What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-08-09 compared with 2022-05-04 · 233 added, 109 removed, 329 unchanged (51% of the section changed)

83 unchanged sentences

Our revenue has grown from $98.0 million in 2017 to $302.0 million in 2021, representing a compound annual growth rate of 33%.

During the three months ended March 31, 2022 foreign revenue as a percent of total revenue increased to 32% compared to 25% during the three months ended March 31, 2021.

During the six months ended June 30, 2022 foreign revenue as a percent of total revenue increased to 31% compared to 28% during the six months ended June 30, 2021.

See “ Note 10.

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 library, customer base, and market access resulting in increased benefits of scale.

Consistent with our growth strategy, we have made 31 acquisitions from February 2012 through March 31, 2022.

Consistent with our growth strategy, we have made 31 acquisitions from February 2012 through June 30, 2022.

COVID-19 Impact

12 unchanged sentences

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

Three Months Ended March 31,

Amount Percent of Revenue Amount Percent of Revenue

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

2022 2021 2022 2021

Amount Percent of Revenue Amount Percent of Revenue Amount Percent of Revenue Amount Percent of Revenue

(dollars in thousands, except share and per share data)

27 unchanged sentences

Loss before provision for income taxes (16,865) (21) % (17,504) (23) % (39,822) (25) % (42,582) (29) %

Benefit from income taxes 126 — % 4,394 6 %

Benefit from (provision for) income taxes 472 1 % (1,538) (2) % 598 — % 2,856 3 %

Net loss $ (16,393) (20) % $ (19,042) (25) % $ (39,224) (25) % $ (39,726) (26) %

4 unchanged sentences

Stockholders' Equity” .

(2) Includes General and administrative stock-based compensation of $9.0 million and $15.5 million for the three months March 31, 2022 and March 31, 2021, respectively.

General and administrative expense excluding stock-based compensation as a percentage of total revenues was 13% and 12% for the three months ended March 31, 2022 and March 31, 2021, respectively.

(3) Includes depreciation and amortization of $3.2 million and $2.7 million for the three months ended March 31, 2022 and March 31, 2021, respectively.

Comparison of the Three Months Ended March 31, 2022 and 2021

Three Months Ended March 31,

2022 2021 % Change

(2) Includes General and administrative stock-based compensation of $12.1 million and $10.4 million for the three months June 30, 2022 and June 30, 2021, respectively, and $21.1 million and $26.0 million for the six months ended June 30, 2022 and June 30, 2021, respectively.

General and administrative expense excluding stock-based compensation as a percentage of total revenues was 12% and 11% for the three months ended June 30, 2022 and June 30, 2021, respectively, and 13% and 12% for the six months ended June 30, 2022 and June 30, 2021, respectively.

(3) Includes depreciation and amortization of $3.1 million and $2.9 million for the three months ended June 30, 2022 and June 30, 2021, respectively, and $6.3 million and $5.6 million for the six months ended June 30, 2022 and June 30, 2021, respectively.

Comparison of the Three and Six Months Ended June 30, 2022 and 2021

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

2022 2021 % Change 2022 2021 % Change

(dollars in thousands)

10 unchanged sentences

Total revenue 100% 100% 100% 100%

For the Three Months Ended March 31, 2022

Total revenue was $78.7 million in the three months ended March 31, 2022, compared to $74.0 million in the three months ended March 31, 2021, an increase of $4.7 million, or 6%.

The acquisitions not fully in the comparative period contributed $10.1 million to the increase after the reduction of $1.9 million purchase accounting deferred revenue discount in the three months ended March 31, 2022.

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

Total revenue related to Overage Charges (as defined) declined by $2.1 million as a result of variable demand in the quarter.

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

2022 2021 2022 2021

(dollars in thousands)

Reconciliation of Total revenue to Non-GAAP Core Organic Revenue:

Total revenue (1)

$ 80,227 $ 76,264 $ 158,943 $ 150,233

Subscription and support revenue from acquisitions not fully in the prior year comparative period 7,297 104 23,215 9,152

Perpetual license revenue 1,858 415 3,636 767

Professional services revenue 3,352 3,444 6,663 6,408

Subscription and support revenue from Sunset Assets (2)

160 353 342 747

Overage Charges (3)

3,005 4,181 5,649 8,879

Political Revenue (4)

Non-GAAP Core Organic Revenue (5)

$ 64,555 $ 67,534 $ 119,438 $ 123,296

(1) After the reduction of $1.7 million and $3.6 million purchase accounting deferred revenue discount for the three and six months ended June 30, 2022, respectively.

(2) Subscription and support revenue from Sunset Assets is revenue related to the divestiture and sunset of certain minor non-strategic customer contracts (collectively referred to as “Sunset Assets”).

(3) Overage Charges are amounts paid to the Company by a customer (in addition to such customer’s contractual minimum payment commitments) as a result of such customer’s number of users or level of usage of services including text and e-mail messaging and third party pass-through costs exceeding the levels stipulated in such customer’s license or related purchase agreements with the Company.

The three months ended March 31, 2021 included $0.8 million of CXM usage revenue from US election-year presidential campaigns (hereafter referred to as “Political Revenue”) which did not repeat in the current quarter and will not repeat for the remainder of 2022.

Our core organic business (the “Core Organic Business”) excludes revenues from acquisitions closed during or subsequent to the prior year comparable period, revenue from business operations related to Sunset Assets, Overage Charges and Political Revenue.

Therefore, total revenue for our Core Organic Business decreased by $2.1 million.

Subscription and support revenue was $73.6 million in the three months ended March 31, 2022, compared to $70.7 million in the three months ended March 31, 2021, an increase of $2.9 million, or 4%.

The acquisitions not fully in the comparative period contributed $8.1 million to the increase in subscription and support revenue after the reduction of $1.9 million purchase accounting deferred revenue discount in the three months ended March 31, 2022.

(4) Political Revenue is CXM usage revenue from US presidential campaigns.

(5) Non-GAAP Core Organic Revenue excludes revenues from acquisitions closed during or subsequent to the prior year comparable period, Perpetual license revenues, Professional services revenues, Revenue from Sunset Assets, Overage Charges and Political Revenue.

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

2022 2021 2022 2021

(dollars in thousands)

Reconciliation of Subscription and support revenue to Non-GAAP Core Organic Revenue:

Subscription and support revenue (1)

$ 75,017 0 $ 72,405 $ 148,644 $ 143,058

Subscription and support revenue from acquisitions not fully in the prior year comparative period 7,297 104 23,215 9,152

Subscription and support revenue from Sunset Assets (2)

160 353 342 747

Overage Charges (3)

3,005 4,181 5,649 8,879

Political Revenue (4)

Non-GAAP Core Organic Revenue (5)

$ 64,555 $ 67,534 $ 119,438 $ 123,296

(1) After the reduction of $1.6 million and $3.6 million purchase accounting deferred revenue discount for the three and six months ended June 30, 2022, respectively.

(4) Political Revenue is CXM usage revenue from US presidential campaigns.

(5) Non-GAAP Core Organic Revenue excludes revenues from acquisitions closed during or subsequent to the prior year comparable period, Revenue from Sunset Assets, Overage Charges and Political Revenue.

For the Three Months Ended June 30, 2022

Total revenue was $80.2 million in the three months ended June 30, 2022, compared to $76.3 million in the three months ended June 30, 2021, an increase of $3.9 million, or 5%.

Total revenue growth includes a negative impact of 3 percentage points from changes in foreign currency exchange rates (“FX”).

Our organic business excludes acquisitions closed during or subsequent to the prior year comparable period and business operations related to Sunset Assets (the “Organic Business”).

The acquisitions not fully in the comparable period contributed $10.0 million to the increase in the three months ended June 30, 2022.

Total revenue related to Perpetual license and Professional services related to our Organic Business declined by $1.4 million.

Total revenue from Sunset Assets declined by $0.3 million in the quarter as a result of decreased sales and marketing focus on those Sunset Assets.

Total revenue related to Overage Charges declined by $1.2 million as a result of variable demand in the quarter.

The three months ended June 30, 2021 included $0.2 million of Political Revenue which did not repeat in the current quarter and will not repeat for the remainder of 2022.

Therefore, net of these non-core revenues, our Non-GAAP Core Organic Revenue decreased by $3.0 million for the three months ended June 30, 2022 compared to the three months ended June 30, 2021.

After removing the negative FX impact on our revenue, net of these non-core revenues, our Non-GAAP Core Organic Revenue decreased by $1.7 million in the three months ended June 30, 2022 compared to the three months ended June 30, 2021.

Subscription and support revenue was $75.0 million in the three months ended June 30, 2022, compared to $72.4 million in the three months ended June 30, 2021, an increase of $2.6 million, or 4%.

Subscription and support revenue growth includes a negative impact of 2 percentage points from changes in FX.

The acquisitions not fully in the comparable period contributed $7.2 million to the increase in subscription and support revenue in the three months ended June 30, 2022.

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

Subscription and support revenue related to Overage Charges declined by $1.2 million as a result of variable demand in the quarter.

The three months ended March 31, 2021 included $0.8 million of Political Revenue which did not repeat in the current quarter and will not repeat for the remainder of 2022.

Therefore, subscription and support revenue for our Core Organic Business decreased to $59.5 million for the three months ended March 31, 2022, from a basis of $61.5 million for the three months ended March 31, 2021.

Perpetual license revenue was $1.8 million in the three months ended March 31, 2022, compared to $0.4 million in the three months ended March 31, 2021.

The acquisitions not fully in the comparative period contributed $1.4 million to the increase in perpetual license revenue in the three months ended March 31, 2022 primarily from the acquisition of Objectif Lune.

Therefore, perpetual license revenue for our Core Organic Business for the three months ended March 31, 2022 was flat compared to the three months ended March 31, 2021.

Professional services revenue was $3.3 million in the three months ended March 31, 2022, compared to $3.0 million in the three months ended March 31, 2021, an increase of $0.3 million, or 12%.

The acquisitions not fully in the comparative period contributed $0.6 million to the increase in professional services revenue in the three months ended March 31, 2022.

professional services revenue for our Core Organic Business decreased by $0.3 million in the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

The three months ended June 30, 2021 included $0.2 million of Political Revenue which did not repeat in the current quarter and will not repeat for the remainder of 2022.

Therefore, net of these non-core revenues, our Non-GAAP Core Organic Revenue decreased by $3.0 million for the three months ended June 30, 2022 compared to the three months ended June 30, 2021.

Perpetual license revenue was $1.9 million in the three months ended June 30, 2022, compared to $0.4 million in the three months ended June 30, 2021.

The acquisitions not fully in the comparable period contributed $1.5 million to the increase in perpetual license revenue in the three months ended June 30, 2022 primarily from the acquisition of Objectif Lune.

Therefore, perpetual license revenue for our Organic Business for the three months ended June 30, 2022 was flat compared to the three months ended June 30, 2021.

Professional services revenue was relatively flat at $3.4 million in both the three months ended June 30, 2022 as well as in the three months ended June 30, 2021.

The acquisitions not fully in the comparable period contributed $1.3 million to the increase in professional services revenue in the three months ended June 30, 2022.

Therefore, professional services revenue for our Organic Business decreased by $1.3 million in the three months ended June 30, 2022 compared to the three months ended June 30, 2021 primarily related to our discipline around not accepting unprofitable professional services projects.

For the Six Months Ended June 30, 2022

Total revenue was $158.9 million in the six months ended June 30, 2022, compared to $150.2 million in the six months ended June 30, 2021, an increase of $8.7 million, or 6%.

Total revenue growth includes a negative impact of 1.5 percentage points from changes in FX.

The acquisitions not fully in the comparable period contributed $18.4 million to the increase in the six months ended June 30, 2022.

Total revenue related to Perpetual license and Professional services related to our Organic Business declined by $1.1 million.

Total revenue related to Sunset Assets decreased by $0.5 million as a result of decreased sales and marketing focus on those Sunset Assets.

Total revenues related to Overage Charges declined by $3.2 million as a result of variable demand during the first half of 2022.

The six months ended June 30, 2021 included $1.0 million in Political Revenue, which did not repeat in the first half of 2022 and will not repeat for the remainder of 2022.

Therefore, net of these non-core revenues, our Non-GAAP Core Organic Revenue decreased by $3.9 million in the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

After removing the negative FX impact on our revenue, net of these non-core revenues, our Non-GAAP Core Organic Revenue decreased by $2.6 million in the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

Subscription and support revenue was $148.6 million in the six months ended June 30, 2022, compared to $143.1 million in the six months ended June 30, 2021, an increase of $5.5 million, or 4%.

Subscription and support revenue growth includes a negative impact of 1.6 percentage points from changes in FX.

The acquisitions not fully in the comparable period contributed $14.0 million to the increase in subscription and support revenue in the six months ended June 30, 2022.

Subscription and support revenue related to our Sunset Assets decreased $0.4 million as a result of decreased sales and marketing focus on those Sunset Assets.

Subscription and support revenues related to Overage Charges declined by $3.2 million as a result of variable demand in the six months ended June 30, 2022.

The six months ended June 30, 2021 included $1.0 million of Political Revenues which did not repeat in the first half of 2022 and will not repeat for the remainder of 2022.

Therefore, net of these non-core revenues, our Non-GAAP Core Organic Revenue decreased by $3.9 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

After removing the negative FX impact on our revenue, net of these non-core revenues, our Non-GAAP Core Organic Revenue decreased by $2.6 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

Perpetual license revenue was $3.6 million in the six months ended June 30, 2022, compared to $0.8 million in the six months ended June 30, 2021, an increase of $2.8 million, or 374%.

Perpetual license revenue related to our Sunset Assets decreased by $0.1 million as a result of decreased sales and marketing focus on those Sunset Assets.

The acquisitions not fully in the comparable period contributed $3.0 million to the increase in perpetual license revenue in the six months ended June 30, 2022.

Therefore, perpetual license revenue from our Organic Business decreased by $0.1 million in the six months ended June 30, 2022 compared to the six months ended June 30, 2021.

Professional services revenue was $6.7 million in the six months ended June 30, 2022, compared to $6.4 million in the six months ended June 30, 2021, an increase of $0.3 million, or 4%.

The acquisitions not fully in the comparable period contributed $1.4 million to the increase in professional services revenue in the six months ended June 30, 2022.

Professional services revenue related to our Sunset Assets decreased by $0.1 million as a result of decreased sales and marketing focus on those Sunset Assets.

Therefore, professional services revenue from our Organic Business decreased by $1.1 million in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 primarily related to our discipline around not accepting unprofitable professional services projects.

Cost of Revenue and Gross Profit Percentage

Three Months Ended March 31,

2022 2021 % Change

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

2022 2021 % Change 2022 2021 % Change

(dollars in thousands)

7 unchanged sentences

Subscription and support (1)

30% 30% 29% 31%

Professional services and other 3% 3% 3% 2%

5 unchanged sentences

Stock Compensation $ 575 $ 563 $ 977 $ 1,005

For the Three Months Ended March 31, 2022

Cost of subscription and support revenue was $22.1 million in the three months ended March 31, 2022, compared to $22.7 million in the three months ended March 31, 2021, a decrease of $0.6 million, or 3%.

The acquisitions not fully in the comparative period contributed $2.0 million to cost of subscription and support revenue, primarily related to costs associated with the delivery of the newly acquired products.

For the Three Months Ended June 30, 2022

Cost of subscription and support revenue was $24.1 million in the three months ended June 30, 2022, compared to $23.2 million in the three months ended June 30, 2021, an increase of $0.9 million, or 4%.

The acquisitions not fully in the comparable period contributed $1.6 million to cost of subscription and support revenue, primarily related to costs associated with the delivery of the newly acquired products.

Cost of subscription and support revenue related to our Sunset Assets decreased $0.1 million.

Our organic business excludes acquisitions closed during or subsequent to the prior year comparable period and business operations related to Sunset Assets (the “Organic Business”).

Therefore, cost of subscription and support revenue for our Organic Business decreased by $2.5 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 2021 related to US election-year presidential campaigns.

Cost of professional services and other revenue was $2.7 million in the three months ended March 31, 2022, compared to $1.7 million in the three months ended March 31, 2021, an increase of $1.0 million, or 54%.

The acquisitions not fully in the comparative period contributed $1.0 million in the cost of professional services revenue.

Therefore, cost of subscription and support revenue for our Organic Business decreased by $0.6 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 2021 related to US presidential campaigns.

Cost of professional services and other revenue was $2.4 million in the three months ended June 30, 2022, compared to $1.9 million in the three months ended June 30, 2021, an increase of $0.6 million, or 31%.

The acquisitions not fully in the comparable period contributed $0.7 million in the cost of professional services revenue.

Therefore, the cost of professional services for our Organic Business decreased by $0.1 million.

For the Six Months Ended June 30, 2022

Cost of subscription and support revenue was $46.2 million in the six months ended June 30, 2022, compared to $45.8 million in the six months ended June 30, 2021, an increase of $0.4 million, or 1%.

The acquisitions not fully in the comparable period contributed $3.7 million to the increase to cost of subscription and support revenue, primarily related to costs associated with the delivery of the BA Insight, Objectif Lune, Panviva and BlueVenn products.

Cost of subscription and support revenue related to our Sunset Assets decreased $0.1 million primarily related to decreased hosting and infrastructure costs.

Therefore, cost of subscription and support revenue for the organic portion of our business decreased by $3.2 million, primarily related to decreases in personnel and related costs and messaging costs related to an increase in CXM usage from US presidential campaigns, partially offset by an increase in hosting and infrastructure costs.

Cost of professional services revenue was $5.1 million in the six months ended June 30, 2022, compared to $3.6 million in the six months ended June 30, 2021, an increase of $1.5 million, or 42%.

The acquisitions not fully in the comparable period contributed $1.6 million to the increase 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 $0.1 million.

Operating Expenses

Sales and Marketing Expense

Three Months Ended March 31,

2022 2021 % Change

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

2022 2021 % Change 2022 2021 % Change

(dollars in thousands)

4 unchanged sentences

Stock Compensation $ 1,498 $ 1,619 $ 2,972 $ 2,756

For the Three Months Ended March 31, 2022

Sales and marketing expense was $15.6 million in the three months ended March 31, 2022, compared to $12.4 million in the three months ended March 31, 2021, an increase of $3.2 million, or 25%.

The acquisitions not fully in the comparative period contributed $2.1 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 $1.1 million in the comparative periods, primarily attributable to sales commissions expense associated with our continued go-to-market investments.

For the Three Months Ended June 30, 2022

Sales and marketing expense was $15.3 million in the three months ended June 30, 2022, compared to $14.3 million in the three months ended June 30, 2021, an increase of $1.0 million, or 7%.

The acquisitions not fully in the comparable period contributed $1.8 million to the increase in sales and marketing expense, primarily consisting of personnel and related costs.

Therefore, sales and marketing expense for our Organic Business decreased $0.8 million primarily attributable to decreases in personnel and related costs, partially offset by increases related to sales commissions expense associated with our continued go-to-market investments.

For the Six Months Ended June 30, 2022

Sales and marketing expense was $30.9 million in the six months ended June 30, 2022, compared to $26.7 million in the six months ended June 30, 2021, an increase of $4.2 million, or 16%.

The acquisitions not fully in the comparable period contributed $3.9 million to the increase in sales and marketing expense, primarily consisting of personnel and related costs.

Therefore, sales and marketing expense for our Organic Business increased by $0.3 million, primarily attributable to sales commission expense associated with our ongoing go-to-market investments.

Research and Development Expense

Three Months Ended March 31,

2022 2021 % Change

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

2022 2021 % Change 2022 2021 % Change

(dollars in thousands)

4 unchanged sentences

Stock Compensation $ 658 $ 942 $ 1,406 $ 1,656

For the Three Months Ended March 31, 2022

Research and development expense was $12.1 million in the three months ended March 31, 2022, compared to $10.9 million in the three months ended March 31, 2021, an increase of $1.2 million, or 10%.

The acquisitions not fully in the comparative period contributed $1.9 million to the increase in research and development expense primarily consisting of personnel and related costs from our acquisitions in 2022 and 2021.

Research and development expense related to our Sunset Assets decreased by $0.1 million.

For the Three Months Ended June 30, 2022

Research and development expense was $11.7 million in the three months ended June 30, 2022, compared to $11.1 million in the three months ended June 30, 2021, an increase of $0.6 million, or 5%.

The acquisitions not fully in the comparable period contributed $2.0 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 decreased by $1.4 million primarily related to personnel and related costs.

For the Six Months Ended June 30, 2022

Research and development expense was $23.7 million in the six months ended June 30, 2022, compared to $22.1 million in the

six months ended June 30, 2021, an increase of $1.6 million, or 8%.

The acquisitions not fully in the comparable period contributed $3.9 million to the increase in research and development expense primarily consisting of personnel and related costs.

Research and development expense related to our Sunset Assets decreased by $0.1 million primarily due to reductions in personnel costs.

Therefore, research and development costs for our Organic Business decreased by $2.2 million primarily related to personnel and related costs.

General and Administrative Expense

Three Months Ended March 31,

2022 2021 % Change

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

2022 2021 % Change 2022 2021 % Change

(dollars in thousands)

4 unchanged sentences

Stock Compensation $ 12,146 $ 10,426 $ 21,141 $ 25,957

For the Three Months Ended March 31, 2022

General and administrative expense was $19.6 million in the three months ended March 31, 2022, compared to $24.4 million in the three months ended March 31, 2021, a decrease of $4.8 million, or 20%.

An increase in general administrative expense of $0.7 million was due to the acquisitions not fully in the comparative period.

Therefore, general and administrative expense for our Organic Business decreased by $5.5 million, which was driven primarily by lower non-cash stock compensation expense, primarily as a result of the $6.3 million in incremental stock-based compensation expense related to the deemed modification of the unvested portion of grants held by our former COO in the last March quarter.

For the Three Months Ended June 30, 2022

General and administrative expense was $21.8 million in the three months ended June 30, 2022, compared to $19.2 million in the three months ended June 30, 2021, an increase of $2.6 million, or 14%.

An increase in general administrative expense of $0.7 million was due to the acquisitions not fully in the comparable period.

In addition, general and administrative expense increased incrementally by $1.9 million, which was driven primarily by higher non-cash stock compensation expense, primarily as a result of the acceleration of stock-based compensation expense.

See “ Note 9.

Stockholders' Equity—Stock-Based Compensation ”, for further details.

For the Six Months Ended June 30, 2022

General and administrative expense was $41.4 million in the six months ended June 30, 2022, compared to $43.6 million in the six months ended June 30, 2021, a decrease of $2.2 million, or 5%.

An increase in general administrative expense of $1.7 million was due to the acquisitions not fully in the comparable period, which consisted primarily of personnel and related costs and administrative expenses.

Therefore, general and administrative expense decreased by $3.9 million, which was driven primarily by overall decrease in non-cash stock compensation expense and personnel and related costs.

Depreciation and Amortization Expense

Three Months Ended March 31,

2022 2021 % Change

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

2022 2021 % Change 2022 2021 % Change

(dollars in thousands)

7 unchanged sentences

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

For the Three Months Ended March 31, 2022

Depreciation and amortization expense was $11.1 million in the three months ended March 31, 2022, compared to $9.7 million in the three months ended March 31, 2021, an increase of $1.4 million, or 13%.

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 Three Months Ended June 30, 2022

Depreciation and amortization expense was $10.8 million in the three months ended June 30, 2022, compared to $10.3 million in the three months ended June 30, 2021, an increase of $0.5 million, or 5%.

The acquisitions not fully in the comparable period increased depreciation and amortization expense by $1.5 million, primarily related to acquired intangible assets such as

customer relationships, developed technology and tradenames.

This increase was partially offset by a decrease of $1.0 million in depreciation and amortization expense from assets becoming fully depreciated and amortized.

For the Six Months Ended June 30, 2022

Depreciation and amortization expense was $21.9 million in the six months ended June 30, 2022, compared to $20.0 million in the six months ended June 30, 2021, an increase of $1.9 million, or 9%.

The acquisitions not fully in the comparable period increased depreciation and amortization expense by $3.3 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 $1.4 million in the comparative periods.

Acquisition-related Expenses

Three Months Ended March 31,

2022 2021 % Change

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

2022 2021 % Change 2022 2021 % Change

(dollars in thousands)

6 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 March 31, 2022

Acquisition-related expense was $10.4 million in the three months ended March 31, 2022, compared to $9.6 million in the three months ended March 31, 2021, an increase of $0.8 million, or 9%.

During the three months ended March 31, 2022 and March 31, 2021 transaction related expenses were $4.5 million and $4.0 million, respectively, and transformational expenses were $5.9 million and $5.6 million, respectively.

For the Three Months Ended June 30, 2022

Acquisition-related expense was $4.9 million in the three months ended June 30, 2022, compared to $5.5 million in the three months ended June 30, 2021, a decrease of $0.6 million, or 11%.

During the three months ended June 30, 2022 and June 30, 2021 transaction related expenses were $0.4 million and $2.0 million, respectively, and transformational expenses were $4.5 million and $3.5 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.

We closed two acquisitions during the three months ended March 31, 2022 and 2021.

Transformation expenses in the three months ended March 31, 2022 include expenses related to acquisitions closed in 2022 as well the three acquisitions closed in 2021 compared to transformation expenses in the three months ended March 31, 2021, which included expenses related to the two acquisitions closed as of March 31, 2021 and one acquisition from 2020.

We had no new acquisitions during the three months ended June 30, 2022 and closed one acquisition during the three months ended June 30, 2021.

Transformation expenses in the three months ended June 30, 2022 include expenses related to acquisitions closed in 2022 as well the three acquisitions closed in 2021 compared to transformation expenses in the three months ended June 30, 2021, which included expenses related to the two acquisitions closed as of March 31, 2021 and one acquisition from 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, 2022

Acquisition related expense was $15.3 million the six months ended June 30, 2022, compared to $15.1 million in the six months ended June 30, 2021 an increase of $0.2 million, or 1%.

During the six months ended June 30, 2022 and June 30, 2021 transaction related expenses were $4.9 million and $6.1 million, respectively, and transformational expenses were $10.4 million and $9.0 million, respectively.

These accelerated rent related expenses decreased $3.5 million to $1.2 million during the six months ended June 30, 2022 from $4.8 million during the same period in 2021.

In addition, 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.

Other Income (Expense)

Three Months Ended March 31,

2022 2021 % Change

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

2022 2021 % Change 2022 2021 % Change

(dollars in thousands)

7 unchanged sentences

Total other expense (8)% (11)% (9)% (11)%

For the Three Months Ended March 31, 2022

Interest expense, net was $7.8 million in the three months ended March 31, 2022, compared to $7.8 million in the three months ended March 31, 2021.

Other expense was $0.4 million in the three months ended March 31, 2022, compared to other income of $0.2 million in the three months ended March 31, 2021.

Other expense recognized during the three months ended March 31, 2022 were related primarily to currency exchange gains (losses).

For the Three Months Ended June 30, 2022

Interest expense, net was $7.8 million in the three months ended June 30, 2022 compared to $7.9 million in the three months ended June 30, 2021 a decrease in interest expense of $0.1 million or 2%.

Other income was $1.8 million in the three months ended June 30, 2022, compared to other expense of $0.4 million in the three months ended June 30, 2021.

Other income recognized during the three months ended June 30, 2022 were related primarily to currency exchange gains.

For the Six Months Ended June 30, 2022

Interest expense was $15.5 million in the six months ended June 30, 2022, compared to $15.7 million in the six months ended June 30, 2021, a decrease in interest expense of $0.2 million, or 1%.

Other income was $1.4 million in the six months ended June 30, 2022, compared to other expense of $0.2 million in the six months ended June 30, 2021.

Other income recognized during the six months ended June 30, 2022 were related primarily to currency exchange gains.

Benefit from (Provision for) Income Taxes

Three Months Ended March 31,

2022 2021 % Change

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

2022 2021 % Change 2022 2021 % Change

(dollars in thousands)

Benefit from income taxes $ 126 $ 4,394 (97) %

Benefit from (provision for) income taxes $ 472 $ (1,538) (131) % $ 598 $ 2,856 (79) %

Percentage of total revenue 1% (2)% —% 3%

For the Three Months Ended March 31, 2022

Benefit from income taxes was $0.1 million in the three months ended March 31, 2022, compared to a benefit from income taxes of $4.4 million in the three months ended March 31, 2021, a decrease of $4.3 million.

The benefit from income taxes for the three months ended March 31, 2022 related primarily to foreign income taxes associated with our combined non-U.S.

These tax benefits are offset by changes in deferred tax liabilities associated with amortization of United States tax deductible goodwill and state taxes in certain states in which the Company does not file on a consolidated basis or have net operating loss carryforwards and the impact, recorded as discrete, of the deferred tax provision attributable to the tax gain associated with the transfer of goodwill between foreign and domestic jurisdictions.

The benefit for the three months ended March 31, 2021 related primarily to the release of valuation allowance related to the acquisition of deferred tax liabilities associated with business combinations completed during the period.

For the Three Months Ended June 30, 2022

Benefit from income taxes was $0.5 million in the three months ended June 30, 2022, compared to a provision for income taxes of $1.5 million in the three months ended June 30, 2021, resulting in a decrease in provision for income taxes of $2.0 million.

The benefit from income taxes for the three months ended June 30, 2022 related primarily to foreign income taxes associated with our combined non-U.S.

The expense for the three months ended June 30, 2021 related

primarily to the release of valuation allowance related to the acquisition of deferred tax liabilities associated with business combinations completed during the period.

For the Six Months Ended June 30, 2022

The benefit from income taxes was $0.6 million in the six months ended June 30, 2022, compared to a benefit from income taxes of $2.9 million in the six months ended June 30, 2021, resulting in a decrease of benefit from income taxes of $2.3 million.

This decrease was due primarily to decreased benefits recognized during the current period attributable to the release of valuation allowances associated with acquisitions of domestic entities with deferred tax liabilities that, upon acquisition, allow us to recognize certain deferred tax assets that had previously been offset by a valuation allowances.

In addition to the GAAP financial measures described in “Results of Operations,” 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.

2 unchanged sentences

Adjusted EBITDA is a non-GAAP financial measure.

We define Adjusted EBITDA as net income (loss), calculated in accordance with GAAP, plus depreciation and amortization expense, interest expense, net, other expense (income), net, provision for (benefit from) income taxes, stock-based compensation expense, acquisition-related expenses, and purchase accounting adjustments for deferred revenue.

We define Adjusted EBITDA as net loss, calculated in accordance with GAAP, plus depreciation and amortization expense, interest expense, net, other expense (income), net, provision for (benefit from) income taxes, stock-based compensation expense, acquisition-related expenses, and purchase accounting adjustments for deferred revenue.

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 March 31,

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

2022 2021 2022 2021

(dollars in thousands)

4 unchanged sentences

Other expense (income), net (1,777) 399 (1,359) 162

Benefit from income taxes (126) (4,394)

Provision for (benefit from) income taxes (472) 1,538 (598) (2,856)

Stock-based compensation expense 14,877 13,550 26,496 31,374

19 unchanged sentences

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 March 31, 2022, we had cash and cash equivalents of $130.4 million, $60.0 million of available borrowings under our credit facility, as discussed below, and $526.5 million of borrowings outstanding under our credit facility.

As of June 30, 2022, we had cash and cash equivalents of $138.3 million, $60.0 million of available borrowings under our credit facility, as discussed below, and $525.2 million of borrowings outstanding under our credit facility.

As of December 31, 2021, we had cash and cash equivalents of $189.2 million, $60.0 million of available borrowings under our Credit Facility, and $527.9 million of borrowings outstanding under our credit facility.

The $58.7 million decrease in cash and cash equivalents from December 31, 2021 to March 31, 2022 includes $62.3 million in cash paid for our two acquisitions completed during 2022, net of $0.8 million in cash acquired.

The $50.9 million decrease in cash and cash equivalents from December 31, 2021 to June 30, 2022 includes $62.4 million in cash paid for our two acquisitions completed during 2022, net of $0.7 million in cash acquired.

Non-cash acquisition date consideration to be paid in future periods related to these acquisitions includes $5.9 million in holdback payments and that are due within 12 to 15 months of the closing dates of the underlying acquisitions.

Our cash and cash equivalents held by our foreign subsidiaries was $20.3 million as of March 31, 2022 and $24.8 million as of December 31, 2021.

Our cash and cash equivalents held by our foreign subsidiaries was $24.5 million as of June 30, 2022 and $24.8 million as of December 31, 2021.

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.

3 unchanged sentences

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

As of March 31, 2022 and December 31, 2021, we had a working capital surplus of $29.9 million and surplus of $106.5 million, respectively, which includes $114.5 million and $102.8 million of deferred revenue recorded as a current liability as of March 31, 2022 and December 31, 2021, respectively.

As of June 30, 2022 and December 31, 2021, we had a working capital surplus of $35.3 million and surplus of $106.5 million, respectively, which includes $103.4 million and $102.8 million of deferred revenue recorded as a current liability as of June 30, 2022 and December 31, 2021, respectively.

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

Securities Purchase Agreement

The Securities Purchase Agreement as discussed in “ Note 12.

Subsequent Events ” will provide us an additional $115.0 million in liquidity, which we intend to use for (a) for general corporate purposes and (b) for transaction-related fees and expenses.

The closing is expected promptly following the satisfaction of customary terms and conditions, including the expiration of the

Hart-Scott-Rodino Act notice period.

However, we can provide no assurances that the transaction will close on the expected timeline or at all.

The holders of Series A Preferred Stock will be entitled to dividends (i) at the rate of 4.5% per annum until but excluding the seven year anniversary of the closing, and (ii) at the rate of 7% per annum on and after the seven year anniversary of the closing, and are also entitled to fully participate in any dividends or other distributions declared or paid on our common stock on an as-converted basis.

Dividends will be payable quarterly in arrears, and may be paid, at our option, in cash or by paying dividends in kind .

Our ability to pay cash dividends is subject to the restrictions under the Credit Facility (as defined below).

The Series A Preferred Stock will rank senior to our common stock with respect to distribution rights and rights upon our liquidation, dissolution or winding up (“Liquidation”), on parity with any class or series of our capital stock expressly designated as ranking on parity with the Series A Preferred Stock with respect to distribution rights and rights upon Liquidation, junior to any class or series of our capital stock expressly designated as ranking senior to the Series A Preferred Stock with respect to distribution rights and rights upon Liquidation and junior in right of payment to our existing and future indebtedness, including the Credit Facility.

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 March 31, 2022.

On November 26, 2019, the Company entered into a First Incremental Assumption Agreement (the “Incremental Assumption Agreement”) which provides for a term loan facility to be established under the Credit Facility in an aggregate principal amount of $190 million (the “2019 Incremental Term Loan”) which is in addition to the existing $350 million term loans outstanding under the Credit Facility and the $60 million Revolver under the Credit Facility.

2 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 March 31, 2022 we were in compliance with all covenants under the Credit Facility.

Debt” for more information regarding our Credit Facility and outstanding debt as of March 31, 2022.

As of June 30, 2022 we were in compliance with all covenants under the Credit Facility.

See “ Note 6.

Debt—Credit Facility ” for more information regarding our Credit Facility and outstanding debt as of June 30, 2022.

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 March 31, 2022, the fair value of the interest rate swap was a $17.8 million asset.

The increase in the

fair value of the interest rate swap assets during the three months ended March 31, 2022 is the result of an increase in short term interest rates compared to December 31, 2021.

Registration Statements

At June 30, 2022, the fair value of the interest rate swap was a $26.0 million asset.

The increase in the fair

value of the interest rate swap assets during the six months ended June 30, 2022 is the result of an increase in short term interest rates compared to December 31, 2021.

On August 10, 2020, we filed a registration statement on Form S-3 (File No.

2 unchanged sentences

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

Three Months Ended March 31,

Six Months Ended June 30,

(dollars in thousands)

13 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 $8.2 million for the three months ended March 31, 2022 compared to cash provided by operating activities of $12.5 million for the three months ended March 31, 2021, a decrease of $4.3 million.

This decrease in operating cash flow is primarily attributable to increased acquisition related cash out flows in 2022 as a result of the Company restarting it's acquisition activity in 2021 after a pause in 2020 due to the COVID pandemic.

Working capital sources of cash for the three months ended March 31, 2022 included a $9.2 million decrease in accounts receivable related to the timing of collections, a $1.8 million decrease in prepaid expenses and other current assets and an increase of $1.1 million in deferred revenue.

Working capital uses of cash for the three months ended March 31, 2022 included a decrease of $4.1 million in accounts payable related to timing of payments and a $4.8 million decrease in accrued expenses.

Cash provided by operating activities was $22.3 million for the six months ended June 30, 2022 compared to cash provided by operating activities of $23.3 million for the six months ended June 30, 2021, a decrease of $1.0 million.

Working capital sources of cash for the six months ended June 30, 2022 included a $22.1 million decrease in accounts receivable related to the timing of collections.

Working capital uses of cash for the six months ended June 30, 2022 included a decrease of $0.9 million in accounts payable related to timing of payments, a decrease of $9.2 million in deferred revenue, a $4.6 million increase in prepaid expenses and other current assets and a $5.2 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 library of cloud-based software applications and infrastructure and support additional personnel.

For the three months ended March 31, 2022, cash used in investing activities consisted of $62.3 million associated with the Company’s 2022 acquisitions, and the purchases of property and equipment of $0.2 million.

Cash used in investing activities decreased $10.4 million for the three months ended March 31, 2022 compared to the same period in 2021 primarily as a result of lower acquisition purchase prices paid for the two acquisitions closed during the period compared to the two acquisitions in the comparable prior year period.

For the six months ended June 30, 2022, cash used in investing activities consisted of $62.4 million associated with the Company’s 2022 acquisitions, and the purchases of property and equipment of $0.3 million.

Cash used in investing activities decreased $30.3 million for the six months ended June 30, 2022 compared to the same period in 2021 primarily as a result of the two acquisitions closed during the period compared to the three acquisitions 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 $2.1 million for the three months ended March 31, 2022 compared to the same period in 2021.

Cash used in financing activities increased $3.2 million for the six months ended June 30, 2022 compared to the same period in 2021.

The increase in cash used in financing activities relates primarily to a $2.3 million increase in additional consideration paid to sellers (i.e.

holdbacks) and $0.5 million increase in net share employee payroll tax settlement payments compared to the same period in 2021.

This was partially offset by cash provided by financing activities related to $0.2 million in proceeds from employee stock option exercises during the period.

holdbacks) and a $1.0 million increase in net share employee payroll tax settlement payments compared to the same period in 2021.

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 May 4, 2022, 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 August 9, 2022, 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 months ended March 31, 2022, as presented herein and in “Item 1.

Financial Statements” to this Quarterly Report on Form 10-Q, reflect 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, 2021 filed with the SEC on February 24, 2022.

Our unaudited interim financial statements and other financial information for the three and six months ended June 30, 2022, as presented herein and in “ Item 1.

Financial Statements ” to this Quarterly Report on Form 10-Q, reflect 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, 2021 filed with the SEC on February 24, 2022 (the “Annual Report”).

Please refer to our 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