During the six months ended June 30, 2021 and June 30, 2020 transaction related expenses were $6.1 million and $3.5 million, respectively, and transformational expenses were $9.0 million and $17.4 million, respectively.

Transformation expenses in 2020 include expenses related to acquisitions closed in 2019 as well as the one acquisition closed in 2020 compared to transformation expenses in 2021 related to the three acquisitions closed in 2021 and one acquisition closed in 2020.

In addition, Acquisition-related expense for the three months ended September 30, 2021 includes a gain of $0.8 million related to a decrease in the fair value of earnout liabilities due to sellers related to the BlueVenn and Second Street acquisitions.

For the Nine Months Ended September 30, 2021

Acquisition related expense was $18.8 million the nine months ended September 30, 2021, compared to $24.5 million in the nine months ended September 30, 2020 a decrease of $5.7 million, or 23%.

During the nine months ended September 30, 2021 and September 30, 2020 transaction related expenses were $6.2 million and $3.5 million, respectively, and transformational expenses were $12.6 million and $21.0 million, respectively.

The increase in transaction costs is primarily related to an increase in acquisitions completed during 2021 to three compared to one acquisition completed during the same period in 2020 as a result of a slow-down in acquisition activity during 2020 as a result of the COVID-19 pandemic.

Acquisition-related expense for the six months ended June 30, 2021 includes a gain of $2.7 million related to a decrease in the fair value of earnout liabilities due to sellers related to the BlueVenn and Second Street acquisitions which was partially offset by a loss on sublease of $1.9 million related to the change in underlying assumptions related to a subtenant.

In addition, Acquisition-related expense for the nine months ended September 30, 2021 includes a gain of $3.5 million related to a decrease in the fair value of earnout liabilities due to sellers related to the BlueVenn and Second Street acquisitions.

Other Income (Expense)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 % Change 2021 2020 % Change

8 unchanged sentences

Total other expense (11)% (10)% (11)% (11)%

For the Three Months Ended June 30, 2021

Interest expense was $7.9 million in the three months ended June 30, 2021, compared to $7.9 million in the three months ended June 30, 2020.

Other expense was $0.4 million in the three months ended June 30, 2021, compared to other expense of $0.0 million in the three months ended June 30, 2020.

Other expense recognized during the three months ended June 30, 2021 related primarily to currency exchange gains (losses) in our foreign entities.

For the Six Months Ended June 30, 2021

Interest expense was $15.7 million in the six months ended June 30, 2021, compared to $15.5 million in the six months ended June 30, 2020, an increase in interest expense of $0.2 million, or 1%.

Other expense was $0.2 million in the six months ended June 30, 2021, compared to other expense of $1.4 million in the six months ended June 30, 2020.

Other expense recognized in the six months ended June 30, 2021 and June 30, 2020 related primarily to foreign currency exchange losses in our UK entities.

For the Three Months Ended September 30, 2021

Interest expense was $8.0 million in the three months ended September 30, 2021, compared to $8.1 million in the three months ended September 30, 2020.

Other expense was $0.7 million in the three months ended September 30, 2021, compared to other income of $0.6 million in the three months ended September 30, 2020.

Other expense recognized during the three months ended September 30, 2021 related primarily to currency exchange gains (losses).

For the Nine Months Ended September 30, 2021

Interest expense was virtually flat at $23.7 million in the nine months ended September 30, 2021, compared to $23.6 million in the nine months ended September 30, 2020.

Other expense was $0.8 million in the nine months ended September 30, 2021, compared to other expense of $0.8 million in the nine months ended September 30, 2020.

Other expense recognized in the nine months ended September 30, 2021 and September 30, 2020 related primarily to foreign currency exchange losses in our UK entities.

Benefit from (Provision for) Income Taxes

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 % Change 2021 2020 % Change

2 unchanged sentences

Percentage of total revenue 5% (2)% 4% 1%

For the Three Months Ended June 30, 2021

Provision for income taxes was $1.5 million in the three months ended June 30, 2021, compared to a benefit from income taxes of $0.7 million in the three months ended June 30, 2020, an increase of $2.2 million.

The provision for income taxes for the three months ended June 30, 2021 related primarily to the impact of expected future changes in UK tax rates on the balance of deferred tax assets and liabilities per tax law enacted during the three months ended June 30, 2021, and was partially offset by income tax benefits associated with our combined non-U.S.

The benefit for the three months ended June 30, 2020 related primarily to deferred tax benefits attributable to the release of valuation allowance related to the acquisitions of deferred tax liabilities associated with business combinations.

For the Six Months Ended June 30, 2021

The benefit from income taxes was $2.9 million in the six months ended June 30, 2021, compared to a benefit from income taxes of $5.0 million in the six months ended June 30, 2020, a decrease of $2.1 million.

The benefits for each period are due primarily to deferred tax benefits attributable to the release of valuation allowance related to the acquisitions of deferred tax liabilities associated with business combinations completed during the respective periods.

The tax benefit for the six months ended June 30, 2021 is primarily offset by the impact of expected future changes in UK tax rates on the balance of deferred tax assets and liabilities per tax law enacted during the three months ended June 30, 2021.

For the Three Months Ended September 30, 2021

Benefit from income taxes was $3.3 million in the three months ended September 30, 2021, compared to a provision for income taxes of $1.1 million in the three months ended September 30, 2020, an increase of $4.4 million.

The benefit for income taxes for the three months ended September 30, 2021 related primarily to deferred tax benefits attributable to the release of valuation allowance related to acquired deferred tax liabilities associated with business combinations, the deferred tax benefit attributable to the reduction in deferred tax liabilities associated with the transfer of intangibles between foreign and domestic jurisdictions, and income tax benefits associated with our combined non-U.S.

The provision for the three months ended September 30, 2020 related primarily to the increase in deferred tax liabilities in our UK entities associated with the change in the applicable UK tax rate.

For the Nine Months Ended September 30, 2021

The benefit from income taxes was $6.2 million in the nine months ended September 30, 2021, compared to a benefit from income taxes of $3.8 million in the nine months ended September 30, 2020, an increase of $2.4 million.

The tax benefit for the nine months ended September 30, 2021 also includes a deferred tax benefit attributable to the reduction in deferred tax liabilities associated with the transfer of intangibles between foreign and domestic jurisdictions.

The tax benefit for each period is primarily offset by the impact of expected future changes in UK tax rates on the balance of deferred tax assets and liabilities per tax law enacted during the three months ended June 30, 2021 and September 30, 2020, respectively.

Liquidity and Capital Resources

To date, we have financed our operations primarily through the raising of capital including sales of our common stock, cash from operating activities, borrowing under our credit facility, and the issuance of notes to sellers in some of our acquisitions.

To date, we have financed our operations primarily through the raising of capital including sales of our common stock, cash from operating activities, and borrowing under our credit facility.

We believe that current cash and cash equivalents, cash flows from operating activities, availability under our existing credit facility, as discussed below, and the ability to offer and sell securities pursuant to our registration statement, as discussed below, will be sufficient to fund our operations for at least the next twelve months.

In addition, we intend to utilize the sources of capital available to us under our Credit Facility and registration statement to support our continued growth via acquisitions within our core enterprise solution suites of complementary technologies and businesses.

As of June 30, 2021, we had cash and cash equivalents of $176.5 million, $60.0 million of available borrowings under our credit facility, as discussed below, and $530.6 million of borrowings outstanding under our credit facility.

As of September 30, 2021, we had cash and cash equivalents of $179.6 million, $60.0 million of available borrowings under our credit facility, as discussed below, and $529.2 million of borrowings outstanding under our credit facility.

As of December 31, 2020, we had cash and cash equivalents of $250.0 million, $60.0 million of available borrowings under our Credit Facility, and $533.3 million of borrowings outstanding under our credit facility.

The $73.5 million decrease in cash and cash equivalents from December 31, 2020 to June 30, 2021 includes $97.7 million in cash paid for our three acquisitions completed during 2021, net of $1.2 million in cash acquired, which was partially offset by a $5.2 million settlement in total consideration for Localytics related to a representation and warranty insurance settlement.

The $70.4 million decrease in cash and cash equivalents from December 31, 2020 to September 30, 2021 includes $97.7 million in cash paid for our three acquisitions completed during 2021, net of $1.2 million in cash acquired, which was partially offset by a $5.2 million settlement in total consideration for Localytics related to a representation and warranty insurance settlement.

Non-cash acquisition date consideration to be paid in future periods related to these acquisitions includes $10.9 million in holdback payments and $4.2 million in earnout payments that are due within 12 to 18 months of the closing dates of the underlying acquisitions.

The earnouts are subject to attainment of future performance-based conditions.

Our cash and cash equivalents held by our foreign subsidiaries was $19.3 million as of June 30, 2021 and $15.3 million as of December 31, 2020.

If these funds held by our foreign subsidiaries are needed for our domestic operations, a repatriation of these funds would require us to accrue and pay dividend withholding taxes in the foreign jurisdictions where applicable and accrue and pay U.S.

Our cash and cash equivalents held by our foreign subsidiaries was $25.4 million as of September 30, 2021 and $15.3 million as of December 31, 2020.

If these funds held by our foreign subsidiaries are needed for our domestic operations, a repatriation of these funds may require us to accrue and pay dividend withholding taxes in the foreign jurisdictions where applicable and accrue and pay U.S.

taxes to the extent such dividend income exceeds our ability to utilize net operating losses.

2 unchanged sentences

We do not provide for federal income taxes on the undistributed earnings of our foreign subsidiaries.

As of June 30, 2021 and December 31, 2020, we had a working capital surplus of $85.3 million and surplus of $196.1 million, respectively, which includes $95.2 million and $87.6 million of deferred revenue recorded as a current liability as of June 30, 2021 and December 31, 2020, respectively.

As of September 30, 2021 and December 31, 2020, we had a working capital surplus of $94.8 million and surplus of $196.1 million, respectively, which includes $90.4 million and $87.6 million of deferred revenue recorded as a current liability as of September 30, 2021 and December 31, 2020, respectively.

This deferred revenue will be recognized as revenue in future periods in accordance with our revenue recognition policy.

Credit Facility

On August 6, 2019, we entered into a credit agreement (the “Credit Facility”) which provides for (i) a fully-drawn $350 million, 7 year, senior secured term loan B facility (the “Term Loan”) and (ii) a $60 million, 5 year, revolving credit facility (the “Revolver”) that was fully available as of June 30, 2021.

The Credit Facility replaced our previous credit facility.

4 unchanged sentences

The Credit Facility contains certain non-financial restrictive covenants that limit our ability to transfer or dispose of assets, merge with other companies or consummate certain changes of control, acquire other companies, pay dividends, incur additional indebtedness and liens, effect changes in management and enter into new businesses.

As of June 30, 2021 we were in compliance with all covenants under the Credit Facility.

Debt for more information regarding our Credit Facility and outstanding debt as of June 30, 2021.

As of September 30, 2021 we were in compliance with all covenants under the Credit Facility.

Debt for more information regarding our Credit Facility and outstanding debt as of September 30, 2021.

On August 6, 2019, the Company entered into an interest rate hedge instrument for the full 7 year term, effectively fixing our interest rate at 5.4% for the Term Loan.

3 unchanged sentences

The interest rate swap has been designated as a cash flow hedge and is valued using a market approach, which is a Level 2 valuation technique.

At June 30, 2021, the fair value of the interest rate swap was a $17.8 million liability as a result of a decline in short term interest rates since entering into the swap agreements.

At September 30, 2021, the fair value of the interest rate swap was a $15.6 million liability as a result of a decline in short term interest rates since entering into the swap agreements.

The decrease in the fair value of the interest rate

swap liability during the three months ended June 30, 2021 is the result of an increase in short term interest rates compared to December 31, 2020.

swap liability during the nine months ended September 30, 2021 is the result of an increase in short term interest rates compared to December 31, 2020.

Registration Statements

3 unchanged sentences

The following table summarizes our cash flows for the periods indicated:

Six Months Ended June 30,

Nine Months Ended September 30,

(dollars in thousands)

Consolidated Statements of Cash Flow Data:

Net cash provided by (used in) operating activities $ 23,308 $ (4,504)

Net cash provided by operating activities $ 28,646 $ 14,152

Net cash used in investing activities (93,382) (68,685)

Net cash used in financing activities (3,381) (14,604)

Net cash provided by (used in) financing activities (5,096) 112,077

Effect of exchange rate fluctuations on cash (613) 404

3 unchanged sentences

Cash Flows from Operating Activities

Cash provided by (used in) operating activities is significantly influenced by the amount of cash we invest in personnel and infrastructure to support the anticipated growth of our business.

Cash provided by operating activities is significantly influenced by the amount of cash we invest in personnel and infrastructure to support the anticipated growth of our business.

Included in net cash provided by operations are one-time acquisition related expenses incurred for up to four quarters after each acquisition to transact and transform the acquired business into the Company's unified operating platform.

2 unchanged sentences

The volume of professional services rendered, the volume and timing of customer bookings and contract renewals, and the related timing of collections on those bookings and renewals, as well as the timing of spending commitments and payments of our accounts payable, accrued expenses, accrued payroll and related benefits, all affect these account balances.

Cash provided by operating activities was $23.3 million for the six months ended June 30, 2021 compared to a use of $4.5 million of cash for the six months ended June 30, 2020, an increase of $27.8 million.

Cash provided by operating activities was $28.6 million for the nine months ended September 30, 2021 compared to cash provided by operating activities of $14.2 million for the nine months ended September 30, 2020, an increase of $14.4 million.

This increase in operating cash flow is generally attributable to the Company’s increased size and scale.

Working capital sources of cash for the six months ended June 30, 2021 included a $10.2 million decrease in accounts receivable related to the timing of collections, and an increase of $5.9 million in accounts payable related to timing of payments.

Working capital uses of cash for the six months ended June 30, 2021 included a $3.6 million increase in prepaids and other related primarily to an increase in deferred commissions, a decrease of $2.9 million in deferred revenue, and a $2.4 million decrease in accrued expenses.

Working capital sources of cash for the nine months ended September 30, 2021 included a $11.7 million decrease in accounts receivable related to the timing of collections, and an increase of $6.6 million in accounts payable related to timing of payments.

Working capital uses of cash for the nine months ended September 30, 2021 included a $3.7 million increase in prepaids and other related primarily to an increase in deferred commissions, a decrease of $6.8 million in deferred revenue, and a $8.1 million decrease in accrued expenses.

A substantial source of cash is invoicing for subscriptions and support fees in advance, which is recorded as deferred revenue, and is included on our condensed consolidated balance sheets as a liability.

4 unchanged sentences

As our business grows, we expect our primary investing activities to continue to further expand our family of software applications and infrastructure and support additional personnel.

For the six months ended June 30, 2021, cash used in investing activities consisted of $97.7 million associated with the Company’s 2021 acquisitions, partially offset by a $5.2 million settlement in total consideration for Localytics related to a representation and warranty insurance settlement, and the purchases of property and equipment of $0.5 million.

investing activities increased $24.4 million for the six months ended June 30, 2021 compared to the same period in 2020 primarily as a result of closing three acquisitions during the period compared to one acquisition in the comparable prior year period.

For the nine months ended September 30, 2021, cash used in investing activities consisted of $97.7 million associated with the Company’s 2021 acquisitions, and the purchases of property and equipment of $1.0 million, partially offset by a

$5.2 million settlement in total consideration for Localytics related to a representation and warranty insurance settlement.

Cash used in investing activities increased $24.7 million for the nine months ended September 30, 2021 compared to the same period in 2020 primarily as a result of closing three acquisitions during the period compared to one acquisition in the comparable prior year period.

Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of spending to support research and development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced applications and professional service offerings, and acquisitions of complementary technologies, products and businesses.

1 unchanged sentence

Our primary financing activities have consisted of capital raised to fund our acquisitions, proceeds from debt obligations incurred to finance our acquisitions, repayments of our debt obligations, and share based employee payroll tax payment activity.

Cash used in financing activities increased $11.2 million for the six months ended June 30, 2021 compared to the same period in 2020.

The increase relates primarily to a $8.8 million decrease in additional consideration paid to sellers (i.e.

Cash provided by financing activities decreased $117.2 million for the nine months ended September 30, 2021 compared to the same period in 2020.

The decrease relates primarily to a decrease in cash generated from issuance of our common stock as the Company received net proceeds of $130.1 million related to a secondary stock offering completed in August 2020.

This decrease in cash provided by financing activities was partially offset by a $10.9 million decrease in additional consideration paid to sellers (i.e.

holdbacks and earnouts) compared to the same period in 2020.

In addition, net share employee payroll tax settlement payments decreased $2.1 million during the six months ended June 30, 2021 compared to the same period in 2020 as a result of the employee payroll tax election in mid-2020 to sell shares to cover employee payroll taxes on stock compensation vestings.

In addition, net share employee payroll tax settlement payments decreased $1.8 million during the nine months ended September 30, 2021 compared to the same period in 2020 as a result of the employee payroll tax election in mid-2020 to sell shares to cover employee payroll taxes on stock compensation vestings.

Critical Accounting Policies and the Use of Estimates

12 unchanged sentences

Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets.

We are not aware of any specific event or circumstance that would require updates to our estimates or judgments or require us to revise the carrying value of our assets or liabilities as of August 4, 2021, the date of issuance of this Quarterly Report on Form 10-Q.

We are not aware of any specific event or circumstance that would require updates to our estimates or judgments or require us to revise the carrying value of our assets or liabilities as of November 3, 2021, the date of issuance of this Quarterly Report on Form 10-Q.

These estimates may change as new events occur and additional information is obtained.

1 unchanged sentence

Other Key Accounting Policies

Our unaudited interim financial statements and other financial information for the three and six months ended June 30, 2021, as presented herein and in Item 1 to this Quarterly Report on Form 10-Q, reflects no material changes in our critical accounting policies and estimates as set forth in our Annual report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 25, 2021.

Our unaudited interim financial statements and other financial information for the three and nine months ended September 30, 2021, as presented herein and in Item 1 to this Quarterly Report on Form 10-Q, reflects no material changes in our critical accounting policies and estimates as set forth in our Annual report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 25, 2021.

Please refer to this Annual Report for a detailed description of our critical accounting policies that involve significant management judgment.

5 unchanged sentences

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 2. Management’s Discussion and Analysis