What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-02 compared with 2023-08-03 · 108 added, 115 removed, 331 unchanged (40% of the section changed)

34 unchanged sentences

• our expectations as to the payment of dividends;

• our Share Repurchase Plan (as defined in Note 11.

Stockholders’ Equity ), including expectations regarding the timing and manner of repurchases made under the Share Repurchase Plan;

• our current level of indebtedness, including our exposure to variable interest rate risk;

• potential elimination or limitation of tax incentives or tax losses and/or reduction of U.S.

15 unchanged sentences

Our revenue has grown from $149.9 million in the year ended December 31, 2018 to $317.3 million in the year ended December 31, 2022, representing a compound annual growth rate of 21%.

During the six months ended June 30, 2023 foreign revenue as a percent of total revenue decreased to 29% compared to 31% during the six months ended June 30, 2022.

During the nine months ended September 30, 2023 and 2022, foreign revenue as a percent of total revenue was 30%.

See “ Note 12.

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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 June 30, 2023.

Consistent with our growth strategy, we have made 31 acquisitions from February 2012 through September 30, 2023.

2022 Acquisitions

During the six months ended June 30, 2022, we completed the two acquisitions summarized below.

During the nine months ended September 30, 2022, we completed the two acquisitions summarized below.

• BA Insight - On February 22, 2022, the Company entered into an agreement to purchase the shares comprising the entire issued share capital of BA Insight Inc., a Delaware corporation.

As a result of the February 22, 2022 purchase date, the impact of this acquisition is fully reflected in our results of operations for the six months ended June 30, 2023 but is not fully reflected in our results of operations for the six months ended June 30, 2022.

As a result of the February 22, 2022 purchase date, the impact of this acquisition is fully reflected in our results of operations for the nine months ended September 30, 2023 but is not fully reflected in our results of operations for the nine months ended September 30, 2022.

• Objectif Lune - On January 7, 2022, the Company entered into an agreement to purchase the shares comprising the entire issued share capital of Objectif Lune Inc., a Quebec proprietary company.

The purchase was recorded using a convenience date of January 1, 2022, therefore the impact of this acquisition is fully reflected in our results of operations for the six months ended June 30, 2023 and the six months ended June 30, 2022.

The purchase was recorded using a convenience date of January 1, 2022, therefore the impact of this acquisition is fully reflected in our results of operations for the nine months ended September 30, 2023 and the nine months ended September 30, 2022.

Key Metrics and Non-GAAP Financial Measures

1 unchanged sentence

Core Organic Growth Rate

Beginning with the three months ended June 30, 2023, we will be disclosing our Core Organic Growth Rate, a non-GAAP financial measure.

Beginning with the three months ended June 30, 2023, we began disclosing our Core Organic Growth Rate, a non-GAAP financial measure.

We use Core Organic Growth Rate as a key performance measure to assess our consolidated operating performance over time and for planning and forecasting purposes.

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Core Organic Growth Rate does not represent actual organic revenue generated by our business as it stood at the beginning of the respective period.

For the three-month period ended June 30, 2023, our Core Organic Growth Rate declined 2.0%.

For the three-month period ended September 30, 2023, our Core Organic Growth Rate was negative 1.9%.

Core Organic Growth Rates are not necessarily indicative of either future results of operations or actual results that might have been achieved had certain Sunset Asset classifications not been made or had certain acquisitions or dispositions been consummated on the first day of the prior year period presented.

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The following table represents a reconciliation of total revenue, the most comparable GAAP measure, to core organic revenue for each of the periods indicated.

Three Months Ended June 30,

Three Months Ended September 30,

(dollars in thousands)

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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 Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

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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,

2023 2022 2023 2022

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Stockholders' Equity” .

(2) Includes general and administrative stock-based compensation of $4.9 million and $12.1 million for the three months June 30, 2023 and June 30, 2022, respectively, and $9.8 million and $21.1 million for the six months ended June 30, 2023 and June 30, 2022, respectively.

General and administrative expense excluding stock-based compensation as a percentage of total revenues was 14% and 12% for the three months ended June 30, 2023 and June 30, 2022, respectively, and 15% and 13% for the six months ended June 30, 2023 and June 30, 2022, respectively.

(3) Includes depreciation and amortization of $3.4 million and $3.1 million for the three months ended June 30, 2023 and June 30, 2022, respectively, and $6.8 million and $6.3 million for the six months ended June 30, 2023 and June 30, 2022, respectively.

Comparison of the Three and Six Months Ended June 30, 2023 and 2022

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

(2) Includes general and administrative stock-based compensation of $4.1 million and $5.7 million for the three months September 30, 2023 and September 30, 2022, respectively, and $13.9 million and $26.8 million for the nine months ended September 30, 2023 and September 30, 2022, respectively.

General and administrative expense excluding stock-based compensation as a percentage of total revenues was 14% and 11% for the three months ended September 30, 2023 and September 30, 2022, respectively, and 15% and 12% for the nine months ended September 30, 2023 and September 30, 2022, respectively.

(3) Includes depreciation and amortization of $3.4 million and $3.0 million for the three months ended September 30, 2023 and September 30, 2022, respectively, and $10.3 million and $9.4 million for the nine months ended September 30, 2023 and September 30, 2022, respectively.

Comparison of the Three and Nine Months Ended September 30, 2023 and 2022

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

2023 2022 % Change 2023 2022 % Change

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Total revenue 100% 100% 100% 100%

For the Three Months Ended June 30, 2023

Total revenue was $74.5 million in the three months ended June 30, 2023, compared to $80.2 million in the three months ended June 30, 2022, a decrease of $5.7 million, or 7%.

This decrease is attributable to a $3.5 million decrease in revenue from Sunset Assets as a result of decreased sales focus on these products, a $1.1 million decrease in other recurring revenue products and variable Overage Charges, a $0.6 million decline in perpetual license revenue, a $0.6 million decline in professional services revenue offset by a $0.1 million positive effect from foreign currency fluctuations.

For the Six Months Ended June 30, 2023

Total revenue was $151.6 million in the six months ended June 30, 2023, compared to $158.9 million in the six months ended June 30, 2022, a decrease of $7.3 million, or 5%.

For the Three Months Ended September 30, 2023

Total revenue was $74.1 million in the three months ended September 30, 2023, compared to $79.5 million in the three months ended September 30, 2022, a decrease of $5.4 million, or 7%.

This decrease is attributable to a $3.6 million decrease in revenue from Sunset Assets as a result of decreased sales focus on these products, a $2.8 million decrease in other recurring revenue products and variable Overage Charges, a $0.1 million decline in perpetual license revenue, a $0.2 million decline in professional services revenue offset by a $0.5 million positive effect from foreign currency fluctuations and an increase of $0.8 million in revenue from acquisitions not fully reflected in the comparable prior period.

For the Nine Months Ended September 30, 2023

Total revenue was $225.7 million in the nine months ended September 30, 2023, compared to $238.5 million in the nine months ended September 30, 2022, a decrease of $12.8 million, or 5%.

This decrease is attributable to a $9.3 million decrease in revenue from Sunset Assets as a result of decreased sales focus on these products, a $6.4 million decrease in other recurring revenue products and variable Overage Charges, a $1.0 million decline in perpetual license revenue, a $1.5 million decline in professional services revenue and a $1.0 million negative effect from foreign currency fluctuations.

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Cost of Revenue

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

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

2023 2022 % Change 2023 2022 % Change

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Stock Compensation $ 246 $ 510 $ 850 $ 1,487

For the Three Months Ended June 30, 2023

Cost of subscription and support revenue was $22.1 million in the three months ended June 30, 2023, compared to $24.1 million in the three months ended June 30, 2022, a decrease of $2.0 million, or 9%.

The decrease in cost of subscription and support revenue of $2.0 million is primarily related to a $1.8 million decrease in our variable telecom carrier pass-through costs, combined with a decrease of $0.6 million in personnel related expenses offset by an increase of $0.4 million in amortization expense.

Cost of professional services and other revenue was $2.1 million in the three months ended June 30, 2023, compared to $2.4 million in the three months ended June 30, 2022, a decrease of $0.3 million, or 13%.

For the Three Months Ended September 30, 2023

Cost of subscription and support revenue was $20.9 million in the three months ended September 30, 2023, compared to $23.6 million in the three months ended September 30, 2022, a decrease of $2.7 million, or 11%.

The decrease in cost of subscription and support revenue is primarily related to a $1.3 million decrease in our variable telecom carrier costs, combined with a decrease of $0.7 million in personnel related expenses and a decrease of $0.3 million in non-cash stock compensation offset by an increase of $0.4 million in amortization expense.

Cost of professional services and other revenue was $2.1 million in the three months ended September 30, 2023, compared to $2.2 million in the three months ended September 30, 2022, a decrease of $0.1 million, or 4%.

The decrease in cost of professional services was related to a decrease in personnel related expenses.

For the Six Months Ended June 30, 2023

Cost of subscription and support revenue was $45.6 million in the six months ended June 30, 2023, compared to $46.2 million in the six months ended June 30, 2022, a decrease of $0.6 million, or 1%.

Cost of subscription and support revenue decreased by $0.6 million primarily due to a $2.6 million decrease in our variable telecom carrier pass-through costs offset with increases of $0.5 million in personnel related expenses, $0.8 million in hosting expenses and $0.7 million in amortization expense.

Cost of professional services revenue was $4.2 million in the six months ended June 30, 2023, compared to $5.1 million in the six months ended June 30, 2022, a decrease of $0.9 million, or 19%, which reflects a decrease in personnel related expenses.

For the Nine Months Ended September 30, 2023

Cost of subscription and support revenue was $66.4 million in the nine months ended September 30, 2023, compared to $69.7 million in the nine months ended September 30, 2022, a decrease of $3.3 million, or 5%.

Cost of subscription and support revenue decreased by $3.3 million primarily due to a $3.9 million decrease in our variable telecom carrier costs, a decrease of $0.5 million in personnel related expenses and a decrease of $0.6 million in non-cash stock compensation offset with increases of $0.3 million in hosting expenses and $1.2 million in amortization expense.

Cost of professional services revenue was $6.2 million in the nine months ended September 30, 2023, compared to $7.3 million in the nine months ended September 30, 2022, a decrease of $1.1 million, or 14%, which reflects a decrease in personnel related expenses.

Operating Expenses

Sales and Marketing Expense

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

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

2023 2022 % Change 2023 2022 % Change

5 unchanged sentences

Stock Compensation $ 429 $ 612 $ 1,563 $ 3,584

For the Three Months Ended June 30, 2023

Sales and marketing expense was $15.8 million in the three months ended June 30, 2023, compared to $15.3 million in the three months ended June 30, 2022, an increase of $0.5 million, or 3%.

The increase in sales and marketing expense is primarily attributable to increase in personnel related expenses associated with the announced investment in our go to market strategy partially offset by a decrease in non-cash stock compensation expense of $0.9 million.

For the Six Months Ended June 30, 2023

Sales and marketing expense was $30.0 million in the six months ended June 30, 2023, compared to $30.9 million in the six months ended June 30, 2022, a decrease of $0.9 million, or 3% attributable a decrease $1.4 million in sales and marketing costs for our Sunset Assets, a decrease of $1.8 million in non-cash stock based compensation, offset by an increase in personnel related expenses associated with the announced investment in our go to market strategy.

For the Three Months Ended September 30, 2023

Sales and marketing expense was $16.9 million in the three months ended September 30, 2023, compared to $14.4 million in the three months ended September 30, 2022, an increase of $2.5 million, or 17%.

The increase in sales and marketing expense is primarily attributable to increase in personnel related expenses and marketing expenses associated with the announced investment in our go to market strategy partially offset by a decrease in non-cash stock compensation expense of $0.2 million.

For the Nine Months Ended September 30, 2023

Sales and marketing expense was $46.9 million in the nine months ended September 30, 2023, compared to $45.3 million in the nine months ended September 30, 2022, an increase of $1.6 million, or 4% attributable to a decrease of $1.5 million in sales and marketing costs for our Sunset Assets, a decrease of $2.0 million in non-cash stock based compensation, offset by an increase in personnel related expenses and marketing expenses associated with the announced investment in our go to market strategy.

Research and Development Expense

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

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

2023 2022 % Change 2023 2022 % Change

5 unchanged sentences

Stock Compensation $ 608 $ 701 $ 1,911 $ 2,107

For the Three Months Ended June 30, 2023

Research and development expense was $12.4 million in the three months ended June 30, 2023, compared to $11.7 million in the three months ended June 30, 2022, an increase of $0.7 million, or 7%.

Research and development expense increased $1.5 million driven by personnel related expenses associated with the continued growth in our India operations offset by a decrease in expense for our Sunset Assets.

For the Six Months Ended June 30, 2023

Research and development expense was $25.0 million in the six months ended June 30, 2023, compared to $23.7 million in the six months ended June 30, 2022, an increase of $1.3 million, or 5%.

The increase was driven by $2.7 million increased personnel related expenses associated with the continued growth in our India operations offset by a decrease in expense related to our Sunset Assets.

For the Three Months Ended September 30, 2023

Research and development expense was $12.7 million in the three months ended September 30, 2023, compared to $11.6 million in the three months ended September 30, 2022, an increase of $1.1 million, or 9%.

Research and development expense increased $1.7 million driven by personnel related expenses associated with the continued growth in our India operations offset by a decrease of $0.6 million in expenses for our Sunset Assets.

For the Nine Months Ended September 30, 2023

Research and development expense was $37.7 million in the nine months ended September 30, 2023, compared to $35.4 million in the nine months ended September 30, 2022, an increase of $2.3 million, or 7%.

The increase was driven by $4.2 million increased personnel related expenses associated with the continued growth in our India operations offset by a decrease of $1.9 million in expenses related to our Sunset Assets.

General and Administrative Expense

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

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

2023 2022 % Change 2023 2022 % Change

5 unchanged sentences

Stock compensation $ 4,077 $ 5,704 $ 13,868 $ 26,845

For the Three Months Ended June 30, 2023

General and administrative expense was $15.6 million in the three months ended June 30, 2023, compared to $21.8 million in the three months ended June 30, 2022, a decrease of $6.2 million, or 29%.

Non-cash stock compensation expense decreased $7.3 million due to additional expense recognized in the three months ended June 30, 2022 related to stock award modifications that did not reoccur.

For the Three Months Ended September 30, 2023

General and administrative expense was $14.6 million in the three months ended September 30, 2023, compared to $14.7 million in the three months ended September 30, 2022, a decrease of $0.1 million, or nil%.

Non-cash stock compensation expense decreased $1.6 million due to additional expense recognized in the three months ended September 30, 2022 related to stock award modifications that did not reoccur.

This was partially offset by a $1.5 million increase in personnel related expenses and outside professional expenses.

For the Six Months Ended June 30, 2023

General and administrative expense was $32.8 million in the six months ended June 30, 2023, compared to $41.4 million in the six months ended June 30, 2022, a decrease of $8.6 million, or 21%.

Non-cash stock compensation expense decreased $11.4 million due to additional expense recognized in the six months ended June 30, 2022 related to stock award modifications that did not reoccur.

General administrative expense increased $2.8 million primarily due to personnel related expenses and outside professional expenses as well as administrative expenses including investments in the new go-to-market leadership team.

For the Nine Months Ended September 30, 2023

General and administrative expense was $47.4 million in the nine months ended September 30, 2023, compared to $56.1 million in the nine months ended September 30, 2022, a decrease of $8.7 million, or 16%.

Non-cash stock compensation expense decreased $13.0 million due to additional expense recognized in the nine months ended September 30, 2022 related to stock award modifications that did not reoccur.

General administrative expense increased $4.3 million primarily due to personnel related expenses and outside professional expenses.

Depreciation and Amortization Expense

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

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

2023 2022 % Change 2023 2022 % Change

8 unchanged sentences

Total depreciation and amortization 19% 13% 20% 13%

For the Three Months Ended June 30, 2023

Depreciation and amortization expense was $14.9 million in the three months ended June 30, 2023, compared to $10.8 million in the three months ended June 30, 2022, an increase of $4.1 million, or 38%.

For the Three Months Ended September 30, 2023

Depreciation and amortization expense was $14.3 million in the three months ended September 30, 2023, compared to $10.1 million in the three months ended September 30, 2022, an increase of $4.2 million, or 41%.

This increase was primarily due to the adjustment of the estimated useful lives of certain intangible assets.

For the Six Months Ended June 30, 2023

Depreciation and amortization expense was $29.9 million in the six months ended June 30, 2023, compared to $21.9 million in the six months ended June 30, 2022, an increase of $8.0 million, or 37%.

For the Nine Months Ended September 30, 2023

Depreciation and amortization expense was $44.2 million in the nine months ended September 30, 2023, compared to $32.0 million in the nine months ended September 30, 2022, an increase of $12.2 million, or 38%.

This increase was primarily due to the adjustment of the estimated useful lives of certain intangible assets.

Acquisition-related Expenses

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

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

2023 2022 % Change 2023 2022 % Change

4 unchanged sentences

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

These acquisition-related expenses include transaction related expenses such as banker fees, legal and professional fees, insurance costs, and deal bonuses.

These acquisition-related expenses also include transformational expenses such as severance, compensation for transitional personnel, office lease terminations, vendor cancellations, and adjustments to the fair value of earnouts due to sellers.

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

For the Three Months Ended June 30, 2023

Acquisition-related expense was $1.1 million in the three months ended June 30, 2023, compared to $4.9 million in the three months ended June 30, 2022, a decrease of $3.8 million, or 78%.

During the three months ended June 30, 2023, transaction related expense was nil compared to $0.4 million for the three months ended June 30, 2022.

Transformational expenses were $1.1 million and $4.5 million during the three months ended June 30, 2023 and 2022, respectively.

Acquisition-related expenses include transaction related expenses such as banker fees, legal and professional fees, insurance costs, and deal bonuses.

Acquisition-related expenses also include transformational expenses such as severance, compensation for transitional personnel, office lease terminations, vendor cancellations, and adjustments to the fair value of earnouts due to sellers.

For the Three Months Ended September 30, 2023

Acquisition-related expense was $0.4 million in the three months ended September 30, 2023, compared to $3.6 million in the three months ended September 30, 2022, a decrease of $3.2 million, or 88%.

We have had no new acquisitions since our two acquisitions during the three months ended March 31, 2022.

Transformation expenses in the three months ended June 30, 2022 include expenses related to acquisitions closed in the three months ended March 31, 2022 as well the residual expenses related to the three acquisitions closed in 2021.

For the Six Months Ended June 30, 2023

Acquisition related expense was $2.2 million the six months ended June 30, 2023, compared to $15.3 million in the six months ended June 30, 2022 a decrease of $13.1 million, or 86%.

During the six months ended June 30, 2023 and June 30, 2022 transaction related expenses were nil and $4.9 million, respectively.

The transformational expenses in both the current and year ago periods were primarily related to temporary transitional personnel related expenses incurred as we consolidate and integrate these acquisitions.Transformation expenses in the three months ended September 30, 2022 include expenses related to acquisitions closed in the three months ended March 31, 2022 as well the residual expenses related to the three acquisitions closed in 2021.

For the Nine Months Ended September 30, 2023

Acquisition related expense was $2.6 million the nine months ended September 30, 2023, compared to $18.9 million in the nine months ended September 30, 2022 a decrease of $16.3 million, or 86%.

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.

These accelerated rent related expenses were nil and $1.2 million during the six months ended June 30, 2023 and June 30, 2022, respectively.

These accelerated rent related expenses were nil and $0.9 million during the nine months ended September 30, 2023 and September 30, 2022, respectively.

Impairment of goodwill

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

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

2023 2022 % Change 2023 2022 % Change

1 unchanged sentence

Impairment of goodwill $ — $ — NA $ 128,755 $ — NA

number of factors and assumptions, including the spot closing price of our Common Stock as of a certain reporting or measurement date.

Goodwill impairment is recognized on a non-recurring basis when the carrying value (or GAAP basis book value) of our Company (which is our only reporting unit) exceeds the estimated fair value of our Company as determined by reference to a number of factors and assumptions, including the spot closing price of our Common Stock as of a certain reporting or measurement date.

We assess goodwill for impairment annually on October 1st, or more frequently when an event occurs which could cause the carrying value of our Company to exceed the estimated fair value of our Company.

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Other Income (Expense)

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

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

2023 2022 % Change 2023 2022 % Change

8 unchanged sentences

Total other expense (3)% (9)% (6)% (9)%

For the Three Months Ended June 30, 2023

Interest expense, net of interest income was $5.4 million in the three months ended June 30, 2023 compared to $7.8 million in the three months ended June 30, 2022, a decrease of $2.4 million or 31%, due primarily to higher interest income on our interest-bearing cash balances as well as a decrease in interest expense due to scheduled principal payments lowering outstanding borrowings on our Credit Facility.

Other expense, net was $0.6 million in the three months ended June 30, 2023, compared to other income, net of $1.8 million in the three months ended June 30, 2022.

Other income (expense), net recognized during the three months ended June 30, 2023 was related primarily to foreign currency exchange fluctuations.

For the Six Months Ended June 30, 2023

Interest expense, net of interest income was $10.8 million in the six months ended June 30, 2023, compared to $15.5 million in the six months ended June 30, 2022, an decrease of $4.7 million, or 30%.

The decrease is primarily attributable to higher interest income on our interest-bearing cash accounts.

As of June 30, 2023, debt outstanding under our credit facility was $519.8 million compared to $525.2 million in debt outstanding as of June 30, 2022.

Other income, net was $0.8 million in the six months ended June 30, 2023, compared to other income, net of $1.4 million in the six months ended June 30, 2022.

Other income (expense), net recognized in the six months ended June 30, 2023 and June 30, 2022 related primarily to foreign currency exchange fluctuations.

For the Three Months Ended September 30, 2023

Interest expense, net of interest income was $2.5 million in the three months ended September 30, 2023 compared to $7.4 million in the three months ended September 30, 2022, a decrease of $4.9 million or 66%, due primarily to the $1.1 million amortization of the deferred gain on the liquidation of a portion of our interest rate swaps as well as a $2.8 million benefit related to the deferred gain recognized immediately into earnings upon the $35 million prepayment on our Term Loans combined with higher interest income on our interest-bearing cash accounts..

Other income, net was $0.1 million in the three months ended September 30, 2023, compared to other income, net of $0.3 million in the three months ended September 30, 2022.

Other income (expense), net recognized during the three months ended September 30, 2023 was related primarily to foreign currency exchange fluctuations.

For the Nine Months Ended September 30, 2023

Interest expense, net of interest income was $13.4 million in the nine months ended September 30, 2023, compared to $22.9 million in the nine months ended September 30, 2022, a decrease of $9.5 million, or 42%.

The decrease is primarily attributable to the $1.1 million amortization of the deferred gain on the liquidation of a portion of our interest rate swaps as well as a $2.8 million benefit related to the deferred gain recognized immediately into earnings upon the $35 million prepayment on our Term Loans combined with higher interest income on our interest-bearing cash accounts.

Other income, net was $0.9 million in the nine months ended September 30, 2023, compared to other income, net of $1.7 million in the nine months ended September 30, 2022.

Other income (expense), net recognized in the nine months ended September 30, 2023 and September 30, 2022 related primarily to foreign currency exchange fluctuations.

Benefit from Income Taxes

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

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

2023 2022 % Change 2023 2022 % Change

2 unchanged sentences

Percentage of total revenue 1% 1% 1% 1%

For the Three Months Ended June 30, 2023

Benefit from income taxes was $0.2 million in the three months ended June 30, 2023, compared to a benefit for income taxes of $0.5 million in the three months ended June 30, 2022, resulting in a decrease in benefit from income taxes of $0.3 million.

The benefit from income taxes for the three months ended June 30, 2023 related primarily to the foreign income taxes associated with our combined non U.S.

For the Three Months Ended September 30, 2023

Benefit from income taxes was $1.5 million in the three months ended September 30, 2023, compared to a benefit for income taxes of $1.1 million in the three months ended September 30, 2022, resulting in an increase in benefit from income taxes of $0.4 million.

The benefit from income taxes for the three months ended September 30, 2023 related primarily to the reduction of uncertain tax positions due to expiration of related statutes of limitation and foreign income taxes associated with our combined non-U.S.

This tax benefit is offset by changes in deferred tax liabilities associated with amortization of United States tax deductible goodwill and U.S.

state taxes in certain states in which the Company does not file on a consolidated basis or have NOL’s.

For the Six Months Ended June 30, 2023

The benefit from income taxes was $1.7 million in the six months ended June 30, 2023, compared to a benefit from income taxes of $0.6 million in the six months ended June 30, 2022, an increase of $1.1 million This increase was due primarily to the deferred tax impact of the goodwill impairment booked during the first quarter of 2023.

This tax benefit is offset by the foreign income taxes associated with our combined non-U.S.

operations, changes in deferred tax liabilities associated with amortization of United States tax deductible goodwill, and U.S.

state taxes in certain states in which the Company does not file on a consolidated basis or have NOL’s.

state taxes in certain states in which the Company does not file on a consolidated basis or have net operating loss carryforwards

For the Nine Months Ended September 30, 2023

The benefit from income taxes was $3.1 million in the nine months ended September 30, 2023, compared to a benefit from income taxes of $1.7 million in the nine months ended September 30, 2022, an increase of $1.4 million.

This increase was due primarily to the deferred tax impact of the goodwill impairment booked during the first quarter of 2023, the reduction of uncertain tax positions due to expiration of related statutes of limitation, and 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.

Liquidity and Capital Resources

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

To date, we have financed our operations primarily through cash generated from operating activities, the raising of capital including sales of our Common Stock or our convertible preferred stock, and borrowings under our credit facility.

We believe that current cash and cash equivalents, cash flows from operating activities, and availability under our existing credit facility will be sufficient to fund our operations for at least the next twelve months.

In addition, we may utilize the sources of capital available to us under our credit facility to support our continued growth via acquisitions.

As of June 30, 2023, we had cash and cash equivalents of $262.6 million, $60.0 million of available borrowings under our credit facility, as discussed below, and $519.8 million of borrowings outstanding under our credit facility.

As of December 31, 2022, we had cash and cash equivalents of $248.7 million, $60.0 million of available borrowings under our Credit Facility, and $522.5 million of borrowings outstanding under our credit facility.

The $13.9 million increase in cash and cash equivalents from December 31, 2022 to June 30, 2023 was due primarily to customer cash receipts in the six months ended June 30, 2023 partially offset by payments on our outstanding borrowings and final payments of holdbacks related to acquisitions in prior periods.

Our cash and cash equivalents held by our foreign subsidiaries was $23.2 million as of June 30, 2023 and $34.8 million as of December 31, 2022.

In addition, we may utilize the sources of capital available to us under our Revolver to support our continued growth via acquisitions.

As of September 30, 2023, we had cash and cash equivalents of $239.6 million, $60.0 million of available borrowings under our Revolver, as discussed below, and $483.4 million of borrowings outstanding under our Term Loans.

As of December 31, 2022, we had cash and cash equivalents of $248.7 million, $60.0 million of available borrowings under our Revolver, and $522.5 million of borrowings outstanding under our Term Loans.

The $9.1 million decrease in cash and cash equivalents from December 31, 2022 to September 30, 2023 was due primarily to the $35 million pay down on our outstanding borrowings and the $3.2 million paid to repurchase shares of the Company’s Common Stock, offset by the cash gain of $20.5 million from the sale of a portion of our interest rate swaps and other cash flows from operations.

Our cash and cash equivalents held by our foreign subsidiaries was $22.5 million as of September 30, 2023 and $34.8 million as of December 31, 2022.

Our intent is to permanently reinvest these funds outside the U.S.

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

As of June 30, 2023 and December 31, 2022, we had working capital surpluses of $187.1 million and $170.1 million, respectively.

As of September 30, 2023 and December 31, 2022, we had working capital surpluses of $178.1 million and $170.1 million, respectively.

Series A Preferred Stock Proceeds

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As described in “ Note 7.

Debt—Credit Facility ”, the Company has a Credit Facility which provides for total Term Loans of up to $540.0 million, of which $20.3 million was available at June 30, 2023, and a $60 million Revolver which was fully available as of June 30, 2023.

Debt—Credit Facility ”, the Company has a Credit Facility which includes the fully drawn Term Loans as of September 30, 2023, and a $60 million Revolver which was fully available as of September 30, 2023.

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

Six Months Ended June 30,

Nine Months Ended September 30,

(dollars in thousands)

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Net cash used in investing activities (1,034) (63,074)

Net cash used in financing activities (8,814) (6,608)

Net cash provided by (used in) financing activities (48,745) 97,127

Effect of exchange rate fluctuations on cash (437) (5,629)

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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 $22.8 million for the six months ended June 30, 2023 compared to cash provided by operating activities of $22.3 million for the six months ended June 30, 2022, an increase of $0.6 million.

Working capital sources of cash for the six months ended June 30, 2023 included a $13.2 million decrease in accounts receivable related to the timing of collections.

Working capital uses of cash for the six months ended June 30, 2023 included a $6.5 million increase in prepaid expenses and other current assets, primarily an increase in the current income tax receivable.

This was partially offset by amortization of previously deferred costs of $6.7 million.

In addition, working capital uses of cash for the six months ended June 30, 2023 included a $4.1 million decrease in accrued expenses and a $1.2 million decrease in accounts payable.

Cash provided by operating activities was $41.2 million for the nine months ended September 30, 2023 compared to cash provided by operating activities of $24.1 million for the nine months ended September 30, 2022, an increase of $17.0 million.

Working capital sources of cash for the nine months ended September 30, 2023 included a one-time $20.5 million cash gain on the sale of a portion of our interest rate swaps offset by working capital uses of cash for the nine months ended September 30, 2023.

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.

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As our business grows, we expect our primary investing activities to continue to expand our product library, customer base, and market access.

For the six months ended June 30, 2023, cash used in investing activities consisted of purchases of property and equipment of $0.5 million.

Cash used in investing activities decreased $62.1 million for the six months ended June 30, 2023 compared to the same period in 2022 primarily as a result of no acquisitions closed during the current period compared to the two acquisitions in the comparable prior year period.

For the nine months ended September 30, 2023, cash used in investing activities consisted of purchases of property and equipment of $1.0 million.

Cash used in investing activities decreased $62.0 million for the nine months ended September 30, 2023 compared to the same period in 2022 primarily as a result of no acquisitions closed during the current period compared to the two acquisitions in the comparable prior year period.

Cash Flows from Financing Activities

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

Cash used in financing activities increased $2.2 million for the six months ended June 30, 2023 compared to the same period in 2022 due to a $2.5 million increase in consideration paid to sellers (i.e.

acquisition holdbacks).

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

Cash used in financing activities changed by $145.9 million for the nine months ended September 30, 2023 compared to the same period in 2022 due to the use of $35 million used to pay down our Credit Facility in 2023, $3.2 million used for Common Stock repurchases and a $2.6 million decrease in consideration paid to sellers (i.e.

acquisition holdbacks) combined with the $110.5 million received from the issuance of preferred stock in 2022 which was not recurring in 2023.

Critical Accounting Policies and the Use of Estimates

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• stock-based compensation.

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 3, 2023, 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 2, 2023, 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.

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Other Key Accounting Policies

Our unaudited interim financial statements and other financial information for the three and six months ended June 30, 2023, as presented herein and in “ Item 1.

Our unaudited interim financial statements and other financial information for the three and nine months ended September 30, 2023, 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, 2022 filed with the SEC on February 28, 2023 (the “Annual Report”).

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis