UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
( State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
|
|
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
|
Trading Symbol(s) |
|
Name of each exchange on which registered |
|
|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
|
☐ |
|
|
☒ |
|
|
|
|
|
|||
Non-accelerated filer |
|
☐ |
|
Smaller reporting company |
|
|
|
|
|
|
|
|
|
Emerging growth company |
|
|
|
|
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of January 31, 2023, the registrant had
Table of Contents
|
|
Page |
PART I. |
|
|
Item 1. |
1 |
|
|
Condensed Consolidated Balance Sheets as of December 31, 2022 and June 30, 2022 |
1 |
|
2 |
|
|
3 |
|
|
4 |
|
|
Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2022 and 2021 |
6 |
|
Notes to Unaudited Condensed Consolidated Financial Statements |
7 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
21 |
Item 3. |
35 |
|
Item 4. |
36 |
|
PART II. |
|
37 |
Item 1. |
37 |
|
Item 1A. |
37 |
|
Item 2. |
38 |
|
Item 3. |
38 |
|
Item 4. |
38 |
|
Item 5. |
38 |
|
Item 6. |
39 |
|
|
40 |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, and the information incorporated herein by reference, particularly in the sections captioned “Risk Factors” under Part II, Item 1A, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Part I, Item 2, contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are based on our management’s beliefs and assumptions and on information currently available to our management. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements, including statements about:
• |
|
our ability to continue our growth at or near historical rates; |
• |
|
our future financial performance and ability to be profitable; |
• |
|
the effect of global events, such as outbreaks, epidemics, or pandemics involving public health, including the COVID-19 pandemic, and Russia’s invasion of Ukraine, on the U.S. and global economies, our business, our employees, results of operations, financial condition, demand for our products, sales and implementation cycles, and the health of our clients’ and partners’ businesses; |
• |
|
our ability to prevent and respond to data breaches, unauthorized access to client data or other disruptions of our solutions; |
• |
|
our ability to effectively manage U.S. and global market and economic conditions, including inflationary pressures and economic and market downturns, particularly adverse to our targeted industries; |
• |
|
the length and variability of our sales cycle; |
• |
|
our ability to attract and retain customers; |
• |
|
our ability to attract and retain talent; |
• |
|
our ability to compete in highly competitive markets; |
• |
|
our ability to manage additional complexity, burdens, and volatility in connection with our international sales and operations; |
• |
|
our ability to incur indebtedness in the future and the effect of conditions in credit markets; |
• |
|
the sufficiency of our cash and cash equivalents to meet our liquidity needs; and |
• |
|
our ability to maintain, protect, and enhance our intellectual property rights. |
We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q. In some cases, you can identify forward-looking statements by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “predict,” “project,” “potential,” “should,” “will,” or “would,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
You should read the section titled “Risk Factors” set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q and in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the fiscal year ended June 30, 2022 for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report on Form 10-Q will prove to be accurate. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
i
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
INTAPP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(unaudited)
|
|
December 31, 2022 |
|
|
June 30, 2022 |
|
||
Assets |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Restricted cash |
|
|
|
|
|
|
||
Accounts receivable, net of allowance for doubtful accounts of $ |
|
|
|
|
|
|
||
Unbilled receivables, net |
|
|
|
|
|
|
||
Other receivables, net |
|
|
|
|
|
|
||
Prepaid expenses |
|
|
|
|
|
|
||
Deferred commissions, current |
|
|
|
|
|
|
||
Total current assets |
|
|
|
|
|
|
||
Property and equipment, net |
|
|
|
|
|
|
||
Operating lease right-of-use assets |
|
|
|
|
|
|
||
Goodwill |
|
|
|
|
|
|
||
Intangible assets, net |
|
|
|
|
|
|
||
Deferred commissions, noncurrent |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
|
|
$ |
|
||
Accrued compensation |
|
|
|
|
|
|
||
Accrued expenses |
|
|
|
|
|
|
||
Deferred revenue, net |
|
|
|
|
|
|
||
Other current liabilities |
|
|
|
|
|
|
||
Total current liabilities |
|
|
|
|
|
|
||
Deferred tax liabilities |
|
|
|
|
|
|
||
Deferred revenue, noncurrent |
|
|
|
|
|
|
||
Operating lease liabilities, noncurrent |
|
|
|
|
|
|
||
Other liabilities |
|
|
|
|
|
|
||
Total liabilities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|||
Stockholders’ equity: |
|
|
|
|
|
|
||
Preferred stock, $ |
|
|
|
|
|
|
||
Common stock, $ |
|
|
|
|
|
|
||
Additional paid-in capital |
|
|
|
|
|
|
||
Accumulated other comprehensive loss |
|
|
( |
) |
|
|
( |
) |
Accumulated deficit |
|
|
( |
) |
|
|
( |
) |
Total stockholders’ equity |
|
|
|
|
|
|
||
Total liabilities and stockholders’ equity |
|
$ |
|
|
$ |
|
||
See accompanying notes to unaudited condensed consolidated financial statements.
1
INTAPP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
|
|
Three Months Ended December 31, |
|
|
Six Months Ended December 31, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
SaaS and support |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Subscription license |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total recurring revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Professional services |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
SaaS and support |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total cost of recurring revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Professional services |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total cost of revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sales and marketing |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Lease modification and impairment |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Total operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating loss |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Loss on debt extinguishment |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Interest expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Other income (expense), net |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||
Net loss before income taxes |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Income tax benefit (expense) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Net loss per share, basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Weighted-average shares used to compute net loss per share, basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
See accompanying notes to unaudited condensed consolidated financial statements.
2
INTAPP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(unaudited)
|
|
Three Months Ended December 31, |
|
|
Six Months Ended December 31, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency translation adjustments |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
||
Comprehensive loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
See accompanying notes to unaudited condensed consolidated financial statements.
3
INTAPP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
(in thousands)
(unaudited)
|
|
|
|
Three Months Ended December 31, 2022 |
|
||||||||||||||||
|
|
|
Common Stock |
|
Additional |
|
Accumulated |
|
Accumulated |
|
Total Stockholders' |
|
|||||||||
|
|
|
|
Shares |
|
Amount |
|
Capital |
|
Loss |
|
Deficit |
|
Equity |
|
||||||
Balance as of September 30, 2022 |
|
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
|
||||||
Issuance of common stock upon exercise of stock options |
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
|
||||||
Vesting of performance stock units and restricted stock units, net of shares withheld for taxes |
|
|
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
( |
) |
|||
Issuance of common stock under employee stock purchase plan |
|
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|||||
Stock-based compensation |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
||||
Foreign currency translation adjustments |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
||||
Net loss |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
||
Balance as of December 31, 2022 |
|
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
Three Months Ended December 31, 2021 |
|
||||||||||||||||
|
|
|
Common Stock |
|
Additional |
|
Accumulated |
|
Accumulated |
|
Total Stockholders' |
|
|||||||||
|
|
|
|
Shares |
|
Amount |
|
Capital |
|
Loss |
|
Deficit |
|
Equity |
|
||||||
Balance as of September 30, 2021 |
|
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
|
||||||
Issuance of common stock upon exercise of stock options |
|
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|||||
Stock-based compensation |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
||||
Foreign currency translation adjustments |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
||||
Net loss |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
||
Balance as of December 31, 2021 |
|
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
|
||||||
4
INTAPP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
(in thousands)
(unaudited)
|
|
|
|
|
|
Six Months Ended December 31, 2022 |
|
||||||||||||||||||
|
|
|
|
Common stock |
|
Additional |
|
Accumulated |
|
Accumulated |
|
Total Stockholders' |
|
||||||||||||
|
|
|
|
|
|
Shares |
|
Amount |
|
Capital |
|
Loss |
|
Deficit |
|
Equity |
|
||||||||
Balance as of June 30, 2022 |
|
|
|
|
|
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
|
||||||
Issuance of common stock upon exercise of stock options |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
|
||||||
Vesting of performance stock units and restricted stock units, net of shares withheld for taxes |
|
|
|
|
|
|
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
( |
) |
|||
Issuance of common stock under employee stock purchase plan |
|
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|||||
Stock-based compensation |
|
|
|
|
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
||||
Foreign currency translation adjustments |
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
||
Net loss |
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
||
Balance as of December 31, 2022 |
|
|
|
|
|
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Six Months Ended December 31, 2021 |
|
|||||||||||||||||||||||
|
Convertible |
|
|
Common Stock |
|
Additional |
|
Accumulated |
|
Accumulated |
|
Total Stockholders' |
|
||||||||||||
|
Shares |
|
Amount |
|
|
Shares |
|
Amount |
|
Capital |
|
Loss |
|
Deficit |
|
Equity (Deficit) |
|
||||||||
Balance as of June 30, 2021 |
|
|
$ |
|
|
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
|||||
Conversion of convertible preferred stock to common stock upon initial public offering |
|
( |
) |
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Issuance of common stock upon initial public offering, net of offering costs of $ |
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
|
||||
Issuance of common stock upon exercise of stock options |
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
|
||||
Stock-based compensation |
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
||
Foreign currency translation adjustments |
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
Net loss |
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
Balance as of December 31, 2021 |
|
— |
|
$ |
— |
|
|
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
|
||||
See accompanying notes to unaudited condensed consolidated financial statements.
5
INTAPP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
|
|
Six Months Ended December 31, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Cash Flows from Operating Activities: |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Amortization of deferred financing costs |
|
|
|
|
|
|
||
Amortization of operating lease right-of-use assets |
|
|
|
|
|
|
||
Provision for doubtful accounts |
|
|
|
|
|
|
||
Stock-based compensation |
|
|
|
|
|
|
||
Lease modification and impairment |
|
|
|
|
|
|
||
Loss on debt extinguishment |
|
|
|
|
|
|
||
Change in fair value of contingent consideration, including unrealized foreign exchange gain |
|
|
( |
) |
|
|
( |
) |
Deferred income taxes |
|
|
( |
) |
|
|
( |
) |
Other |
|
|
|
|
|
|
||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
( |
) |
|
|
|
|
Unbilled receivables, current |
|
|
( |
) |
|
|
( |
) |
Prepaid expenses and other assets |
|
|
|
|
|
|
||
Deferred commissions |
|
|
( |
) |
|
|
( |
) |
Accounts payable and accrued liabilities |
|
|
( |
) |
|
|
( |
) |
Deferred revenue, net |
|
|
|
|
|
|
||
Operating lease liabilities |
|
|
( |
) |
|
|
|
|
Other liabilities |
|
|
|
|
|
( |
) |
|
Net cash provided by operating activities |
|
|
|
|
|
|
||
Cash Flows from Investing Activities: |
|
|
|
|
|
|
||
Purchases of property and equipment |
|
|
( |
) |
|
|
( |
) |
Capitalized internal-use software costs |
|
|
( |
) |
|
|
( |
) |
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Cash Flows from Financing Activities: |
|
|
|
|
|
|
||
Payments on borrowings |
|
|
|
|
|
( |
) |
|
Proceeds from initial public offering, net of underwriting discounts |
|
|
|
|
|
|
||
Payments for deferred offering costs |
|
|
|
|
|
( |
) |
|
Proceeds from stock option exercises |
|
|
|
|
|
|
||
Proceeds from employee stock purchase plan |
|
|
|
|
|
|
||
Payments related to tax withholding for vested equity awards |
|
|
( |
) |
|
|
|
|
Payments of contingent consideration and acquisition-related holdback |
|
|
( |
) |
|
|
|
|
Payment of deferred financing costs |
|
|
|
|
|
( |
) |
|
Net cash provided by (used in) financing activities |
|
|
( |
) |
|
|
|
|
Effect of foreign currency exchange rate changes on cash and cash equivalents |
|
|
( |
) |
|
|
|
|
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
|
( |
) |
|
|
|
|
Cash, cash equivalents and restricted cash - beginning of period |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash - end of period |
|
$ |
|
|
$ |
|
||
Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Restricted cash |
|
|
|
|
|
|
||
Total cash, cash equivalents and restricted cash |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Supplemental Disclosures of Cash Flow Information: |
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
|
|
$ |
|
||
Cash paid for income taxes |
|
$ |
|
|
$ |
|
||
Non-cash investing and financing activities: |
|
|
|
|
|
|
||
Purchases of property and equipment in accounts payable and accrued liabilities |
|
$ |
|
|
$ |
|
||
Conversion of convertible preferred stock to common stock upon initial public offering |
|
$ |
|
|
$ |
|
||
See accompanying notes to unaudited condensed consolidated financial statements.
6
Intapp, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Description of Business
Intapp, Inc. (“Intapp” or the “Company”), formerly known as LegalApp Holdings, Inc., was incorporated in Delaware on November 27, 2012 to facilitate the acquisition of Integration Appliance, Inc., which became a wholly owned subsidiary of Intapp, Inc. on December 21, 2012. LegalApp Holdings, Inc. changed its name to Intapp, Inc. in February 2021. Intapp has no significant assets or operations other than the ownership of Integration Appliance, Inc.
The Company is a leading provider of industry-specific, cloud-based software solutions for the global professional and financial services industry. The Company empowers private capital, investment banking, legal, accounting, and consulting firms with the technology they need to meet rapidly changing client, investor, and regulatory requirements, deliver the right insights to the right professionals, replace legacy systems, and operate more competitively. The Company serves clients primarily in the United States, United Kingdom and Australian markets. References to “the Company,” “us,” “we,” or “our” in these unaudited condensed consolidated financial statements refer to the consolidated operations of Intapp and its consolidated subsidiaries.
Initial Public Offering
On July 2, 2021, the Company completed its initial public offering (“IPO”), in which it sold
On July 8, 2021, the underwriters of the Company’s IPO exercised in full their right to purchase an additional
Note 2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and the requirements of the U.S. Securities and Exchange Commission (the “SEC”) for interim reporting. Certain information and disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2022 filed with the SEC on September 9, 2022. The unaudited condensed consolidated financial statements include accounts of the Company and its consolidated subsidiaries, after eliminating all inter-company transactions and balances.
The interim unaudited condensed consolidated financial statements have been prepared on a basis consistent with the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal and recurring adjustments, necessary to state fairly the Company’s financial condition, its operations and cash flows for the periods presented. The historical results are not necessarily indicative of future results, and the results of operations for the three and six months ended December 31, 2022 are not necessarily indicative of the results to be expected for the full year or any other period.
Use of Estimates
The preparation of the accompanying unaudited condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported and disclosed in the unaudited condensed consolidated financial statements and accompanying notes. Those estimates and assumptions include, but are not limited to, revenue recognition including determination of the standalone selling price (“SSP”) of the deliverables included in multiple deliverable revenue arrangements; allowance for doubtful accounts; the depreciable lives of long-lived assets including intangible assets; the expected useful life of deferred commissions; the fair value of stock-based awards; the fair value of assets acquired and liabilities assumed in business combinations; goodwill and long-lived assets impairment assessment; the fair value of contingent consideration liabilities; the incremental borrowing rate used to determine the operating lease liabilities; valuation allowances on deferred tax assets; uncertain tax positions; and loss contingencies. The Company evaluates estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from these estimates, and those differences could be material to the unaudited condensed consolidated financial statements.
7
Significant Accounting Policies
The Company’s significant accounting policies are described in Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022. Except for the accounting policy for leases, which was updated as a result of adopting a new accounting standard, there have been no material changes to the significant accounting policies during the three and six months ended December 31, 2022.
See “Recently Adopted Accounting Pronouncements” below for additional information on the impact of the adoption of the new accounting standard for leases on the Company’s condensed consolidated financial statements.
Revenue Recognition
The Company’s revenues are derived from contracts with our clients. The majority of the Company’s revenues are derived from the sale of our software as a service (“SaaS”) solutions and subscriptions to our term software applications, including support services, as well as the provision of professional services for the implementation of our solutions. The Company accounts for revenues in accordance with Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606”), which the Company adopted on July 1, 2020 using the full retrospective method of adoption.
The core principle of ASC 606 is to recognize revenues upon the transfer of control of services or products to customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services or products. The Company applies the following framework to recognize revenues:
Identification of the contract, or contracts, with our clients
The Company considers the terms and conditions of written contracts and its customary business practices in identifying its contracts under ASC 606. The Company determines it has a contract with a client when the contract is approved, each party’s rights regarding the services and products to be transferred can be identified, payment terms for the services and products can be identified, the client has the ability and intent to pay, and the contract has commercial substance. The Company evaluates whether two or more contracts entered within close proximity with one another should be combined and accounted for as a single contract. The Company also evaluates the client’s ability and intent to pay, which is based on a variety of factors, including the client’s historical payment experience or, in the case of a new client, credit and financial information pertaining to the client.
Identification of the performance obligation in the contract
Performance obligations promised in a contract are identified based on the services or products that will be transferred to the client that are both:
To the extent a contract includes multiple promised services or products, the Company applies judgment to determine whether promised services or products are capable of being distinct and distinct in the context of the contract. If these criteria are not met, the promised services or products are accounted for as a combined performance obligation.
The Company derives its revenues primarily from the following four sources, which represent the performance obligations of the Company:
SaaS and subscription licenses are generally sold as annual or multi-year initial terms with automatic annual renewal provisions on expiration of the initial term. Support for subscription licenses follows the same contract periods as the initial or renewal term. Professional services related to implementation and configuration activities are typically time and materials contracts.
Determination of the transaction price
The transaction price is determined based on the consideration to which the Company expects to be entitled in exchange for transferring services and products to the client. Variable consideration is estimated and included in the transaction price if, in the Company’s judgment, it is probable that no significant future reversal of cumulative revenues under the contract will occur.
8
In instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined that contracts generally do not include a significant financing component. The primary purpose of the Company’s invoicing terms is to provide clients with simplified and predictable ways of purchasing the Company’s products and services, not to receive financing from clients or to provide clients with financing.
Allocation of the transaction price to the performance obligations in the contract
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on its relative SSP. The majority of the Company’s contracts contain multiple performance obligations, such as when subscription licenses are sold with support and professional services. Some of the Company’s performance obligations have observable inputs that are used to determine the SSP of those distinct performance obligations. Where SSP is not directly observable, the Company determines the SSP using information that may include market conditions and other observable inputs.
Recognition of revenues when, or as, the Company satisfies a performance obligation
The Company recognizes revenues as control of the services or products is transferred to a client, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services or products. The Company is principally responsible for the satisfaction of its distinct performance obligations, which are satisfied either at a point in time or over a period of time.
The Company records revenues net of applicable sales taxes collected. Sales taxes collected from clients are recorded in other current liabilities in the accompanying unaudited condensed consolidated balance sheets and are remitted to state and local taxing jurisdictions based on the filing requirements of each jurisdiction.
Performance obligations satisfied at a point in time
Subscription licenses
The Company has concluded that its sale of term licenses to clients (“subscription licenses”) provides the client with the right to functional intellectual property (“IP”) and are distinct performance obligations from which the client can benefit on a stand-alone basis. The transaction price allocated to subscription license arrangements is recognized as revenues at a point in time when control is transferred to the client, which generally occurs at the time of delivery or upon commencement of the renewal term. Subscription license fees are generally payable in advance on an annual basis over the term of the license arrangement, which is typically noncancelable.
Performance obligations satisfied over a period of time
SaaS and support as well as professional services arrangements comprise the majority of distinct performance obligations that are satisfied over a period of time.
SaaS and support
The transaction price allocated to SaaS subscription arrangements is recognized as revenues over time throughout the term of the contract as the services are provided on a continuous basis, beginning after the SaaS environment is provisioned and made available to clients. The Company’s SaaS subscriptions are generally to
The Company’s subscription license sales include noncancelable support which entitle clients to receive technical support and software updates, on a when and if available basis, during the term of the subscription license agreement. Technical support and software updates are considered distinct from the related subscription licenses but accounted for as a single stand ready performance obligation as they each constitute a series of distinct services that are substantially the same and have the same pattern of transfer to the client. The transaction price allocated to support is recognized as revenue over time on a straight-line basis over the term of the support contract which corresponds to the underlying subscription license agreement. Consideration for support services is typically billed in advance on an annual basis. In some instances, the client may purchase premium support services which are generally priced as a percentage of the associated subscription license.
9
Professional services
The Company’s professional services revenues are primarily comprised of implementation, configuration and upgrade services. The Company has determined that professional services provided to clients represent distinct performance obligations. These services may be provided on a stand-alone basis or bundled with other performance obligations, including SaaS arrangements, subscription licenses, and support services. The transaction price allocated to these performance obligations is recognized as revenue over time as the services are performed. The professional services engagements are billed to clients on a time and materials basis and are recognized as invoiced. In instances where professional services arrangements are sold on a fixed price basis, revenues are recognized over time using an input measure of time incurred to date relative to total estimated time to be incurred at project completion. Professional services arrangements sold on a time and materials basis are generally invoiced monthly in arrears and those sold on a fixed fee basis are invoiced upon the achievement of project milestones.
The Company records reimbursable out-of-pocket expenses associated with professional services contracts in both revenues and cost of revenues.
Contract Modifications
Contracts may be modified to account for changes in contract scope or price. The Company considers contract modifications to exist when the modification either creates new rights or obligations or changes the existing enforceable rights and obligations of either party. Contract modifications are accounted for prospectively when it results in the promise to deliver additional products and services that are distinct and contract price does not increase by an amount that reflects standalone selling price for the new goods or services.
Balance Sheet Presentation
Contracts with our clients are reflected in the consolidated balance sheets as follows:
The Company may receive consideration from its clients in advance of performance on a portion of the contract and, on another portion of the contract, perform in advance of receiving consideration. Contract assets and liabilities related to rights and obligations in a contract are interdependent. Therefore, contract assets and liabilities are presented net at the contract level, as either a single contract asset or a single contract liability, in the consolidated balance sheets.
Concentrations of Credit Risk and Significant Clients
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and accounts receivable. The Company maintains its cash with high quality financial institutions. The Company is exposed to credit risk for cash held in financial institutions in the event of a default to the extent that such amounts recorded on the balance sheet are in excess of amounts that are insured by the Federal Deposit Insurance Corporation (“FDIC”).
10
Leases
The Company leases its office space under non-cancelable operating lease agreements with expiration dates through
The Company does not assume renewals or early terminations of its leases unless it is reasonably certain to exercise these options at commencement and does not allocate consideration between lease and non-lease components. For short-term leases, the Company records rent expense in its unaudited condensed consolidated statements of operations on a straight-line basis over the lease term and records variable lease payments as incurred.
ROU assets are evaluated for impairment whenever events or changes in the circumstances indicate that the carrying amount may not be recoverable.
Recent Accounting Pronouncements
The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it is (i) no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, the consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
The JOBS Act does not preclude an emerging growth company from early adopting new or revised accounting standards.
Recently Adopted Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (ASC 842). The guidance requires lessees to put most leases on their balance sheets but recognize the expenses on their income statements in a manner similar to current practice. The guidance states that a lessee would recognize a lease liability for the obligation to make lease payments and a ROU asset for the right to use the underlying asset for the lease term. The Company
The Company elected the package of transitional practical expedients, which allows the Company not to reassess under the new guidance our prior conclusions about lease identification, lease classification and initial direct costs, for any existing leases on the adoption date. The Company elected to combine the lease and non-lease components for all asset classes. The Company also elected not to record leases that, at the commencement date, have a lease term of 12 months or less. The Company did not elect to apply the hindsight practical expedient when determining lease term and assessing impairment of its ROU assets.
The Company elected to determine the discount rate for existing leases based on the remaining lease term and remaining minimum lease payments as of the adoption date.
Upon the adoption of ASC 842, the Company recognized ROU assets of $
See Note 7 Leases in the Notes to unaudited condensed consolidated financial statements for additional information.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (ASC 740): Simplifying the Accounting for Income Taxes, which is intended to simplify the accounting for income taxes by removing certain exceptions and by updating accounting requirements around franchise taxes, goodwill recognized for tax purposes, the allocation of current and deferred tax expense among legal entities, among other minor changes. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company
11
Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses, which requires the establishment of an allowance for estimated credit losses on financial assets, including trade and other receivables, at each reporting date. The guidance is effective for the Company beginning July 1, 2023. The Company is currently evaluating the impact of the adoption on its consolidated financial statements.
Note 3. Revenues
Disaggregation of Revenues
Revenues by geography were as follows (in thousands):
|
|
Three Months Ended December 31, |
|
|
Six Months Ended December 31, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
United States |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
United Kingdom |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Rest of the world |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Contract balances
The Company’s contract assets and liabilities were as follows (in thousands):
|
|
December 31, 2022 |
|
|
June 30, 2022 |
|
||
Unbilled accounts receivable, net(1) |
|
$ |
|
|
$ |
|
||
Deferred revenue, net |
|
|
|
|
|
|
||
There was
Performance Obligations
Remaining performance obligations represent non-cancellable contracted revenues that have not yet been recognized, which includes deferred revenue and amounts that will be invoiced and recognized as revenues in future periods. Subscription services are typically satisfied over one to three years, support services are generally satisfied within one year, and professional services are typically satisfied within one year. Professional services under time and material contracts are not included in the performance obligations amount as these arrangements can be cancelled at any time.
As of December 31, 2022, approximately $
Note 4. Goodwill and Intangible Assets
Goodwill
Changes in the carrying amounts of goodwill were as follows (in thousands):
|
|
Six Months Ended December 31, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Balance, beginning of period |
|
$ |
|
|
$ |
|
||
Purchase price adjustment |
|
|
|
|
|
|
||
Foreign currency translation adjustment |
|
|
( |
) |
|
|
( |
) |
Balance, end of period |
|
$ |
|
|
$ |
|
||
12
During the six months ended December 31, 2022, the Company recognized a purchase price adjustment of $
Intangible Assets
Intangible assets acquired through business combinations consisted of the following (in thousands):
|
|
December 31, 2022 |
|
|||||||||||
|
|
Useful Life |
|
Gross Carrying Amount |
|
|
Accumulated |
|
|
Net Carrying Amount |
|
|||
Client relationships |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Non-compete agreements |
|
|
|
|
|
|
( |
) |
|
|
|
|||
Trademarks and trade names |
|
Indefinite |
|
|
|
|
|
— |
|
|
|
|
||
Trademarks and trade names |
|
|
|
|
|
|
( |
) |
|
|
|
|||
Core technology |
|
|
|
|
|
|
( |
) |
|
|
|
|||
Backlog |
|
|
|
|
|
|
( |
) |
|
|
|
|||
Intangible assets, net |
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
|
|
June 30, 2022 |
|
|||||||||||
|
|
Useful Life |
|
Gross Carrying Amount |
|
|
Accumulated |
|
|
Net Carrying Amount |
|
|||
Client relationships |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Non-compete agreements |
|
|
|
|
|
|
( |
) |
|
|
|
|||
Trademarks and trade names |
|
Indefinite |
|
|
|
|
|
— |
|
|
|
|
||
Trademarks and trade names |
|
|
|
|
|
|
( |
) |
|
|
|
|||
Core technology |
|
|
|
|
|
|
( |
) |
|
|
|
|||
Backlog |
|
|
|
|
|
|
( |
) |
|
|
|
|||
Intangible assets, net |
|
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Amortization expense related to acquired intangible assets was recognized as follows (in thousands):
|
|
Three Months Ended December 31, |
|
|
Six Months Ended December 31, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Cost of SaaS and support |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Sales and marketing |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total amortization expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
As of December 31, 2022, the estimated future amortization expense of acquired intangible assets is as follows (in thousands):
Fiscal Year Ending June 30, |
|
Amount |
|
|
2023 (remaining 6 months) |
|
$ |
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 and thereafter |
|
|
|
|
Total remaining amortization |
|
$ |
|
|
13
Note 5. Fair Value Measurements
The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:
Level 1—Inputs are unadjusted, quoted prices in active markets for identical, assets or liabilities at the measurement date;
Level 2—Inputs are quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability;
Level 3—Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
The following tables set forth the Company’s financial liabilities that were measured at fair value on a recurring basis as of the dates indicated by level within the fair value hierarchy (in thousands):
|
|
December 31, 2022 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liability for contingent consideration, current portion |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
June 30, 2022 |
|
|||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liability for contingent consideration, current portion |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Liability for contingent consideration, non-current portion |
|
|
|
|
|
|
|
|
|
|
|
|||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
In connection with the acquisition of Repstor, Limited (“Repstor”) in June 2021, the Company recorded contingent consideration liabilities representing the amounts payable to former Repstor shareholders based upon the achievement of certain performance measures. During the six months ended December 31, 2022, the Company paid $
In connection with the acquisition of Billstream in June 2022, the Company recorded $
The fair value of the contingent consideration was initially estimated using the Monte Carlo simulation and included key assumptions used by management related to the estimated probability of occurrence and discount rates. Subsequent changes in the fair value of the contingent consideration liabilities, resulting from management’s revision of key assumptions and estimates, have been recorded in general and administrative expense in the unaudited condensed consolidated statements of operations. Gains and losses arising from exchange rate fluctuation on these liabilities not denominated in U.S. Dollars have been included in other income (expense) on the unaudited condensed consolidated statements of operations.
Changes in the fair value of contingent consideration liabilities during the six months ended December 31, 2022 were as follows (in thousands):
|
|
Amount |
|
|
Balance as of June 30, 2022 |
|
$ |
|
|
Payment of contingent consideration |
|
|
( |
) |
Change in fair value of contingent consideration |
|
|
( |
) |
Effect of foreign currency exchange rate changes |
|
|
( |
) |
Balance as of December 31, 2022 |
|
$ |
|
|
Other financial instruments consist of accounts receivable, accounts payable and accrued expenses and other current liabilities. Accounts receivable, accounts payable and accrued liabilities are stated at their carrying value, which approximates fair value due to the short time to expected receipt or payment.
14
Note 6. Property and Equipment
Property and equipment, net, consisted of the following (in thousands):
|
|
December 31, 2022 |
|
|
June 30, 2022 |
|
||
Computer equipment and software |
|
$ |
|
|
$ |
|
||
Capitalized internal-use software |
|
|
|
|
|
|
||
Furniture and office equipment |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Construction in progress |
|
|
|
|
|
|
||
Total property and equipment |
|
|
|
|
|
|
||
Less: accumulated depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
Property and equipment, net |
|
$ |
|
|
$ |
|
||
Depreciation expense, excluding the amortization of capitalized internal-use software development costs, was $
The Company capitalized $
Note 7. Leases
The Company leases the majority of its office space in the U.S., U.K., Singapore and Ukraine under non-cancelable operating lease agreements, which have various expiration dates through June
As part of the Company's continuing assessment of its facilities requirements, during the first half of fiscal year 2023, the Company exited a portion of the leased office space in its headquarters in Palo Alto, California and amended the underlying lease agreement to relieve the Company of certain lease payments. As a result, the Company assessed the right-of-use asset associated with the leased office space and deemed it to be impaired. The Company also assessed the lease liability in view of the amended lease agreement. The Company recorded a net charge of $
The components of lease costs were as follows (in thousands):
Operating Leases |
|
Three Months Ended |
|
|
Six Months Ended |
|
||
Operating lease cost (1) |
|
$ |
|
|
$ |
|
||
Short-term lease cost |
|
|
|
|
|
|
||
(1)
Rent expense for operating leases recognized prior to the adoption of ASC 842 for the three and six months ended December 31, 2021 was $
The weighted-average remaining lease term of the Company's operating leases and the weighted-average discount rate used to measure the present value of the operating lease liabilities are as follows:
Lease Term and Discount Rate |
|
December 31, 2022 |
|
|
Weighted-average remaining lease term (in years) |
|
|
|
|
Weighted-average discount rate |
|
|
% |
|
15
The following table presents supplemental cash flow information related to the Company's operating leases (in thousands):
|
|
Six Months Ended |
|
|
Cash payments included in the measurement of operating lease liabilities |
|
$ |
|
|
ROU assets obtained in exchange for new operating lease liabilities |
|
|
|
|
of $
As of December 31, 2022, remaining maturities of operating lease liabilities are as follows (in thousands):
Fiscal Year Ending June 30, |
|
Amount |
|
|
2023 (remaining 6 months) |
|
$ |
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 and thereafter |
|
|
|
|
Total lease payments |
|
|
|
|
Less: imputed interest |
|
|
( |
) |
Present value of operating lease liabilities |
|
$ |
|
|
Future minimum lease payments under non-cancelable operating leases as of June 30, 2022 under ASC 840 were as follows (in thousands):
Fiscal Year Ending June 30, |
|
Amount |
|
|
2023 |
|
$ |
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 and thereafter |
|
|
|
|
Total future minimum lease payments |
|
$ |
|
|
Note 8. Commitments and Contingencies
Software and Other Commitments
In the ordinary course of business, the Company enters into commitments to purchase or subscribe to software that is required to conduct its business activities. The Company also has commitments towards its cloud hosting service providers. There were no material purchase commitments that were entered into during the six months ended December 31, 2022.
In December 2021, the Company entered into an agreement with Microsoft, pursuant to which the Company is committed to spend a minimum of $
Litigation
From time to time, the Company is a party to claims, lawsuits, and proceedings which arise in the ordinary course of business. The Company warrants to its customers that it has all necessary rights and licenses to the intellectual property comprised in its products and services and indemnifies those customers against intellectual property claims with respect to such products and services, so such claims, lawsuits and proceedings might in the future include claims of alleged infringement of intellectual property rights. The Company records a liability when it believes that it is probable that a loss will be incurred, and the amount of loss or range of loss can be reasonably estimated. Given the unpredictable nature of legal proceedings, the Company bases its estimate on the information available at the time of the assessment. As additional information becomes available, the Company reassesses the potential liability and may revise the estimate. The Company is not presently a party to any litigation the outcome of which, it believes, if determined adversely to the Company, would individually or in the aggregate have a material adverse effect on the business, operating results, or financial condition.
16
Note 9. Debt
As of June 30, 2021, the Company had outstanding borrowings of $
On October 5, 2021, the Company entered into a Credit Agreement, as amended on June 6, 2022 and further amended on November 17, 2022 (the “Credit Agreement”) among the Company, the guarantors party thereto, the lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (“JPMorgan”). The Credit Agreement provides for a
In connection with the execution of the Credit Agreement, the Company also entered into a pledge and security agreement (the “Security Agreement”) dated as of October 5, 2021 with the subsidiaries of the Company and JPMorgan, as collateral agent for the secured parties. Under the Security Agreement, borrowings under the JPMorgan Credit Facility are secured by a first priority pledge of all of the capital stock and substantially all of the assets (excluding real estate interests) of each subsidiary of the Company and the subsidiary guarantors.
The Credit Agreement provides that the Company must maintain compliance with a maximum consolidated total net leverage ratio covenant, as determined in accordance with the Credit Agreement. It also contains affirmative, negative and financial covenants, including limitations on certain other indebtedness, loans and investments, liens, mergers, asset sales, and transactions with affiliates, as well as customary events of default. The Company was in compliance with all covenants as of December 31, 2022.
Note 10. Stockholders' Equity and Stock-Based Compensation
On July 2, 2021, in conjunction with the closing of the IPO, the Company’s Amended and Restated Certificate of Incorporation became effective, pursuant to which the Company’s authorized capital stock was increased to
On July 2, 2021, upon the closing of the IPO,
Equity Incentive Plans
In June 2021, the Company’s Board of Directors adopted, and its stockholders approved, the 2021 Omnibus Incentive Plan (the “2021 Plan”) and the 2021 Employee Stock Purchase Plan ("ESPP"). The 2021 Plan provides for the grant of restricted shares, restricted share units, performance shares, performance share units, deferred share units, share options and share appreciation rights. All employees, non-employee directors and selected third-party service providers of the Company and its subsidiaries and affiliates are eligible to receive grants under the 2021 Plan. Eligible employees may purchase the Company’s common stock under the ESPP.
Both the 2021 Plan and ESPP include a provision to increase the share reserves on July 1 of each year through 2031. On July 1, 2022,
As of December 31, 2022, shares of common stock reserved for future issuance were as follows (in thousands):
|
|
December 31, 2022 |
|
|
Stock plans: |
|
|
|
|
Outstanding stock options |
|
|
|
|
Unvested performance stock units and restricted stock units |
|
|
|
|
Reserved for ESPP |
|
|
|
|
Reserved for future stock award grants |
|
|
|
|
Total shares of common stock reserved for issuance |
|
|
|
|
17
Stock Awards
The Company has granted time-based and performance-based stock options, time-based restricted stock units (“RSUs”) and performance-based restricted stock units (“PSUs”), collectively referred to as “Stock Awards”. The Company accounts for stock-based compensation using the fair value method which requires the Company to measure stock-based compensation based on the grant-date fair value of the awards and recognize compensation expense over the requisite service or performance period. Awards that contain only service conditions, are generally earned over four years and expensed on a straight-line basis over that term. Compensation expense for awards that contain performance conditions is calculated using the graded vesting method and the portion of expense recognized in any period may fluctuate depending on changing estimates of the achievement of the performance conditions.
Stock Options
Stock options granted generally become exercisable ratably over a
Stock option activity under the Company’s equity incentive plans during the six months ended December 31, 2022 was as follows (in thousands, except per share data):
|
|
Number of |
|
|
Weighted- |
|
|
Weighted- |
|
|
Aggregate |
|
||||
Outstanding as of June 30, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercised |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Forfeited |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Outstanding as of December 31, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Vested and exercisable as of December 31, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Vested and expected to vest as of December 31, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
The total intrinsic value of stock options exercised and the proceeds from option exercises during the six months ended December 31, 2022 were $
Performance Stock Units and Restricted Stock Units
The Company granted stock units to certain of its employees with vesting terms based on meeting certain revenue and profitability targets, and continued service. The Company also granted stock units to certain employees that vest based on continued service.
Performance stock unit activity during the six months ended December 31, 2022 was as follows (in thousands, except per share data):
|
|
Number of Shares |
|
|
Weighted- |
|
||
Balance as of June 30, 2022 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Balance as of December 31, 2022 |
|
|
|
|
$ |
|
||
18
Restricted stock unit activity during the six months ended December 31, 2022 was as follows (in thousands, except per share data):
|
|
Number of Shares |
|
|
Weighted- |
|
||
Balance as of June 30, 2022 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Balance as of December 31, 2022 |
|
|
|
|
$ |
|
||
Stock-Based Compensation Expense
The Company recorded stock-based compensation expense in the unaudited condensed consolidated statements of operations as follows (in thousands):
|
|
Three Months Ended December 31, |
|
|
Six Months Ended December 31, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Cost of revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of SaaS and support |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Cost of professional services |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sales and marketing |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total stock-based compensation |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
As of December 31, 2022, there was a total of $
Employee Stock Purchase Plan
Under the ESPP, eligible employees may purchase the Company's common stock at a price equal to
As of December 31, 2022, total unrecognized compensation cost related to the ESPP was $
19
Note 11. Income Taxes
The Company determines its income tax provision for interim periods using an estimate of its annual effective tax rate adjusted for discrete items occurring during the periods presented. The primary difference between its effective tax rate and the federal statutory rate is the full valuation allowance the Company has established on its federal and state net operating losses and credits. Income taxes from international operations were not material for the three and six months ended December 31, 2022 and 2021.
The Company files income tax returns in the U.S. federal jurisdiction, various state jurisdictions and various foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities. The Company is not currently under audit by the Internal Revenue Service or other similar tax authorities. The Company’s tax returns remain open to examination as follows: U.S. federal and states, all tax years; and significant foreign jurisdictions, generally 2018 through 2022.
Note 12. Net Loss Per Share
Basic net loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding for the period. Diluted net loss per share is calculated by giving effect to all potentially dilutive securities outstanding for the period using the treasury stock method.
The following table sets forth the computation of basic and diluted net loss per share for the periods presented (in thousands, except per share data):
|
|
Three Months Ended December 31, |
|
|
Six Months Ended December 31, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average shares used to compute net loss per share - basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per share - basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Basic net loss per share is the same as diluted net loss per share because the Company reported net losses for all periods presented. The Company excluded the following potential shares of common stock from the calculation of diluted net loss per share because their effect would be anti-dilutive (in thousands):
|
|
As of December 31, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Outstanding stock options to purchase common stock |
|
|
|
|
|
|
||
Unvested performance stock units and restricted stock units |
|
|
|
|
|
|
||
Shares issuable under employee stock purchase plan |
|
|
|
|
|
|
||
Total |
|
|
|
|
|
|
||
20
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Notes Regarding Forward-Looking Statements
The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements and related notes and other financial information included in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended June 30, 2022 filed with the SEC on September 9, 2022. The following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K, particularly in the section titled “Risk Factors.” Our historical results are not necessarily indicative of the results that may be expected for any period in the future. Unless otherwise noted, any reference to a year preceded by the word “fiscal” refers to the fiscal year ended June 30 of that year.
Overview
Intapp is a leading provider of industry-specific, cloud-based software solutions for the global professional and financial services industry. We empower the world’s premier private capital, investment banking, legal, accounting, and consulting firms with the technology they need to meet rapidly changing client, investor, and regulatory requirements, deliver the right insights to the right professionals, and operate more competitively.
Our Intapp Platform is purpose-built to modernize these firms. The platform facilitates greater team collaboration, digitizes complex workflows to optimize deal and engagement execution, and leverages proprietary AI to help nurture relationships and originate new business. By better connecting their most important assets—people, processes, and data—our platform helps firms increase client fees and investment returns, operate more efficiently, and better manage risk and compliance.
How We Generate Revenue
We generate revenues primarily from software subscriptions, typically with one-year or multi-year contract terms. We sell our software through a direct enterprise sales model, which targets clients based on end market, geography, firm size, and business need. We invested in developing a multi-tenant cloud version of our platform and launched our initial SaaS solutions in 2017. We recognize revenues from SaaS subscriptions ratably over the term of the contract, while we recognize revenues from the license component of on-premise subscriptions upfront and the support component of such subscriptions ratably over the support term. We generally price our subscriptions based on the modules deployed as well as the number of users adopting our solution.
We expect the vast majority of our new ARR growth in the future to be from the sale of SaaS subscriptions.
We generate a majority of our non-recurring revenues from professional services. Our clients utilize these services to configure and implement one or more modules of the Intapp Platform, integrate those modules with the existing platform and with other core systems in their IT environment, upgrade their existing deployment, and provide training for their employees. Other professional services include strategic consulting and advisory work, which are generally provided on a standalone basis.
Key Factors Affecting Our Performance
Market Adoption of our Cloud Platform. Our future growth depends on our ability to win new professional and financial services clients and expand within our existing client base, primarily through the continued acceptance of our cloud business. Our cloud business has historically grown faster than our overall business, and represents an increasing proportion of our ARR. We must demonstrate to new and existing clients the benefits of selecting our cloud platform, and support those deployments once live with reliable and secure service. From a sales perspective, our ability to add new clients and expand within existing accounts depends upon a number of factors, including the quality and effectiveness of our sales personnel and marketing efforts, and our ability to convince key decision makers within professional and financial services firms to embrace the Intapp Platform over point solutions, internally developed solutions, and horizontal solutions.
Net Revenue Retention. We measure our ability to grow and retain ARR from existing clients using a metric we refer to as net revenue retention. We calculate this by starting with the ARR from the cohort of all clients as of the twelve months prior to the applicable fiscal period, or prior period ARR. We then calculate the ARR from these same clients as of the current fiscal period, or current period ARR. We then divide the current period ARR by the prior period ARR to calculate the net revenue retention.
21
This metric accounts for changes in our recurring revenue base from cross-sell (additional solution capabilities sold), upsell (additional seats sold), price changes, and client attrition (including contraction of solution capabilities, contraction of seats and client churn). We upsold additional seats and cross-sold new solutions to our existing clients such that our trailing twelve months’ net revenue retention rate as of December 31, 2022 was above our projected range of 110% to 114%. However, if our clients do not continue to see the ability of our platform to generate return on investment relative to other software alternatives, net revenue retention could suffer and our operating results may be adversely affected.
Continued Investment in Innovation and Growth. We have made substantial investments in research and development and sales and marketing to achieve a leadership position in our market and grow our revenues and client base. We intend to continue to invest in research and development to build new capabilities and maintain the core technology underpinning our differentiated platform. In addition, we expect to invest in sales and marketing to broaden our reach with new clients in the United States and abroad and deepen our penetration with existing clients. With our revenue growth objectives, we expect to continue to make such investments for the foreseeable future. We are continuing to gradually increase our general and administrative spending to support our growing operational needs.
We have a track record of successfully identifying and integrating complementary businesses within the professional and financial services industry. To complement our organic investment in innovation and accelerate our growth, we will continue to evaluate acquisition opportunities that help us extend our platform, broaden and deepen our market leadership, and add new clients.
COVID-19 Expenses. In March 2022, with the easing of COVID-related restrictions, we announced a broad return to office on a voluntary basis and since then have experienced a resumption of more normal levels of business travel and in-person meetings and marketing events which has resulted in an increase in these costs. We continue to closely monitor the status of COVID-19 cases in the community to ensure the health and safety of our employees and clients and may reinstate travel and meeting restrictions from time to time in response to future COVID surges. We have also adopted a hybrid work model to allow flexibility for our employees which has resulted in a re-assessment of our facilities needs. In the first half of fiscal year 2023, we exited certain leased space in Palo Alto, California and recorded a net charge of $1.6 million in connection with the impairment of the related operating lease right-of-use asset and the reassessment of the lease liability. We expect a reduction in rent expense for the remainder of fiscal year 2023. As we continue to evaluate our real estate needs, we may incur additional charges in the future in connection with exit activities.
Business Impact of Russia’s Invasion of Ukraine. In March 2022, in response to Russia’s invasion of Ukraine, we implemented contingency plans to ensure the safety of personnel and continuity of our contract research and development activity located in Ukraine, Russia and Belarus, including relocation of certain resources to other geographic locations and transitioning work previously performed by such teams to other teams outside of the conflict zone in the European Union, U.K. and Americas. We have officially ended all work performed by our contract resources in Russia and Belarus. As a result, we have incurred and expect to continue to incur a minor increase in research and development expenses due to increased labor rates pertaining to contract resources and relocation costs in connection with such resources, from Ukraine, Russia, and Belarus, to other jurisdictions and backfilling positions in other jurisdictions for those not willing or able to relocate. Any such increase has been and is expected to continue to be offset in part by cost reductions in future discretionary spending.
Key Business Metrics
We review a number of operating and financial metrics, including the following key metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions.
Annual Recurring Revenues (“ARR”)
ARR represents the annualized recurring value of all active SaaS and on-premise subscription contracts at the end of a reporting period. Contracts with a term other than one year are annualized by taking the committed contract value for the current period divided by number of days in that period then multiplying by 365. As a metric, ARR mitigates fluctuations in revenue recognition due to certain factors, including contract term and the sales mix of SaaS contracts and subscription licenses. ARR does not have any standardized meaning and may not be comparable to similarly titled measures presented by other companies. ARR should be viewed independently of revenues and deferred revenues and is not intended to be combined with or to replace either of those elements of our financial statements. ARR is not a forecast and the active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our clients.
ARR was $301.3 million and $240.0 million as of December 31, 2022 and 2021, respectively, an increase of 26%.
Cloud ARR
Cloud ARR is the portion of our ARR which represents the annualized recurring value of our active SaaS contracts. We believe Cloud ARR provides important information about our ability to sell new SaaS subscriptions to existing clients and to acquire new SaaS clients.
Cloud ARR was $191.8 million and $135.3 million as of December 31, 2022 and 2021, respectively, an increase of 42%, and represented 64% and 56% of ARR as of December 31, 2022 and 2021, respectively.
22
Number of Clients
We believe our ability to increase the number of clients on our platform is a key indicator of the growth of our business and our future business opportunities. We define a client at the end of any reporting period as an entity with at least one active subscription as of the measurement date. As of December 31, 2022, we had over 2,200 clients. No single client represented more than 10% of total revenues for the three and six months ended December 31, 2022 and 2021.
Our client base includes some of the largest and most reputable professional and financial services firms globally. These clients have the financial and operating resources needed to purchase, deploy, and successfully use the full capabilities of our software platform, and as such, we believe the number of our clients with contracts greater than $100,000 of ARR is an important metric for highlighting our progress on the path to full adoption of our platform by our professional and financial services clients. As of December 31, 2022 and 2021, we had 561 and 467 clients, respectively, with contracts greater than $100,000 of ARR.
Components of Our Results of Operations
Revenues
We generate recurring revenues from the sale of our SaaS solutions, subscriptions to our term software applications, and from providing support for those applications. We generate non-recurring revenues primarily by delivering professional services for the configuration, implementation and upgrade of our solutions. Our recurring revenues accounted for 86% and 87% of our total revenues during the six months ended December 31, 2022 and 2021, respectively.
SaaS and Support
We recognize revenues from our SaaS solutions ratably over the term of the contract beginning once the SaaS environment is provisioned and made available to clients. The initial term of our SaaS contracts is generally one to three years in duration.
Support revenues consist of non-cancelable support which is included with our subscription licenses and entitles clients to receive technical support and software updates, on a when and if available basis. We recognize revenues for support ratably over the term of the support contract which corresponds to the underlying subscription license agreement. We expect to continue to generate a relatively consistent stream of revenues from support services we provide to our existing subscription license clients. However, over time as we focus on new sales of our SaaS solutions and encourage existing subscription license clients to migrate to SaaS solutions, we expect revenues from support to decrease as a percentage of total revenues.
Subscription License
Our subscription licenses provide the client with the right to functional intellectual property and are distinct performance obligations as the client can benefit from the subscription licenses on their own. The transaction price allocated to subscription license arrangements is recognized as revenues at a point in time when control is transferred to the client, which generally occurs at the time of delivery for a new contract or commencement of the renewal term for renewals. Subscription license fees are generally payable in advance on an annual basis over the term of the license arrangement, which is typically noncancelable.
Professional Services
Our professional services primarily consist of implementation, configuration and upgrade services provided to clients. These engagements are billed to clients either on a time and materials or milestone basis; revenues are recognized as invoiced or in proportion to the work performed, respectively. We expect the demand for our professional services to increase due to client growth and the need for implementation, upgrade, and migration services for new and existing clients. This demand will be affected by the mix of professional services that are provided by us versus provided by our third-party implementation partners. Our professional services are currently loss making (after allocated overhead costs for facilities and IT) and accounted for 14% and 13% of our total revenues during the six months ended December 31, 2022 and 2021, respectively.
Cost of Revenues
Our cost of revenues consists primarily of expenses related to providing SaaS subscription, support and professional services to our clients, including personnel costs (salaries, bonuses, benefits and stock-based compensation) and related expenses for client support and services personnel, as well as cloud infrastructure costs, third-party expenses, amortization of capitalized internal-use software costs and acquired intangible assets, and allocated overhead costs. We do not have any cost of revenues related to our subscription licenses. We expect our cost of revenues to increase in absolute dollars as we expand our SaaS client base over time as this will result in increased cloud infrastructure costs and increased costs for additional personnel to provide technical support services to our growing client base.
23
Cost of SaaS and Support
Our cost of SaaS and support revenues comprises the direct costs to deliver and support our products, including salaries, bonuses, benefits, stock-based compensation, as well as allocated overhead costs for facilities and IT, third-party hosting fees related to cloud services, amortization of capitalized internal-use software development costs and amortization of acquired intangible assets.
Cost of Professional Services
Our cost of professional services revenues comprises the personnel-related costs for our professional services employees and contractors responsible for delivering implementation, upgrade and migration services to our clients. This includes salaries, bonuses, benefits, stock-based compensation, and allocated overhead costs for facilities and IT. We expect the cost of professional services revenues to increase in absolute dollars as we continue to hire personnel and engage contractors to provide implementation, upgrade and migration services to our growing client base.
Operating Expenses
Research and Development
Our research and development expenses consist primarily of personnel-related costs for engineering and product development employees, costs of third-party services, and allocations of various overhead, cloud hosting costs and facilities costs. We expect our research and development expenses to continue to increase in absolute dollars for the foreseeable future as we continue to dedicate substantial internal resources to develop, improve and expand the functionality of our solutions. As noted above, we experienced a minor year-over-year increase in research and development expenses in connection with the relocation of contract resources primarily from Russia and Belarus to other geographic locations and transitioning work previously performed by such teams to other teams outside of the conflict zone in the European Union, U.K. and Americas.
Sales and Marketing
Our sales and marketing expenses consist primarily of costs incurred for personnel-related costs for our sales and marketing employees as well as commission payments to our sales employees, costs of marketing events and online advertising, allocations of various overhead and facilities costs and travel and entertainment expenses. We capitalize client acquisition costs (principally commissions paid to sales personnel) and subsequently amortize these costs over the expected period of benefit. In the medium-term, we expect to see an increase in sales and marketing expense as we continue to expand our direct sales force to take advantage of opportunities for growth and resume more normal levels of in-person meetings, conferences, and attendance at trade shows as the COVID-19 pandemic wanes.
General and Administrative
Our general and administrative expenses consist primarily of personnel-related costs as well as professional services and facilities costs related to our executive, finance, human resources, information technology and legal functions. As a public company, we expect to continue to incur significant accounting and legal costs related to compliance with rules and regulations enacted by the SEC, including the costs of maintaining compliance with the Sarbanes-Oxley Act, as well as insurance, investor relations and other costs associated with being a public company.
Lease Modification and Impairment
Lease modification and impairment consists of charges related to the early exit of certain leased office space and amendments to the underlying lease agreement.
Loss on Debt Extinguishment
Loss on debt extinguishment consists of the write-off of unamortized deferred financing costs upon the repayment of our debt obligations.
Interest Expense
Interest expense consists primarily of the interest on our debt, which was repaid in full in July 2021, and the amortization of deferred financing costs.
Other Income (Expense), Net
Other income (expense), net consists primarily of realized and unrealized foreign exchange gains and losses resulting from fluctuations in foreign currency exchange rates on monetary assets and liabilities denominated in currencies other than the U.S. dollar.
24
Income Tax Benefit (Expense)
Our income tax benefit (expense) consists of an estimate of federal, state, and foreign income taxes based on enacted federal, state, and foreign tax rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in the valuation of our deferred tax assets and liabilities, and changes in tax laws. We maintain a full valuation allowance on our federal and state deferred tax assets as we have concluded that it is more likely than not that the deferred tax assets will not be realized.
Results of Operations
The following tables set forth our results of operations for the periods presented, expressed in total dollar terms and as a percentage of total revenues (percentages may not add up due to rounding):
|
|
Three Months Ended December 31, |
|
Six Months Ended December 31, |
||||||||||||||||||||||||||||||||
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
||||||||||||||||||||||||||||
|
|
(in thousands, except for percentages) |
||||||||||||||||||||||||||||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
SaaS and support |
|
$ |
61,605 |
|
|
|
73 |
|
% |
|
$ |
46,970 |
|
|
|
73 |
|
% |
|
$ |
118,418 |
|
|
|
72 |
|
% |
|
$ |
90,459 |
|
|
|
71 |
|
% |
Subscription license |
|
|
10,979 |
|
|
|
13 |
|
|
|
|
9,323 |
|
|
|
14 |
|
|
|
|
23,227 |
|
|
|
14 |
|
|
|
|
19,907 |
|
|
|
16 |
|
|
Total recurring revenues |
|
|
72,584 |
|
|
|
86 |
|
|
|
|
56,293 |
|
|
|
87 |
|
|
|
|
141,645 |
|
|
|
86 |
|
|
|
|
110,366 |
|
|
|
87 |
|
|
Professional services |
|
|
12,108 |
|
|
|
14 |
|
|
|
|
8,404 |
|
|
|
13 |
|
|
|
|
22,585 |
|
|
|
14 |
|
|
|
|
16,521 |
|
|
|
13 |
|
|
Total revenues |
|
|
84,692 |
|
|
|
100 |
|
|
|
|
64,697 |
|
|
|
100 |
|
|
|
|
164,230 |
|
|
|
100 |
|
|
|
|
126,887 |
|
|
|
100 |
|
|
Cost of revenues (1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
SaaS and support |
|
|
12,456 |
|
|
|
15 |
|
|
|
|
12,175 |
|
|
|
19 |
|
|
|
|
24,854 |
|
|
|
15 |
|
|
|
|
23,517 |
|
|
|
19 |
|
|
Total cost of recurring revenues |
|
|
12,456 |
|
|
|
15 |
|
|
|
|
12,175 |
|
|
|
19 |
|
|
|
|
24,854 |
|
|
|
15 |
|
|
|
|
23,517 |
|
|
|
19 |
|
|
Professional services |
|
|
14,329 |
|
|
|
17 |
|
|
|
|
11,378 |
|
|
|
18 |
|
|
|
|
27,265 |
|
|
|
17 |
|
|
|
|
22,412 |
|
|
|
18 |
|
|
Total cost of revenues |
|
|
26,785 |
|
|
|
32 |
|
|
|
|
23,553 |
|
|
|
36 |
|
|
|
|
52,119 |
|
|
|
32 |
|
|
|
|
45,929 |
|
|
|
36 |
|
|
Gross profit |
|
|
57,907 |
|
|
|
68 |
|
|
|
|
41,144 |
|
|
|
64 |
|
|
|
|
112,111 |
|
|
|
68 |
|
|
|
|
80,958 |
|
|
|
64 |
|
|
Operating expenses (1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Research and development |
|
|
23,392 |
|
|
|
28 |
|
|
|
|
17,386 |
|
|
|
27 |
|
|
|
|
43,071 |
|
|
|
26 |
|
|
|
|
34,356 |
|
|
|
27 |
|
|
Sales and marketing |
|
|
33,538 |
|
|
|
40 |
|
|
|
|
26,840 |
|
|
|
41 |
|
|
|
|
64,850 |
|
|
|
39 |
|
|
|
|
52,485 |
|
|
|
41 |
|
|
General and administrative |
|
|
20,753 |
|
|
|
25 |
|
|
|
|
21,217 |
|
|
|
33 |
|
|
|
|
41,163 |
|
|
|
25 |
|
|
|
|
42,047 |
|
|
|
33 |
|
|
Lease modification and impairment |
|
|
(348 |
) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
1,601 |
|
|
|
1 |
|
|
|
|
— |
|
|
|
— |
|
|
Total operating expenses |
|
|
77,335 |
|
|
|
91 |
|
|
|
|
65,443 |
|
|
|
101 |
|
|
|
|
150,685 |
|
|
|
92 |
|
|
|
|
128,888 |
|
|
|
102 |
|
|
Operating loss |
|
|
(19,428 |
) |
|
|
(23 |
) |
|
|
|
(24,299 |
) |
|
|
(38 |
) |
|
|
|
(38,574 |
) |
|
|
(23 |
) |
|
|
|
(47,930 |
) |
|
|
(38 |
) |
|
Loss on debt extinguishment |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
(2,407 |
) |
|
|
(2 |
) |
|
Interest expense |
|
|
(39 |
) |
|
|
— |
|
|
|
|
(38 |
) |
|
|
— |
|
|
|
|
(78 |
) |
|
|
— |
|
|
|
|
(197 |
) |
|
|
— |
|
|
Other income (expense), net |
|
|
179 |
|
|
|
— |
|
|
|
|
(419 |
) |
|
|
(1 |
) |
|
|
|
(505 |
) |
|
|
— |
|
|
|
|
460 |
|
|
|
— |
|
|
Net loss before income taxes |
|
|
(19,288 |
) |
|
|
(23 |
) |
|
|
|
(24,756 |
) |
|
|
(38 |
) |
|
|
|
(39,157 |
) |
|
|
(24 |
) |
|
|
|
(50,074 |
) |
|
|
(39 |
) |
|
Income tax benefit (expense) |
|
|
(466 |
) |
|
|
(1 |
) |
|
|
|
531 |
|
|
|
1 |
|
|
|
|
(651 |
) |
|
|
— |
|
|
|
|
719 |
|
|
|
1 |
|
|
Net loss |
|
$ |
(19,754 |
) |
|
|
(23 |
) |
% |
|
$ |
(24,225 |
) |
|
|
(37 |
) |
% |
|
$ |
(39,808 |
) |
|
|
(24 |
) |
% |
|
$ |
(49,355 |
) |
|
|
(39 |
) |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
(1) Amounts include stock-based compensation expense as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||
|
|
Three Months Ended December 31, |
|
|
|
Six Months Ended December 31, |
|
|
||||||||||||||||||||||||||||
|
|
2022 |
|
2021 |
|
2022 |
|
2021 |
||||||||||||||||||||||||||||
Cost of SaaS and support |
|
$ |
546 |
|
|
|
1 |
|
% |
|
$ |
355 |
|
|
|
1 |
|
% |
|
$ |
831 |
|
|
|
1 |
|
% |
|
$ |
523 |
|
|
|
— |
|
% |
Cost of professional services |
|
|
1,145 |
|
|
|
1 |
|
|
|
|
835 |
|
|
|
1 |
|
|
|
|
1,893 |
|
|
|
1 |
|
|
|
|
1,415 |
|
|
|
1 |
|
|
Research and development |
|
|
4,646 |
|
|
|
5 |
|
|
|
|
4,285 |
|
|
|
7 |
|
|
|
|
6,780 |
|
|
|
4 |
|
|
|
|
8,635 |
|
|
|
7 |
|
|
Sales and marketing |
|
|
6,352 |
|
|
|
8 |
|
|
|
|
6,888 |
|
|
|
11 |
|
|
|
|
12,105 |
|
|
|
7 |
|
|
|
|
13,357 |
|
|
|
11 |
|
|
General and administrative |
|
|
7,579 |
|
|
|
9 |
|
|
|
|
8,077 |
|
|
|
12 |
|
|
|
|
14,427 |
|
|
|
9 |
|
|
|
|
15,538 |
|
|
|
12 |
|
|
Total stock-based compensation expense |
|
$ |
20,268 |
|
|
|
24 |
|
|
|
$ |
20,440 |
|
|
|
32 |
|
|
|
$ |
36,036 |
|
|
|
22 |
|
|
|
$ |
39,468 |
|
|
|
31 |
|
|
25
Comparison of the Three and Six Months Ended December 31, 2022 and 2021
Revenues
|
|
Three Months Ended December 31, |
|
|
Change |
|
|
Six Months Ended December 31, |
|
|
Change |
|
||||||||||||||||||||
|
|
2022 |
|
|
2021 |
|
|
Amount |
|
|
% |
|
|
2022 |
|
|
2021 |
|
|
Amount |
|
|
% |
|
||||||||
|
|
(in thousands, except for percentages) |
|
|||||||||||||||||||||||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
SaaS and support |
|
$ |
61,605 |
|
|
$ |
46,970 |
|
|
$ |
14,635 |
|
|
|
31 |
% |
|
$ |
118,418 |
|
|
$ |
90,459 |
|
|
$ |
27,959 |
|
|
|
31 |
% |
Subscription license |
|
|
10,979 |
|
|
|
9,323 |
|
|
|
1,656 |
|
|
|
18 |
% |
|
|
23,227 |
|
|
|
19,907 |
|
|
|
3,320 |
|
|
|
17 |
% |
Total recurring revenues |
|
|
72,584 |
|
|
|
56,293 |
|
|
|
16,291 |
|
|
|
29 |
% |
|
|
141,645 |
|
|
|
110,366 |
|
|
|
31,279 |
|
|
|
28 |
% |
Professional services |
|
|
12,108 |
|
|
|
8,404 |
|
|
|
3,704 |
|
|
|
44 |
% |
|
|
22,585 |
|
|
|
16,521 |
|
|
|
6,064 |
|
|
|
37 |
% |
Total revenues |
|
$ |
84,692 |
|
|
$ |
64,697 |
|
|
$ |
19,995 |
|
|
|
31 |
% |
|
$ |
164,230 |
|
|
$ |
126,887 |
|
|
$ |
37,343 |
|
|
|
29 |
% |
Recurring Revenues
Recurring revenues from the sale of our SaaS solutions, from subscriptions to our term software solutions, and from providing support for these solutions increased by $16.3 million, or 29%, and $31.3 million, or 28%, respectively, in the three and six months ended December 31, 2022 compared to the same periods in the prior year.
Our SaaS and support revenues grew $14.6 million, or 31%, and $28.0 million, or 31%, respectively, in the three and six months ended December 31, 2022 compared to the same periods in the prior year, due to sales to new clients and expansion of existing clients from both cross-selling and upselling sales motions. The continuation of clients migrating from using our on-premise solutions to our cloud solutions also contributed to the growth.
Subscription license revenues increased by $1.7 million, or 18%, and $3.3 million, or 17%, respectively, in the three and six months ended December 31, 2022 compared to the same periods in the prior year, reflecting growth in multi-year renewals and continued stability in annual renewals.
Professional Services
Professional services revenues increased by $3.7 million, or 44%, and $6.1 million, or 37%, respectively, for the three and six months ended December 31, 2022 compared to the same periods in the prior year, This reflects a continuation in demand for implementation, upgrade and migration services consistent with our revenue growth.
Cost of Revenues and Gross Profit
|
|
Three Months Ended December 31, |
|
|
Change |
|
|
Six Months Ended December 31, |
|
|
Change |
|
||||||||||||||||||||
|
|
2022 |
|
|
2021 |
|
|
Amount |
|
|
% |
|
|
2022 |
|
|
2021 |
|
|
Amount |
|
|
% |
|
||||||||
|
|
(in thousands, except for percentages) |
|
|||||||||||||||||||||||||||||
Cost of revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
SaaS and support |
|
$ |
12,456 |
|
|
$ |
12,175 |
|
|
$ |
281 |
|
|
|
2 |
% |
|
$ |
24,854 |
|
|
$ |
23,517 |
|
|
$ |
1,337 |
|
|
|
6 |
% |
Total cost of recurring revenues |
|
|
12,456 |
|
|
|
12,175 |
|
|
|
281 |
|
|
|
2 |
% |
|
|
24,854 |
|
|
|
23,517 |
|
|
|
1,337 |
|
|
|
6 |
% |
Professional services |
|
|
14,329 |
|
|
|
11,378 |
|
|
|
2,951 |
|
|
|
26 |
% |
|
|
27,265 |
|
|
|
22,412 |
|
|
|
4,853 |
|
|
|
22 |
% |
Total cost of revenues |
|
|
26,785 |
|
|
|
23,553 |
|
|
|
3,232 |
|
|
|
14 |
% |
|
|
52,119 |
|
|
|
45,929 |
|
|
|
6,190 |
|
|
|
13 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
SaaS and support |
|
|
49,149 |
|
|
|
34,795 |
|
|
|
14,354 |
|
|
|
41 |
% |
|
|
93,564 |
|
|
|
66,942 |
|
|
|
26,622 |
|
|
|
40 |
% |
Subscription license |
|
|
10,979 |
|
|
|
9,323 |
|
|
|
1,656 |
|
|
|
18 |
% |
|
|
23,227 |
|
|
|
19,907 |
|
|
|
3,320 |
|
|
|
17 |
% |
Total gross profit - recurring revenues |
|
|
60,128 |
|
|
|
44,118 |
|
|
|
16,010 |
|
|
|
36 |
% |
|
|
116,791 |
|
|
|
86,849 |
|
|
|
29,942 |
|
|
|
34 |
% |
Professional services |
|
|
(2,221 |
) |
|
|
(2,974 |
) |
|
|
753 |
|
|
|
(25 |
)% |
|
|
(4,680 |
) |
|
|
(5,891 |
) |
|
|
1,211 |
|
|
|
(21 |
)% |
Gross profit |
|
$ |
57,907 |
|
|
$ |
41,144 |
|
|
$ |
16,763 |
|
|
|
41 |
% |
|
$ |
112,111 |
|
|
$ |
80,958 |
|
|
$ |
31,153 |
|
|
|
38 |
% |
26
Cost of SaaS and Support
Cost of SaaS and support revenues increased by $0.3 million, or 2%, for the three months ended December 31, 2022 compared to the three months ended December 31, 2021. The increase can be attributed primarily to an increase in cloud hosting costs of $0.4 million, royalty expense of $0.3 million, amortization expense of $0.3 million relating to capitalized software development costs and an increase in personnel-related costs of $0.2 million, (which reflects a benefit of $2.0 million in the three months ended December 31, 2022 resulting from an organizational realignment which reclassified expenses from cost of SaaS and support to sales and marketing), partially offset by a decrease in amortization expense of $0.9 million relating to acquired intangible assets.
Cost of SaaS and support revenues increased by $1.3 million, or 6%, for the six months ended December 31, 2022 compared to the six months ended December 31, 2021. The increase can be attributed primarily to increases in royalty expense of $0.8 million relating to third-party products, cloud hosting costs of $0.8 million, personnel-related costs of $0.7 million, (which reflects a benefit of $3.9 million in the six months ended December 31, 2022 resulting from an organizational realignment which reclassified expenses from cost of SaaS and support to sales and marketing), and amortization expense of $0.5 million relating to capitalized software development costs, partially offset by a decrease in amortization expense of $1.5 million relating to acquired intangible assets.
Cost of Professional Services
Cost of professional services revenues increased by $3.0 million, or 26%, for the three months ended December 31, 2022 compared to the three months ended December 31, 2021, primarily due to an increase in personnel-related costs of $1.6 million due to salary raises and increased headcount, subcontractor costs of $0.8 million, and other allocated overhead costs of $0.3 million as we expanded our teams to provide implementation and migration services to our growing client base.
Cost of professional services revenues increased by $4.9 million, or 22%, for the six months ended December 31, 2022 compared to the six months ended December 31, 2021, primarily due to an increase in personnel-related costs of $2.6 million due to salary raises and increased headcount, sub-contractor costs of $1.2 million, and other allocated overhead costs of $0.6 million as we expanded our teams to provide implementation and migration services to our growing client base.
Gross Profit
Gross profit increased by $16.8 million, or 41%, for the three months ended December 31, 2022 compared to the three months ended December 31, 2021. Of this increase, $14.3 million was attributable to growth in SaaS and support revenues and the reduction in SaaS and support costs resulting from the organizational realignment of part of the client success team to sales and marketing. The balance of the improvement in gross profit was attributable to the increase in subscription license revenue which contributed $1.7 million and the decrease in losses on professional services which contributed $0.8 million.
Gross profit increased by $31.2 million, or 38%, for the six months ended December 31, 2022 compared to the six months ended December 31, 2021. Of this increase, $26.6 million was attributable to growth in SaaS and support revenues and the reduction in SaaS and support costs resulting from the organizational realignment of part of the client success team to sales and marketing. The balance of the improvement in gross profit was attributable to the increase in subscription license revenue which contributed $3.4 million and the decrease in losses on professional services which contributed $1.2 million.
Operating Expenses
|
|
Three Months Ended December 31, |
|
|
Change |
|
|
Six Months Ended December 31, |
|
|
Change |
|
||||||||||||||||||||
|
|
2022 |
|
|
2021 |
|
|
Amount |
|
|
% |
|
|
2022 |
|
|
2021 |
|
|
Amount |
|
|
% |
|
||||||||
|
|
(in thousands, except for percentages) |
|
|||||||||||||||||||||||||||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Research and development |
|
$ |
23,392 |
|
|
$ |
17,386 |
|
|
$ |
6,006 |
|
|
|
35 |
% |
|
$ |
43,071 |
|
|
$ |
34,356 |
|
|
$ |
8,715 |
|
|
|
25 |
% |
Sales and marketing |
|
|
33,538 |
|
|
|
26,840 |
|
|
|
6,698 |
|
|
|
25 |
% |
|
|
64,850 |
|
|
|
52,485 |
|
|
|
12,365 |
|
|
|
24 |
% |
General and administrative |
|
|
20,753 |
|
|
|
21,217 |
|
|
|
(464 |
) |
|
|
(2 |
)% |
|
|
41,163 |
|
|
|
42,047 |
|
|
|
(884 |
) |
|
|
(2 |
)% |
Lease modification and impairment |
|
|
(348 |
) |
|
|
— |
|
|
|
(348 |
) |
|
* |
|
|
|
1,601 |
|
|
|
— |
|
|
|
1,601 |
|
|
* |
|
||
Total operating expenses |
|
$ |
77,335 |
|
|
$ |
65,443 |
|
|
$ |
11,892 |
|
|
|
18 |
% |
|
$ |
150,685 |
|
|
$ |
128,888 |
|
|
$ |
21,797 |
|
|
|
17 |
% |
*Not meaningful
27
Research and Development
Research and development expenses increased by $6.0 million, or 35%, for the three months ended December 31, 2022 compared to the three months ended December 31, 2021. Contractor and personnel-related costs increased by $2.8 million and $2.3 million, respectively, as we increased contract resources and our headcount to support on-going development of our cloud offerings. Cloud hosting costs increased by $0.4 million and allocated overhead costs increased by $0.2 million due to increased IT costs and headcount. Stock-based compensation expense increased by $0.3 million.
Research and development expenses increased by $8.7 million, or 25%, for the six months ended December 31, 2022 compared to the six months ended December 31, 2021. Contractor and personnel-related costs increased by $5.1 million and $4.2 million, respectively, as we increased contract resources and our headcount to support on-going development of our cloud offerings. Cloud hosting costs increased by $0.8 million and allocated overhead costs increased by $0.5 million due to increased IT costs and headcount. These increases were partially offset by a decrease of $1.9 million in stock-based compensation expense arising primarily from the reversal of stock-based compensation expense on forfeitures of unvested performance stock awards.
Sales and Marketing
Sales and marketing expenses increased by $6.7 million, or 25%, for the three months ended December 31, 2022 compared to the three months ended December 31, 2021. Personnel-related costs increased by $5.2 million due to increased headcount, ($2.0 million of which was due to the organizational realignment of part of the client success team to sales and marketing) and higher sales commissions driven by increased sales. Marketing expenses increased by $1.1 million largely due to a return to more normal levels of travel and company and marketing events following the easing of COVID-related restrictions on travel and in-person events. Allocated overhead costs increased by $0.7 million due to increased IT costs and headcount. These increases were partially offset by a decrease of $0.6 million in stock-based compensation expense due to achievement of performance milestones on previously granted awards.
Sales and marketing expenses increased by $12.4 million, or 24%, for the six months ended December 31, 2022 compared to the six months ended December 31, 2021. Personnel-related costs increased by $9.4 million due to increased headcount, ($3.9 million of which was due to the organizational realignment of part of the client success team to sales and marketing) and higher sales commissions driven by increased sales. Marketing expenses increased by $2.3 million largely due to a return to more normal levels of travel and company and marketing events following the easing of COVID-related restrictions on travel and in-person events. Allocated overhead costs increased by $1.5 million due to increased IT costs and headcount. These increases were partially offset by a decrease of $1.3 million in stock-based compensation expense due to achievement of performance milestones on previously granted awards.
General and Administrative
General and administrative expenses decreased by $0.5 million, or 2%, for the three months ended December 31, 2022 compared to the three months ended December 31, 2021. The decrease was primarily driven by an increase of $1.1 million in costs allocated to other functions due to increased IT costs as well as increase in headcount in other departments, a decrease of $0.7 million in third-party professional fees, a decrease of $0.6 million in change in fair value of contingent consideration related to prior acquisitions and a decrease of $0.5 million in stock-based compensation expense due to achievement of performance milestones on previously granted awards. These decreases were partially offset by an increase of $2.3 million in personnel-related costs primarily due to annual salary increases and increased headcount.
General and administrative expenses decreased by $0.9 million, or 2%, for the six months ended December 31, 2022 compared to the six months ended December 31, 2021. The decrease was primarily driven by an increase of $2.5 million in costs allocated to other functions due to increased IT costs as well as increase in headcount in other departments, a decrease of $1.1 million in stock-based compensation expense due to achievement of performance milestones on previously granted awards, a decrease of $1.0 million in change in fair value of contingent consideration related to prior acquisitions and a decrease $0.7 million in third-party professional fees. These decreases were partially offset by an increase of $3.9 million in personnel-related costs primarily due to annual salary increases and increased headcount and an increase of $0.6 million in travel and company event related expenses.
Lease modification and impairment
Lease modification and impairment benefit of $0.3 million during the three months ended December 31, 2022 was related to a benefit arising from the amendment to the underlying lease agreement which resulted in a reduction in the related lease payment obligation.
Lease modification and impairment net charge of $1.6 million during the six months ended December 31, 2022 related to accelerated amortization expense associated with a right-of-use leased asset on the early exit of a leased office space, offset by a benefit arising from the amendment to the underlying lease agreement which resulted in a reduction in the related lease payment obligation.
28
Loss on Debt Extinguishment
|
|
Three Months Ended December 31, |
|
|
Change |
|
|
Six Months Ended December 31, |
|
|
Change |
||||||||||||||||||
|
|
2022 |
|
|
2021 |
|
|
Amount |
|
|
% |
|
|
2022 |
|
|
2021 |
|
|
Amount |
|
|
% |
||||||
|
|
(in thousands, except for percentages) |
|||||||||||||||||||||||||||
Loss on debt extinguishment |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
* |
|
|
$ |
— |
|
|
$ |
(2,407 |
) |
|
$ |
2,407 |
|
|
* |
*Not meaningful
Loss on debt extinguishment of $2.4 million during the six months ended December 31, 2021 related to the write-off of unamortized deferred financing costs upon the full repayment of our debt under the Prior Credit Facility in July 2021.
Interest Expense and Other Income (Expense), Net
|
|
Three Months Ended December 31, |
|
|
Change |
|
|
Six Months Ended December 31, |
|
|
Change |
|
||||||||||||||||||||
|
|
2022 |
|
|
2021 |
|
|
Amount |
|
|
% |
|
|
2022 |
|
|
2021 |
|
|
Amount |
|
|
% |
|
||||||||
|
|
(in thousands, except for percentages) |
|
|||||||||||||||||||||||||||||
Interest expense |
|
$ |
(39 |
) |
|
$ |
(38 |
) |
|
$ |
(1 |
) |
|
|
3 |
% |
|
$ |
(78 |
) |
|
$ |
(197 |
) |
|
$ |
119 |
|
|
|
(60 |
)% |
Other income (expense), net |
|
$ |
179 |
|
|
$ |
(419 |
) |
|
$ |
598 |
|
|
|
(143 |
)% |
|
$ |
(505 |
) |
|
$ |
460 |
|
|
$ |
(965 |
) |
|
|
(210 |
)% |
Interest expense decreased by $0.1 million in the six months ended December 31, 2022 compared to the six months ended December 31, 2021. The decrease was due to the full repayment of our debt under the Prior Credit Facility in July 2021.
The change in other income (expense), net, was primarily due to the impact of fluctuations in foreign currency rates on our monetary asset and liability balances denominated in currencies other than the U.S. Dollar, primarily British Pounds.
We had foreign exchange gains on our net monetary asset position as a result of the British Pound strengthening against the U.S. Dollar during the three months ended December 31, 2022 compared to foreign exchange losses on our net monetary liability position during the same period in the prior year.
We had foreign exchange losses on our net monetary asset position as a result of the British Pound weakening against the U.S. Dollar during the six months ended December 31, 2022. We had foreign exchange gains on our net monetary liability position, attributable primarily to the contingent consideration relating to the acquisition of Repstor denominated in British Pounds, during the same period in the prior year.
Income Tax Benefit (Expense)
|
|
Three Months Ended December 31, |
|
|
Change |
|
|
Six Months Ended December 31, |
|
|
Change |
|
||||||||||||||||||||
|
|
2022 |
|
|
2021 |
|
|
Amount |
|
|
% |
|
|
2022 |
|
|
2021 |
|
|
Amount |
|
|
% |
|
||||||||
|
|
(in thousands, except for percentages) |
|
|||||||||||||||||||||||||||||
Income tax benefit (expense) |
|
$ |
(466 |
) |
|
$ |
531 |
|
|
$ |
(997 |
) |
|
|
(188 |
)% |
|
$ |
(651 |
) |
|
$ |
719 |
|
|
$ |
(1,370 |
) |
|
|
(191 |
)% |
Income tax expense was $0.5 million and $0.7 million for the three and six months ended December 31, 2022, respectively, compared to an income tax benefit of $0.5 million and $0.7 million recorded during the three and six months ended December 31, 2021, respectively. Our income tax expense during the three and six months ended December 31, 2022 was primarily attributable to income tax expense in a number of U.S. state jurisdictions and foreign jurisdictions. Our income tax benefit during the three and six months ended December 31, 2021 was primarily attributable to income tax benefits from net losses in our foreign jurisdictions.
29
Liquidity and Capital Resources
Sources of Liquidity
As of December 31, 2022, we had cash, cash equivalents, and restricted cash of $52.6 million. We finance our liquidity needs primarily through collections from clients and the issuance of equity securities. We generally bill and collect from our clients annually in advance. Our billings are subject to seasonality with billings in the fourth quarter higher than in the other quarters.
Operating losses could continue in the future as we continue to invest in the growth of our business. We believe our existing cash and cash equivalents and restricted cash as of December 31, 2022, along with our JPMorgan Credit Facility described below, will be sufficient to meet our working capital and capital expenditure needs for at least the next twelve months.
On October 5, 2021, we entered into a Credit Agreement with a group of lenders led by JPMorgan. The Credit Agreement provides for a five-year, senior secured revolving credit facility of $100.0 million with a sub-facility for letters of credit in the aggregate amount of up to $10.0 million. As of December 31, 2022, no amounts have been borrowed under the JPMorgan Credit Facility. See Note 9 to our unaudited condensed consolidated financial statements for additional information.
Our future capital requirements will depend on many factors, including, but not limited to, our ability to grow our revenues and the timing and extent of investment across our organization necessary to support growth in our business. In addition, we may in the future enter into arrangements to acquire or invest in complementary businesses or technologies. We may need to seek additional equity or debt financing in order to meet these future capital requirements. If we are unable to raise additional capital when desired, or on terms that are acceptable to us, our business, financial condition and results of operations could be adversely affected.
Cash Flows
The following table summarizes our cash flows from operating, investing, and financing activities for the periods presented (in thousands):
|
|
Six Months Ended December 31, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Net cash provided by operating activities (1) |
|
$ |
13,347 |
|
|
$ |
6,525 |
|
Net cash used in investing activities |
|
|
(4,395 |
) |
|
|
(2,054 |
) |
Net cash provided by (used in) financing activities |
|
|
(10,342 |
) |
|
|
13,514 |
|
Effect of foreign currency exchange rate changes on cash and cash equivalents |
|
|
(351 |
) |
|
|
303 |
|
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
$ |
(1,741 |
) |
|
$ |
18,288 |
|
(1) Includes debt-related cash interest payments of $6.0 million during the six months ended December 31, 2021.
Operating Activities
During the six months ended December 31, 2022, net cash provided by operating activities was $13.3 million, as our operating loss of $39.8 million was reduced by $53.1 million of adjustments. These adjustments consisted of $48.0 million of non-cash charges (principally comprising stock-based compensation expense, depreciation and amortization, amortization of operating lease right-of-use assets and lease modification and impairment), and net cash inflow of $5.1 million from net changes in operating assets and liabilities. The net cash inflow from changes in operating assets and liabilities was primarily driven by an increase in deferred revenue of $18.8 million due to our revenue growth, an increase of $2.0 million in other liabilities and a decrease of $1.0 million in prepaid expenses and other assets due to the timing of payments. These changes were partially offset by a decrease in accounts payable and accrued liabilities of $8.1 million primarily due to payments for annual bonuses, a decrease in operating lease liabilities of $3.1 million due to lease payments, an increase in unbilled receivables of $2.4 million due to the timing of invoicing to our clients, an increase in deferred commissions of $1.6 million due to increased sales and an increase in accounts receivable of $1.5 million due to the timing of billing and collections on our outstanding receivables.
30
During the six months ended December 31, 2021, net cash provided by operating activities was $6.5 million, as our operating loss of $49.4 million, was reduced by $55.9 million of adjustments. These adjustments consisted of $49.6 million of non-cash charges (principally comprising stock-based compensation expense, depreciation and amortization and loss on debt extinguishment), and net cash inflow of $6.3 million from net changes in operating assets and liabilities. The net cash inflow from changes in operating assets and liabilities was primarily driven by an increase in deferred revenues of $10.0 million due to our revenue growth, a decrease in accounts receivable of $7.2 million due to the timing of billing and collections on our outstanding receivables and a decrease in prepaid expenses and other assets of $1.5 million primarily due to the timing of prepaid operating expenses. These changes were partially offset by a decrease in other liabilities of $5.3 million primarily due to a decrease in our accrued interest as our debt under the Prior Credit Facility was repaid in full in July 2021, a decrease in accounts payable and accrued liabilities of $3.7 million primarily due to payments for deferred offering costs and annual bonuses, and an increase in deferred commissions of $3.4 million due to increased sales.
Investing Activities
Net cash used in investing activities consists of purchases of property and equipment and capitalized internal-use software costs.
During the six months ended December 31, 2022, net cash used in investing activities was $4.4 million, consisting of capital expenditures of $1.7 million on property and equipment largely of computer equipment and leasehold improvements to our London office in U.K., and capitalized internal-use software costs of $2.7 million.
During the six months ended December 31, 2021, net cash used in investing activities was $2.1 million, primarily consisting of capitalized internal-use software costs.
Financing Activities
During the six months ended December 31, 2022, net cash used in financing activities was $10.3 million, primarily comprised of payments of $11.1 million which represented the final contingent consideration and cash holdback related to the acquisition of Repstor and $4.9 million of payments related to employee payroll tax withholding on vested equity awards, partially offset by $4.5 million of proceeds from stock option exercises and $1.2 million of proceeds from employee stock purchase plan.
During the six months ended December 31, 2021, net cash provided by financing activities was $13.5 million, primarily comprised of $292.8 million in net proceeds from our IPO completed in July 2021 and $3.9 million of proceeds from stock option exercises, partially offset by $278.0 million used for the repayment of borrowings, $4.4 million of payments related to deferred offering costs in connection with our IPO, and $0.8 million of payments related to deferred financing costs.
Material Cash Requirements
Except as described below, there have been no significant changes in our material cash requirements from those disclosed in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the fiscal year ended June 30, 2022, filed with the SEC on September 9, 2022.
In connection with the acquisition of Repstor in June 2021, we were obligated to make certain earn-out payments upon the achievement of certain performance measures as well as a cash holdback payment. During the six months ended December 31, 2022, we paid $9.3 million in full consideration for the remaining contingent consideration and $1.8 million for cash holdback related to the acquisition of Repstor.
In January 2023, we paid $11.2 million in deferred purchase consideration related to the June 2022 acquisition of Billstream.
31
Non-GAAP Financial Measures
We report our financial results in accordance with GAAP, however, management believes evaluating our ongoing operating results may be enhanced if investors have additional non-GAAP financial measures. Specifically, management reviews non-GAAP gross profit, non-GAAP recurring gross profit, and non-GAAP operating profit (loss), each of which is a non-GAAP financial measure, to manage our business, make planning decisions, evaluate our performance and allocate resources and, for the reasons described below, considers them to be useful indicators, for both management and investors, of our financial performance over time. These non-GAAP financial measures, which may be different than similarly-titled measures used by other companies, should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.
Non-GAAP Gross Profit
We define non-GAAP gross profit as GAAP gross profit before the portion related to cost of revenues of stock-based compensation expense and amortization of intangible assets. We believe non-GAAP gross profit provides investors and other users of our financial information consistency and comparability with our past financial performance and facilitates period-to-period comparisons of gross profit.
The following table provides a reconciliation of gross profit to non-GAAP gross profit (in thousands):
|
|
Three Months Ended December 31, |
|
|
Six Months Ended December 31, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
GAAP gross profit |
|
$ |
57,907 |
|
|
$ |
41,144 |
|
|
$ |
112,111 |
|
|
$ |
80,958 |
|
Adjusted to exclude the following (as related to cost of revenues): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock-based compensation |
|
|
1,691 |
|
|
|
1,190 |
|
|
|
2,724 |
|
|
|
1,938 |
|
Amortization of intangible assets |
|
|
917 |
|
|
|
1,963 |
|
|
|
2,413 |
|
|
|
3,927 |
|
Non-GAAP gross profit |
|
$ |
60,515 |
|
|
$ |
44,297 |
|
|
$ |
117,248 |
|
|
$ |
86,823 |
|
Non-GAAP Recurring Gross Profit
We define non-GAAP recurring gross profit as GAAP total recurring revenues less GAAP total cost of recurring revenues adjusted for the portion of cost related to stock-based compensation expense and amortization of intangible assets. We believe non-GAAP recurring gross profit provides investors and other users of our financial information consistency and comparability with our past financial performance and facilitates period-to-period comparisons of recurring gross profit as management is focused on increasing sales associated with our recurring revenue stream.
The following table provides a reconciliation of recurring gross profit to non-GAAP recurring gross profit (in thousands):
|
|
Three Months Ended December 31, |
|
|
Six Months Ended December 31, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Total recurring revenues |
|
$ |
72,584 |
|
|
$ |
56,293 |
|
|
$ |
141,645 |
|
|
$ |
110,366 |
|
Total cost of recurring revenues |
|
|
12,456 |
|
|
|
12,175 |
|
|
|
24,854 |
|
|
|
23,517 |
|
Recurring gross profit |
|
|
60,128 |
|
|
|
44,118 |
|
|
|
116,791 |
|
|
|
86,849 |
|
Adjusted to exclude the following (as related to cost of recurring revenues) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock-based compensation |
|
|
546 |
|
|
|
355 |
|
|
|
831 |
|
|
|
523 |
|
Amortization of intangible assets |
|
|
917 |
|
|
|
1,963 |
|
|
|
2,413 |
|
|
|
3,927 |
|
Non-GAAP recurring gross profit |
|
$ |
61,591 |
|
|
$ |
46,436 |
|
|
$ |
120,035 |
|
|
$ |
91,299 |
|
32
Non-GAAP Operating Profit (Loss)
We define non-GAAP operating profit (loss) as GAAP operating loss excluding stock-based compensation expense, amortization of intangible assets, lease modification and impairment, change in fair value of contingent consideration and acquisition-related transaction costs. We believe non-GAAP operating profit (loss) provides investors and other users of our financial information consistency and comparability with our past financial performance and facilitates period-to-period comparisons of GAAP operating loss.
The following table provides a reconciliation of GAAP operating loss to non-GAAP operating profit (loss) (in thousands):
|
|
Three Months Ended December 31, |
|
|
Six Months Ended December 31, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
GAAP operating loss |
|
$ |
(19,428 |
) |
|
$ |
(24,299 |
) |
|
$ |
(38,574 |
) |
|
$ |
(47,930 |
) |
Adjusted to exclude the following (including the portion related to total cost of revenues): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock-based compensation |
|
|
20,268 |
|
|
|
20,440 |
|
|
|
36,036 |
|
|
|
39,468 |
|
Amortization of intangible assets |
|
|
2,506 |
|
|
|
3,310 |
|
|
|
5,587 |
|
|
|
6,619 |
|
Lease modification and impairment |
|
|
(348 |
) |
|
|
— |
|
|
|
1,601 |
|
|
|
— |
|
Change in fair value of contingent consideration |
|
|
(232 |
) |
|
|
390 |
|
|
|
(232 |
) |
|
|
727 |
|
Acquisition-related transaction costs |
|
|
42 |
|
|
|
— |
|
|
|
201 |
|
|
|
81 |
|
Non-GAAP operating profit (loss) |
|
$ |
2,808 |
|
|
$ |
(159 |
) |
|
$ |
4,619 |
|
|
$ |
(1,035 |
) |
Indebtedness
On October 5, 2021, we entered into a Credit Agreement, as amended on June 6, 2022 and further amended on November 17, 2022, with a group of lenders led by JPMorgan. The Credit Agreement provides for a five-year, senior secured revolving credit facility of $100.0 million with a sub-facility for letters of credit in the aggregate amount of up to $10.0 million. Future borrowings under the JPMorgan Credit Facility will bear interest, at our election, at an annual rate based on either (a) an adjusted secured overnight financing rate (SOFR, as described in the Credit Agreement) plus a percentage spread (ranging from 1.75% to 2.50%) or (b) an alternate base rate (as described in the Credit Agreement) plus a percentage spread (ranging from 0.75% to 1.50%), in each case based on our total net leverage ratio. In addition, a commitment fee accrues with respect to the unused amount of the JPMorgan Credit Facility at an annual rate ranging from 0.25% to 0.40%, based on our total net leverage ratio. Subject to certain exceptions, our total net leverage ratio as of the end of each fiscal quarter may not exceed 3.50 to 1.00. We were in compliance with all of the covenants as of December 31, 2022.
As of December 31, 2022, no amounts have been borrowed under the JPMorgan Credit Facility.
Critical Accounting Policies and Estimates
The process of preparing our unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires the use of estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses. These estimates and judgments are based on historical experience, future expectations and other factors and assumptions we believe to be reasonable under the circumstances. The most significant estimates and judgments are reviewed on an ongoing basis and are revised when necessary. Actual amounts may differ from these estimates and judgments.
There have been no significant changes in our critical accounting policies or estimates from those disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2022, filed with the SEC on September 9, 2022.
Recent Accounting Pronouncements
See Note 2 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information regarding recent accounting pronouncements and our assessment of their impact.
33
Emerging Growth Company Status
In April 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. We have elected to use this extended transition period to enable us to comply with certain new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our unaudited condensed consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
We also intend to rely on certain other exemptions and reduced reporting requirements under the JOBS Act, including: not having to (1) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act or (2) comply with any requirement that may be adopted by Public Company Accounting Oversight Board (“PCAOB”) regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis.
We will remain an emerging growth company until the earlier of (1) the last day of fiscal year in which we have more than $1.07 billion in annual revenues; (2) the date we qualify as a “large accelerated filer,” which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of the most recently completed second fiscal quarter, and we have been required to file annual, quarterly and current reports under the Exchange Act for at least twelve months, and we have filed at least one annual report pursuant to the Exchange Act; (3) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; and (4) the last day of fiscal year ending after the fifth anniversary of our initial public offering.
34
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risks in the ordinary course of our business, including foreign currency exchange, credit, inflation, and interest rate risks.
Foreign Currency Exchange Risk
Our reporting currency is the U.S. dollar and the functional currency for all of our foreign subsidiaries is the U.S. dollar, except Rekoop Ltd., which uses the British Pound.
The majority of our revenue and expenses are denominated in U.S. dollars. However, we have foreign currency risks as we have contracts with clients and payroll obligations and a limited number of supply contracts with vendors which have payments denominated in foreign currencies.
The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy. We have experienced and will continue to experience fluctuations in foreign exchange gains and losses related to changes in foreign currency exchange rates. We have not engaged in the hedging of foreign currency transactions to date, although we may choose to do so in the future. Our exposure to foreign currency exchange risk relates primarily to our accounts receivable, cash balances and other employee compensation related obligations denominated in British Pounds. If a hypothetical 10% change in the relative value of U.S. dollar to British Pound were to occur in the future, the resulting gain or loss would be immaterial on our operating results.
Credit Risk
We routinely assess the creditworthiness of our clients. We have not experienced any material losses related to non-payment of receivables from individual or groups of clients due to loss of creditworthiness during the three and six months ended December 31, 2022 and 2021. Clients representing in excess of 10% of our accounts receivable balance at December 31, 2022 and June 30, 2022 were zero and one, respectively. Due to these factors, management believes that we do not have additional credit risk beyond the amounts already provided for collection losses in our accounts receivable.
Inflation Risk
We do not believe that inflation has had a material effect on our business, results of operations, or financial condition. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs, particularly if inflationary pressures occur during an economic downturn. Further, our clients may not buy new products or may refrain from expanding current product usage as a result of the impact of increasing costs on their spend. These matters could harm our business, results of operations, or financial condition.
Interest Rate Risk
Our exposure to market risk for changes in interest rates relates primarily to our senior secured revolving credit facility of up to $100.0 million. As of December 31, 2022, we had no outstanding loan balance under this facility. Future borrowings under this facility will accrue interest at a variable rate based on, at our election, either (a) an adjusted secured overnight financing rate (SOFR, as described in the Credit Agreement) plus a percentage spread (ranging from 1.75% to 2.50%) or (b) an alternate base rate (as described in the Credit Agreement) plus a percentage spread (ranging from 0.75% to 1.50%), in each case based on the Company’s total net leverage ratio. As a result, we will be exposed to increased interest rate risk if we draw down on the facility.
35
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
36
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
The information contained in Note 8. “Commitments and Contingencies—Litigation” in our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q is incorporated herein by reference. From time to time, we may be subject to legal proceedings and claims in the ordinary course of business. We cannot predict the results of any such disputes, and regardless of the potential outcomes, the existence thereof may have an adverse material impact on us due to diversion of management time and attention as well as the financial costs related to resolving such disputes.
On February 11, 2021, Navatar Group, Inc. commenced an action in the United States District Court for the Southern District of New York captioned Navatar Group, Inc. v. DealCloud, Inc., 1:21-cv-01255. In its complaint, Navatar asserts false advertising and related claims, alleging that DealCloud, Inc., a subsidiary of the Company, has disseminated false and/or misleading statements about Navatar’s financial condition, current sales and sales staff levels. Navatar claims that it has lost customers and prospective customers to DealCloud as a result of the allegedly false statements. The Company believes that the allegations are without merit and is vigorously defending the claim.
Item 1A. Risk Factors
Except as set forth below, there have been no material changes to the risk factors disclosed under Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2022, the current effects of which are discussed in more detail in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q. If any of these risks or uncertainties actually occur, our business, financial condition, prospects, results of operations and cash flow could be materially and adversely affected. In that case, the market price of our common stock could decline. These risks are not the only risks we face. Additional risks or uncertainties not currently known to us, or that we currently deem immaterial, may also have a material adverse effect on our business, financial condition, prospects, results of operations or cash flows, as well as the market price of our securities. We cannot assure you that any of the events discussed in the risk factors will not occur.
All of our revenues are generated by sales to clients in our targeted verticals, and factors, including the downturn in U.S. and global markets and economic conditions, that adversely affect the applicable industry could also adversely affect us.
Currently, all of our sales are to clients in the professional and financial services industry. Demand for our solutions could be affected by factors that are unique to and adversely affect our targeted verticals. In particular, our clients in the professional and financial services industry are highly regulated, subject to intense competition and impacted by changes in general economic and market conditions. For example, changes in applicable laws and regulations could significantly impact the software functionality demanded by our clients and require us to expend significant resources to ensure our solutions continue to meet their evolving needs. In addition, other industry-specific factors, such as industry consolidation or the introduction of competing technology, could lead to a significant reduction in the number of clients that use our solutions within a particular vertical or the services demanded by these clients.
Additionally, inflation has risen significantly worldwide, and the United States has recently experienced historically high levels of inflation. This inflation and government efforts to combat inflation, such as recent and future significant increases to benchmark interest rates and other related monetary policies, have and could continue to increase market volatility and have an adverse effect on the domestic and international financial markets and general economic conditions which directly impact our clients in the professional and financial services industry. If the inflation rate continues to increase, it could also push up the costs of labor and our employee compensation expenses.
Further, our clients in the professional and financial services industry are particularly sensitive to U.S. and global market and economic conditions. Significant economic and market downturns make it difficult for our clients and us to forecast and plan future business activities accurately. Also, the effects of climate change may disrupt our clients’ businesses, by, among other things, increasing their costs and credit risk from their customers. Adverse changes in domestic and global economic and political conditions, including those associated with the withdrawal of the United Kingdom from the European Union (“Brexit”), outbreaks, epidemics, or pandemics involving public health, including the COVID-19 pandemic, Russian military action against Ukraine, inflation and the adverse economic downturn, and impacts from climate change, could result in significant decreases in demand or lengthened sales cycles for our solutions, including the delay or cancellation of current or anticipated projects, and reduction in IT spending by our clients and potential clients, or could present difficulties in collecting accounts receivables from our clients if their financial condition deteriorates. Our existing clients may be acquired by or merged into other entities that use our competitors’ products, or they may decide to reduce the number of seats they use of our solutions or terminate their relationships with us for other reasons. Additionally, our market verticals are also interdependent. Our clients in the professional services industry rely significantly on revenues they receive from their own clients in the financial services industry, thus a decline in one vertical can lead to a decline in the other vertical. As a result, our ability to generate revenues from our clients could be adversely affected by specific factors that affect the professional and financial services industry.
37
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
38
Item 6. Exhibits
The information required by this Item is set forth on the exhibit index that precedes the signature page of this Quarterly Report on Form 10-Q.
|
|
|
|
Incorporated by Reference |
|
|
||||||
Exhibit Number |
|
Description |
|
Form |
|
File Number |
|
Date |
|
Number |
|
Filed Herewith |
|
|
|
|
|
|
|
|
|
|
|
|
|
10.1 |
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.1 |
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.2 |
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.1* |
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.2* |
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document |
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
|
|
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
|
|
|
|
|
|
|
|
|
X |
* The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and are not deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall they be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, irrespective of any general incorporation language contained in such filing.
39
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
Intapp, Inc. |
|
|
|
|
|
Date: February 8, 2023 |
|
By: |
/s/ John Hall |
|
|
|
John Hall |
|
|
|
Chief Executive Officer (Principal Executive Officer) |
|
|
|
|
Date: February 8, 2023 |
|
By: |
/s/ Stephen Robertson |
|
|
|
Stephen Robertson |
|
|
|
Chief Financial Officer (Principal Financial Officer) |
40
Exhibit 10.1
Execution Version
AMENDMENT NO. 2 TO CREDIT AGREEMENT
This AMENDMENT NO. 2 TO CREDIT AGREEMENT, dated as of November 17, 2022 (this “Amendment”), by and among INTAPP, INC., a Delaware corporation, (the “Borrower”), the other Loan Parties party hereto, the Lenders party hereto and JPMORGAN CHASE BANK, N.A., as Administrative Agent. Capitalized terms which are used in this Amendment without definition and which are defined in the Amended Credit Agreement (as defined below) shall have the same meanings herein as in the Amended Credit Agreement.
R E C I T A L S:
WHEREAS, the Borrower, the other Loan Parties from time to time party thereto, the Lenders from time to time party thereto and the Administrative Agent have entered into that certain Credit Agreement, dated as of October 5, 2021 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time prior to the date hereof, the “Credit Agreement” and, as further amended pursuant to this Amendment, the “Amended Credit Agreement”);
WHEREAS, the Loan Parties, the Administrative Agent and the Lenders party hereto are willing to amend the Credit Agreement in certain respects pursuant to Section 1 hereof on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, and subject to the terms and conditions hereof, the parties hereto agree as follows:
2
3
[Signature Pages Follow]
4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective authorized officers as of the day and year first above written.
INTAPP, INC., a Delaware corporation
By: /s/ Stephen Robertson______________________
Name: Stephen Robertson
Title: Chief Financial Officer
INTEGRATION APPLIANCE, INC., a Delaware corporation
By: /s/ Stephen Robertson______________________
Name: Stephen Robertson
Title: Chief Financial Officer
INTAPP US, INC., a Delaware corporation
By: /s/ Stephen Robertson______________________
Name: Stephen Robertson
Title: Chief Financial Officer
THE FRAYMAN GROUP, INC., a Delaware corporation
By: /s/ Stephen Robertson______________________
Name: Stephen Robertson
Title: Chief Financial Officer
[Amendment No. 2 to Credit Agreement Signature Page]
GWABBIT, INC., a Delaware corporation
By: /s/ Stephen Robertson______________________
Name: Stephen Robertson
Title: Chief Financial Officer
DEALCLOUD, INC., a Delaware corporation
By: /s/ Stephen Robertson______________________
Name: Stephen Robertson
Title: Chief Financial Officer
[Amendment No. 2 to Credit Agreement Signature Page]
JPMORGAN CHASE BANK, N.A., as Administrative Agent and as a Lender
By: /s/ John D’Alessandro______________________
Name: John D’Alessandro
Title: Authorized Signatory
[Amendment No. 2 to Credit Agreement Signature Page]
BANK OF AMERICA, N.A., as a Lender
By:_/s/ Dylan Honza________________________
Name: Dylan Honza
Title: Vice President
[Amendment No. 2 to Credit Agreement Signature Page]
CREDIT SUISSE AG CAYMAN ISLANDS BRANCH, as a Lender
By:__/s/ Doreen Barr________________________
Name: Doreen Barr
Title: Authorized Signatory
By:_/s/ Wesley Cronin_______________________
Name: Wesley Cronin
Title: Authorized Signatory
[Amendment No. 2 to Credit Agreement Signature Page]
Exhibit A
Amended Credit Agreement
[See attached]
CONFORMED TO REFLECT
AMENDMENT NO. 1 TO CREDIT AGREEMENT, DATED AS OF June 6, 2022 and
AMENDMENT NO. 2 TO CREDIT AGREEMENT, DATED AS OF November 17. 2022
CREDIT AGREEMENT dated as of October 5, 2021 among intapP, INC., as the Borrower, The Lenders and Other Loan Parties Party Hereto and JPMORGAN CHASE BANK, N.A., JPMORGAN CHASE BANK, N.A. and
BOFA SECURITIES, INC., as Joint Bookrunners and Joint Lead Arrangers |
|
TABLE OF CONTENTS
(Continued)
Page
TABLE OF CONTENTS
Page
Article I Definitions 1
SECTION 1.01 Defined Terms 1
SECTION 1.02 Classification of Loans and Borrowings 3334
SECTION 1.03 Terms Generally 3335
SECTION 1.04 Accounting Terms; GAAP 3435
SECTION 1.05 Interest Rates; LIBOR Notification 34Benchmark Notifications 36
SECTION 1.06 Pro Forma Adjustments for Acquisitions and Dispositions 3536
SECTION 1.07 Status of Obligations 3536
SECTION 1.08 Letters of Credit 3637
SECTION 1.09 Divisions 3637
Article II The Credits 3637
SECTION 2.01 Revolving Commitments 3637
SECTION 2.02 Loans and Borrowings 3637
SECTION 2.03 Requests for Borrowings 3738
SECTION 2.04 [Section Intentionally Omitted] 3839
SECTION 2.05 [Section Intentionally Omitted] 3839
SECTION 2.06 Letters of Credit 3839
SECTION 2.07 Funding of Borrowings 4243
SECTION 2.08 Interest Elections 4344
SECTION 2.09 Termination and Reduction of Revolving Commitments; Increase in Revolving Commitments 4445
SECTION 2.10 Repayment of Loans; Evidence of Debt 4647
SECTION 2.11 Prepayment of Loans 4647
SECTION 2.12 Fees 4748
SECTION 2.13 Interest 4849
SECTION 2.14 Alternate Rate of Interest; Illegality 4950
SECTION 2.15 Increased Costs 5153
SECTION 2.16 Break Funding Payments 5254
SECTION 2.17 Withholding of Taxes; Gross-Up 5354
SECTION 2.18 Payments Generally; Allocation of Proceeds; Sharing of Setoffs 5658
SECTION 2.19 Mitigation Obligations; Replacement of Lenders 5860
SECTION 2.20 Defaulting Lenders 5961
SECTION 2.21 Returned Payments 6163
i
TABLE OF CONTENTS
(Continued)
Page
SECTION 2.22 Banking Services and Swap Agreements 6163
Article III Representations and Warranties 6263
SECTION 3.01 Organization; Powers 6263
SECTION 3.02 Authorization; Enforceability 6263
SECTION 3.03 Governmental Approvals; No Conflicts 6264
SECTION 3.04 Financial Condition; No Material Adverse Change 6264
SECTION 3.05 Properties 6264
SECTION 3.06 Litigation and Environmental Matters 6364
SECTION 3.07 Compliance with Laws and Agreements; No Default 6365
SECTION 3.08 Investment Company Status 6365
SECTION 3.09 Taxes 6365
SECTION 3.10 ERISA 6365
SECTION 3.11 Disclosure 6465
SECTION 3.12 Material Agreements 6466
SECTION 3.13 Solvency 6466
SECTION 3.14 Insurance 6466
SECTION 3.15 Capitalization and Subsidiaries 6566
SECTION 3.16 Security Interest in Collateral 6566
SECTION 3.17 Employment Matters 6567
SECTION 3.18 Margin Regulations 6567
SECTION 3.19 Use of Proceeds 6567
SECTION 3.20 [Section Intentionally Omitted] 6567
SECTION 3.21 Anti-Corruption Laws and Sanctions 6567
SECTION 3.22 Affected Financial Institutions 6667
SECTION 3.23 Plan Assets; Prohibited Transactions 6667
Article IV Conditions 6668
SECTION 4.01 Effective Date 6668
SECTION 4.02 Each Credit Event 6870
Article V Affirmative Covenants 6970
SECTION 5.01 Financial Statements and Other Information 6971
SECTION 5.02 Notices of Material Events 7173
SECTION 5.03 Existence; Conduct of Business 7274
SECTION 5.04 Payment of Obligations 7274
SECTION 5.05 Maintenance of Properties 7274
SECTION 5.06 Books and Records; Inspection Rights 7274
ii
TABLE OF CONTENTS
(Continued)
Page
SECTION 5.07 Compliance with Laws and Material Contractual Obligations 7374
SECTION 5.08 Use of Proceeds 7375
SECTION 5.09 [Section Intentionally Omitted] 7375
SECTION 5.10 Insurance 7375
SECTION 5.11 [Section Intentionally Omitted] 7375
SECTION 5.12 Casualty and Condemnation 7375
SECTION 5.13 [Section Intentionally Omitted] 7475
SECTION 5.14 Additional Collateral; Further Assurances 7475
SECTION 5.15 Post-Closing Requirements 7577
Article VI Negative Covenants 7577
SECTION 6.01 Indebtedness 7577
SECTION 6.02 Liens 7880
SECTION 6.03 Fundamental Changes 7981
SECTION 6.04 Investments, Loans, Advances, Guarantees and Acquisitions 8082
SECTION 6.05 Asset Sales 8284
SECTION 6.06 Sale and Leaseback Transactions 8385
SECTION 6.07 Swap Agreements 8385
SECTION 6.08 Restricted Payments; Certain Payments of Indebtedness 8385
SECTION 6.09 Transactions with Affiliates 8587
SECTION 6.10 Restrictive Agreements 8587
SECTION 6.11 Amendment of Material Documents 8687
SECTION 6.12 Total Net Leverage Ratio 8688
Article VII Events of Default 8688
Article VIII The Administrative Agent 8991
SECTION 8.01 Authorization and Action 8991
SECTION 8.02 Administrative Agent’s Reliance, Limitation of Liability, Etc 9193
SECTION 8.03 Posting of Communications 9294
SECTION 8.04 The Administrative Agent Individually 9395
SECTION 8.05 Successor Administrative Agent 9495
SECTION 8.06 Acknowledgements of Lenders and Issuing Banks 9597
SECTION 8.07 Collateral Matters 9799
SECTION 8.08 Credit Bidding 9799
SECTION 8.09 Certain ERISA Matters 98100
SECTION 8.10 Flood Laws 99101
iii
TABLE OF CONTENTS
(Continued)
Page
Article IX Miscellaneous 100102
SECTION 9.01 Notices 100102
SECTION 9.02 Waivers; Amendments 101104
SECTION 9.03 Expenses; Limitation of Liability; Indemnity; Etc 103106
SECTION 9.04 Successors and Assigns 105108
SECTION 9.05 Survival 109112
SECTION 9.06 Counterparts; Integration; Effectiveness; Electronic Execution 109112
SECTION 9.07 Severability 110113
SECTION 9.08 Right of Setoff 110113
SECTION 9.09 Governing Law; Jurisdiction; Consent to Service of Process 111114
SECTION 9.10 WAIVER OF JURY TRIAL 112114
SECTION 9.11 Headings 112115
SECTION 9.12 Confidentiality 112115
SECTION 9.13 Several Obligations; Nonreliance; Violation of Law 113116
SECTION 9.14 USA PATRIOT Act 113116
SECTION 9.15 Disclosure 113116
SECTION 9.16 Appointment for Perfection 113116
SECTION 9.17 Interest Rate Limitation 114116
SECTION 9.18 No Fiduciary Duty, etc 114116
SECTION 9.19 [Section Intentionally Omitted] 115117
SECTION 9.20 Acknowledgement and Consent to Bail-In of Affected Financial Institutions 115117
SECTION 9.21 Acknowledgement Regarding Any Supported QFCs 115118
Article X Loan Guaranty 116118
SECTION 10.01 Guaranty 116118
SECTION 10.02 Guaranty of Payment 116119
SECTION 10.03 No Discharge or Diminishment of Loan Guaranty 116119
SECTION 10.04 Defenses Waived 117120
SECTION 10.05 Rights of Subrogation 117120
SECTION 10.06 Reinstatement; Stay of Acceleration 117120
SECTION 10.07 Information 118120
SECTION 10.08 Termination 118120
SECTION 10.09 Taxes 118121
SECTION 10.10 Maximum Liability 118121
SECTION 10.11 Contribution 118121
iv
TABLE OF CONTENTS
(Continued)
Page
SECTION 10.12 Liability Cumulative 119122
SECTION 10.13 Keepwell 119122
SCHEDULES:
Commitment Schedule
Schedule 3.05 – Properties, etc.
Schedule 3.06 – Disclosed Matters
Schedule 3.12 – Material Agreements
Schedule 3.15 – Capitalization and Subsidiaries
Schedule 5.15 – Post-Closing Requirements
Schedule 6.01 – Existing Indebtedness
Schedule 6.02 – Existing Liens
Schedule 6.04 – Existing Investments
EXHIBITS:
Exhibit A Assignment and Assumption
Exhibit B-1 Borrowing Request
Exhibit B-2 Interest Election Request
Exhibit C-1 U.S. Tax Compliance Certificate (For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)
Exhibit C-2 U.S. Tax Compliance Certificate (For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)
Exhibit C-3 U.S. Tax Compliance Certificate (For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes)
Exhibit C-4 U.S. Tax Compliance Certificate (For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)
Exhibit D Compliance Certificate
Exhibit E Joinder Agreement
v
CREDIT AGREEMENT dated as of October 5, 2021 (as it may be amended, restated, amended and restated, supplemented or modified from time to time, this “Agreement”), by and among Intapp, Inc., a Delaware corporation, as the Borrower, the other Loan Parties party hereto, the Lenders party hereto, and JPMORGAN CHASE BANK, N.A., as Administrative Agent.
The parties hereto agree as follows:
Definitions
“ABR”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, is bearing interest at a rate determined by reference to the Alternate Base Rate.
“Account” has the meaning assigned to such term in the Security Agreement.
“Account Debtor” means any Person obligated on an Account.
“Acquisition” means any transaction, or any series of related transactions, consummated on or after the Effective Date, by which any Loan Party (a) acquires any going business or all or substantially all of the assets of any Person, whether through purchase of assets, merger or otherwise or (b) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the Equity Interests of a Person which has ordinary voting power for the election of directors or other similar management personnel of a Person (other than Equity Interests having such power only by reason of the happening of a contingency) or a majority of the outstanding Equity Interests of a Person.
“Adjusted Daily Simple SOFR” means an interest rate per annum equal to (a) the Daily Simple SOFR, plus (b) 0.10%; provided that if the Adjusted Daily Simple SOFR as so determined would be less than the Floor, such rate shall be deemed to be equal to the Floor for the purposes of this Agreement.
“Adjusted LIBOTerm SOFR Rate” means, with respect to any Eurodollar Borrowing for any Interest Period or for any ABR Borrowing, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBOTerm SOFR Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate, plus (b) 0.10%; provided that if the Adjusted Term SOFR Rate as so determined would be less than the Floor, such rate shall be deemed to be equal to the Floor for the purposes of this Agreement.
“Administrative Agent” means JPMorgan Chase Bank, N.A. (or any of its designated branch offices or affiliates), in its capacity as administrative agent for the Lenders hereunder, or any successor administrative agent.
“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent.
“Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK Financial Institution.
1
“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the specified Person.
“Agent-Related Person” has the meaning assigned to it in Section 9.03(d).
“Aggregate Credit Exposure” means, at any time, the aggregate Credit Exposure of all the Lenders at such time.
“Agreement” has the meaning assigned to it in the introductory paragraph of this Agreement.
“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the NYFRB Rate in effect on such day plus ½ of 1.00%, and (c) the Adjusted LIBOTerm SOFR Rate for a one-month Interest Period onas published two (2) U.S. Government Securities Business Days prior to such day (or if such day is not a Business Day, the immediately preceding Business Day) plus 1.00%,; provided that, for the purpose of this definition, the Adjusted LIBOTerm SOFR Rate for any day shall be based on the LIBO Screen Rate (or if the LIBO Screen Rate is not available for such one month Interest Period, the LIBO Interpolated Rate)Term SOFR Reference Rate at approximately 11:005:00 a.m. LondonChicago time on such day (or any amended publication time for the Term SOFR Reference Rate, as specified by the CME Term SOFR Administrator in the Term SOFR Reference Rate methodology). Any change in the Alternate Base Rate due to a change in the Prime Rate, the NYFRB Rate or the Adjusted LIBOTerm SOFR Rate shall be effective from and including the effective date of such change in the Prime Rate, the NYFRB Rate or the Adjusted LIBOTerm SOFR Rate, respectively. If the Alternate Base Rate is being used as an alternate rate of interest pursuant to Section 2.14 (for the avoidance of doubt, only until the Benchmark Replacement has been determined pursuant to Section 2.14(cb)), then the Alternate Base Rate shall be the greater of clause (a) and (b) above and shall be determined without reference to clause (c) above. For the avoidance of doubt, if the Alternate Base Rate as determined pursuant to the foregoing would be less than 1.00%, such rate shall be deemed to be 1.00% for purposes of this Agreement.
“Ancillary Document” has the meaning assigned to it in Section 9.06(b).
“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to the Borrower or any of its Subsidiaries from time to time concerning or relating to bribery or corruption.
“Applicable Parties” has the meaning assigned to it in Section 8.03(c).
“Applicable Percentage” means, at any time with respect to any Lender, a percentage equal to a fraction the numerator of which is such Lender’s Revolving Commitment at such time and the denominator of which is the aggregate Revolving Commitments at such time (provided that, if the Revolving Commitments have terminated or expired, the Applicable Percentages shall be determined based upon such Lender’s share of the Aggregate Credit Exposure at such time); provided that, in accordance with Section 2.20, so long as any Lender shall be a Defaulting Lender, such Defaulting Lender’s Revolving Commitment shall be disregarded in the calculations above.
“Applicable Rate” means, for any day, with respect to any Loan, or with respect to the commitment fees payable hereunder, as the case may be, the applicable rate per annum set forth below under the caption “ABR Spread”, “EurodollarTerm Benchmark Spread/RFR” or “Commitment Fee Rate”, as the case may be, based upon the Borrower’s Total Net Leverage Ratio as of the most recent determination date; provided that until the delivery to the Administrative Agent, pursuant to Section 5.01, of the Borrower’s consolidated
2
financial information for the Borrower’s first fiscal quarter ending after the Effective Date, the “Applicable Rate” shall be the applicable rates per annum set forth in Category 1:
Category |
Total Net Leverage Ratio |
EURODOLLARTERM Benchmark Spread/rfr |
ABR |
Commitment Fee Rate |
1 |
> 3.00 to 1.00 |
2.50% |
1.50% |
0.40% |
2 |
>2.00 to 1.00 but < 3.00 to 1.00 |
2.25% |
1.25% |
0.35% |
3 |
>1.00 to 1.00 but < 2.00 to 1.00 |
2.00% |
1.00% |
0.30% |
4 |
< 1.00 to 1.00 |
1.75% |
0.75% |
0.25% |
For purposes of the foregoing, (a) the Applicable Rate shall be determined as of the end of each fiscal quarter of the Borrower, based upon the Borrower’s annual or quarterly consolidated financial statements delivered pursuant to Section 5.01 and (b) each change in the Applicable Rate resulting from a change in the Total Net Leverage Ratio shall be effective during the period commencing on and including the date of delivery to the Administrative Agent of such consolidated financial statements indicating such change and ending on the date immediately preceding the effective date of the next such change, provided that at the option of the Administrative Agent or at the request of the Required Lenders, if the Borrower fails to deliver the annual or quarterly consolidated financial statements required to be delivered by it pursuant to Section 5.01, the Total Net Leverage Ratio shall be deemed to be in Category 1 during the period from the expiration of the time for delivery thereof until such consolidated financial statements are delivered.
If at any time the Administrative Agent determines that the financial statements upon which the Applicable Rate was determined were incorrect (whether based on a restatement, fraud or otherwise), or any ratio or compliance information in a Compliance Certificate or other certification was incorrectly calculated, relied on incorrect information or was otherwise not accurate, true or correct, the Borrower shall be required to retroactively pay any additional amount that the Borrower would have been required to pay if such financial statements, Compliance Certificate or other information had been accurate and/or computed correctly at the time they were delivered.
“Approved Electronic Platform” has the meaning assigned to it in Section 8.03(a).
“Approved Fund” has the meaning assigned to the term in Section 9.04(b).
“Arrangers” means JPMorgan Chase Bank, N.A. and BofA Securities, Inc., each in its capacity as joint bookrunner and joint lead arranger hereunder.
“Assignment and Assumption” means an assignment and assumption agreement entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 9.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form (including electronic records generated by the use of an electronic platform) approved by the Administrative Agent.
“Availability Period” means the period from and including the Effective Date to but excluding the earlier of the Maturity Date and the date of termination of the Revolving Commitments.
3
“Available Tenor” means, as of any date of determination and with respect to the then-current Benchmark, as applicable, any tenor for such Benchmark (or component thereof) or payment period for interest calculated with reference to such Benchmark (or component thereof), as applicable, that is or may be used for determining the length of an Interest Period for any term rate or otherwise, for determining any frequency of making payments of interest calculated pursuant to this Agreement as of such date and not including, for the avoidance of doubt, any tenor for such Benchmark that is then-removed from the definition of “Interest Period” pursuant to clause (ge) of Section 2.14.
“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable Resolution Authority in respect of any liability of an Affected Financial Institution.
“Bail-In Legislation” means (a) with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law, regulation, rule or requirement for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (other than through liquidation, administration or other insolvency proceedings).
“Banking Services” means each and any of the following bank services provided to any Loan Party or any Subsidiary by any Lender or any of its Affiliates: (a) credit cards for commercial customers (including, without limitation, “commercial credit cards” and purchasing cards), (b) stored value cards, (c) merchant processing services, and (d) treasury management services (including, without limitation, controlled disbursement, automated clearinghouse transactions, return items, any direct debit scheme or arrangement, overdrafts and interstate depository network services and cash pooling services).
“Banking Services Obligations” means any and all obligations of the Loan Parties or their Subsidiaries, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor) in connection with Banking Services.
“Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy,” as now or hereafter in effect, or any successor thereto, as hereafter amended.
“Bankruptcy Event” means, with respect to any Person, when such Person becomes the subject of a voluntary or involuntary bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, administrator, custodian, assignee for the benefit of creditors or similar Person charged with the reorganization or liquidation of its business, appointed for it, or, in the good faith determination of the Administrative Agent, has taken any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any such proceeding or appointment, or has had any order for relief in such proceeding entered in respect thereof, provided that a Bankruptcy Event shall not result solely by virtue of any ownership interest, or the acquisition of any ownership interest, in such Person by a Governmental Authority or instrumentality thereof, unless such ownership interest results in or provides such Person with immunity from the jurisdiction of courts within the U.S. or from the enforcement of judgments or writs of attachment on its assets or permits such Person (or such Governmental Authority or instrumentality) to reject, repudiate, disavow or disaffirm any contracts or agreements made by such Person.
“Benchmark” means, initially, LIBOwith respect to any (i) RFR Loan, the Daily Simple SOFR or (ii) Term Benchmark Loan, the Term SOFR Rate; provided that if a Benchmark Transition Event, a Term SOFR Transition Event, an Early Opt-in Election or an Other Benchmark Rate Election, as
4
applicable, and its and the related Benchmark Replacement Date have occurred with respect to the LIBODaily Simple SOFR or Term SOFR Rate, as applicable, or the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to clause (c) or clause (db) of Section 2.14.
“Benchmark Replacement” means, for any Available Tenor, the first alternative set forth in the order below that can be determined by the Administrative Agent for the applicable Benchmark Replacement Date; provided that, in the case of an Other Benchmark Rate Election, “Benchmark Replacement” shall mean the alternative set forth in (3) below::
(1) the sum of (a) Term SOFR and (b) the related Benchmark Replacement Adjustment;
(21) the sum of (a)Adjusted Daily Simple SOFR and (b) the related Benchmark Replacement Adjustment; or
(32) the sum of: (a) the alternate benchmark rate that has been selected by the Administrative Agent and the Borrower as the replacement for the then-current Benchmark for the applicable Corresponding Tenor giving due consideration to (i) any selection or recommendation of a replacement benchmark rate or the mechanism for determining such a rate by the Relevant Governmental Body or (ii) any evolving or then-prevailing market convention for determining a benchmark rate as a replacement for the then-current Benchmark for dollar-denominated syndicated credit facilities at such time in the United States and (b) the related Benchmark Replacement Adjustment;.
provided that, in the case of clause (1), such Unadjusted Benchmark Replacement is displayed on a screen or other information service that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion; provided further that, in the case of clause (3), when such clause is used to determine the Benchmark Replacement in connection with the occurrence of an Other Benchmark Rate Election, the alternate benchmark rate selected by the Administrative Agent and the Borrower shall be the term benchmark rate that is used in lieu of a LIBOR-based rate in the relevant other Dollar-denominated syndicated credit facilities; provided further that, notwithstanding anything to the contrary in this Agreement or in any other Loan Document, upon the occurrence of a Term SOFR Transition Event, and the delivery of a Term SOFR Notice, on the applicable Benchmark Replacement Date the “Benchmark Replacement” shall revert to and shall be deemed to be the sum of (a) Term SOFR and (b) the related Benchmark Replacement Adjustment, as set forth in clause (1) of this definition (subject to the first proviso above).
If the Benchmark Replacement as determined pursuant to clause (1), or (2) or (3) above would be less than the Floor, the Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the other Loan Documents.
“Benchmark Replacement Adjustment” means, with respect to any replacement of the then-current Benchmark with an Unadjusted Benchmark Replacement for any applicable Interest Period and Available Tenor for any setting of such Unadjusted Benchmark Replacement:
, the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by (1) for purposes of clauses (1) and (2) of the definition of “Benchmark Replacement,” the first alternative set forth in the order below that can be determined by the Administrative Agent:
5
(a) the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) as of the Reference Time such Benchmark Replacement is first set for such Interest Period that has been selected or recommended by the Relevant Governmental Body for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement for the applicable Corresponding Tenor;
(b) the spread adjustment (which may be a positive or negative value or zero) as of the Reference Time such Benchmark Replacement is first set for such Interest Period that would apply to the fallback rate for a derivative transaction referencing the ISDA Definitions to be effective upon an index cessation event with respect to such Benchmark for the applicable Corresponding Tenor; and
(2) for purposes of clause (3) of the definition of “Benchmark Replacement,” the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by thethe Administrative Agent and the Borrower for the applicable Corresponding Tenor giving due consideration to (i) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body on the applicable Benchmark Replacement Date and/or (ii) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement for dollar-denominated syndicated credit facilities; at such time.
provided that, in the case of clause (1) above, such adjustment is displayed on a screen or other information service that publishes such Benchmark Replacement Adjustment from time to time as selected by the Administrative Agent in its reasonable discretion.
“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement and/or any Term Benchmark Loan, any technical, administrative or operational changes (including changes to the definition of “Alternate Base Rate,” the definition of “Business Day,” the definition of “U.S. Government Securities Business Day,” the definition of “Interest Period,” timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, length of lookback periods, the applicability of breakage provisions, and other technical, administrative or operational matters) that the Administrative Agent decides may be appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Administrative Agent determines that no market practice for the administration of such Benchmark Replacement exists, in such other manner of administration as the Administrative Agent decides is reasonably necessary in connection with the administration of this Agreement and the other Loan Documents).
“Benchmark Replacement Date” means, with respect to any Benchmark, the earliest to occur of the following events with respect to thesuch then-current Benchmark:
(1) in the case of clause (1) or (2) of the definition of “Benchmark Transition Event,” the later of (a) the date of the public statement or publication of information referenced therein and (b) the date on which the administrator of such Benchmark (or the published component used in the calculation thereof) permanently or indefinitely ceases to provide all Available Tenors of such Benchmark (or such component thereof); or
6
(2) in the case of clause (3) of the definition of “Benchmark Transition Event,” the first date on which such Benchmark (or the published component used in the calculation thereof) has been determined and announced by the regulatory supervisor for the administrator of such Benchmark (or such component thereof) to be no longer representative; provided, that such non-representativeness will be determined by reference to the most recent statement or publication referenced in such clause (3) and even if any Available Tenor of such Benchmark (or such component thereof) continues to be provided on such date;.
(3) in the case of a Term SOFR Transition Event, the date that is thirty (30) days after the date a Term SOFR Notice is provided to the Lenders and the Borrower pursuant to Section 2.14(d); or
(4) in the case of an Early Opt-in Election or an Other Benchmark Rate Election, the sixth (6th) Business Day after the date notice of such Early Opt-in Election or Other Benchmark Rate Election, as applicable, is provided to the Lenders, so long as the Administrative Agent has not received, by 5:00 p.m. (New York City time) on the fifth (5th) Business Day after the date notice of such Early Opt-in Election or Other Benchmark Rate Election, as applicable, is provided to the Lenders, written notice of objection to such Early Opt-in Election or Other Benchmark Rate Election, as applicable, from Lenders comprising the Required Lenders.
For the avoidance of doubt, (ai) if the event giving rise to the Benchmark Replacement Date occurs on the same day as, but earlier than, the Reference Time in respect of any determination, the Benchmark Replacement Date will be deemed to have occurred prior to the Reference Time for such determination and (bii) the “Benchmark Replacement Date” will be deemed to have occurred in the case of clause (1) or (2) with respect to any Benchmark upon the occurrence of the applicable event or events set forth therein with respect to all then-current Available Tenors of such Benchmark (or the published component used in the calculation thereof).
“Benchmark Transition Event” means, with respect to any Benchmark, the occurrence of one or more of the following events with respect to thesuch then-current Benchmark:
(1) a public statement or publication of information by or on behalf of the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that such administrator has ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof), permanently or indefinitely,; provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component thereof);
(2) a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof), the Federal Reserve Board, the NYFRB, the CME Term SOFR Administrator, an insolvency official with jurisdiction over the administrator for such Benchmark (or such component), a resolution authority with jurisdiction over the administrator for such Benchmark (or such component) or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark (or such component), in each case, which states that the administrator of such Benchmark (or such component) has ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof) permanently or indefinitely,; provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component thereof); or
7
(3) a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that all Available Tenors of such Benchmark (or such component thereof) are no longer, or as of a specified future date will no longer be, representative.
For the avoidance of doubt, a “Benchmark Transition Event” will be deemed to have occurred with respect to any Benchmark if a public statement or publication of information set forth above has occurred with respect to each then-current Available Tenor of such Benchmark (or the published component used in the calculation thereof).
“Benchmark Unavailability Period” means, with respect to any Benchmark, the period (if any) (x) beginning at the time that a Benchmark Replacement Date pursuant to clauses (1) or (2) of that definition has occurred if, at such time, no Benchmark Replacement has replaced thesuch then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 2.14 and (y) ending at the time that a Benchmark Replacement has replaced thesuch then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 2.14.
“Beneficial Ownership Certification” means a certification regarding beneficial ownership or control as required by the Beneficial Ownership Regulation.
“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.
“Benefit Plan” means any of (a) an “employee benefit plan” (as defined in Section 3(3) of ERISA) that is subject to Title I of ERISA, (b) a “plan” as defined in Section 4975 of the Code to which Section 4975 of the Code applies, and (c) any Person whose assets include (for purposes of the Plan Asset Regulations or otherwise for purposes of Title I of ERISA or Section 4975 of the Code) the assets of any such “employee benefit plan” or “plan”.
“BHC Act Affiliate” of a party means an “affiliate” (as such term is defined under, and interpreted in accordance with, 12 U.S.C. 1841(k)) of such party.
“Board of Directors” means as to any Person, the board of directors, board of managers, sole member or managing member or other governing body of such Person, or if such Person is owned or managed by a single entity or has a general partner, the board of directors, board of managers, sole member or managing member or other governing body of such entity or general partner, or in each case, any duly authorized committee thereof, and the term “directors” means members of the Board of Directors.
“Borrower” means Intapp, Inc., a Delaware corporation.
“Borrowing” means Revolving Loans of the same Type, made, converted or continued on the same date and, in the case of EurodollarTerm Benchmark Loans, as to which a single Interest Period is in effect.
“Borrowing Request” means a request by the Borrower for a Borrowing in accordance with Section 2.03, which shall be substantially in the form of Exhibit B‑1 hereto or any other form approved by the Administrative Agent.
“Brightstar Acquisition” means the Acquisition by Intregration Appliance, directly or indirectly, of the Transferred Assets (as defined therein) pursuant to the Brightstar Acquisition Agreement and the transactions related thereto.
8
“Brightstar Acquisition Agreement” means that certain Asset Purchase Agreement, dated as of June 6, 2022, by and among Integration Appliance, Brightstar Seller and the Owners (as defined therein), as amended, supplemented, modified or restated from time to time; provided that no provision thereof shall be amended , waived, or otherwise modified, in each case in a manner materially adverse to the Lenders or the Administrative Agent (in each case, in its capacity as such) without the prior written consent of the Administrative Agent.
“Brightstar Guaranty” means the Guarnatee by the Borrower under and pursuant to that certain Guaranty Agreement, dated as of June 6, 2022, made by the Borrower in favor of Brightstar Seller, as amended, supplemented, modified or restated from time to time; provided that no provision thereof shall be amended, waived or otherwise modified, in each case in a manner materially adverse to the Lenders or the Administrative Agent (in each case, in its capacity as such) without the prior written consent of the Administrative Agent.
“Brightstar Seller” means Billstream LLC, a Delaware limited liability company.
“Burdensome Restrictions” means any consensual encumbrance or restriction of the type described in clause (a) or (b) of Section 6.10.
“Business Day” means, any day that is not(other than a Saturday, or a Sunday or other day) on which commercial banks are open for business in New York City are authorized or required by law to remain closedor Chicago; provided that, when used in connection with a Eurodollar Loan, the term “Business Day” shall also exclude any day on which banks are not open for general business in London.in addition to the foregoing, a Business Day shall be (a) in relation to RFR Loans and any interest rate settings, fundings, disbursements, settlements or payments of any such RFR Loan, or any other dealings of such RFR Loan and (b) in relation to Loans referencing the Adjusted Term SOFR Rate and any interest rate settings, fundings, disbursements, settlements or payments of any such Loans referencing the Adjusted Term SOFR Rate or any other dealings of such Loans referencing the Adjusted Term SOFR Rate, any such day that is only a U.S. Government Securities Business Day.
“Capital Lease Obligations” of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases or financing leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.
“Capitalized Software Expenditures” means, for any period, the aggregate amount of all expenditures (whether paid in cash or accrued as liabilities) by any Person during such period in respect of purchased software or internally developed software and software enhancements that, in conformity with GAAP, are or are required to be reflected as capitalized costs on the consolidated balance sheet (excluding the footnotes thereto) of such Person.
“CFC” means a “controlled foreign corporation” within the meaning of Section 957 of the Code in which any Loan Party is a “United States shareholder” within the meaning of Section 951(b) of the Code the dividends of which are not entitled to the dividends received deduction under Section 245A of the Code.
“Change in Control” means (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the SEC thereunder as in effect on the date hereof, but excluding any employee benefit plan of such Person or its Subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary
9
or administrator of any such plan), other than the Permitted Holders, of Equity Interests representing more than 35% of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of the Borrower or (b) occupation at any time of a majority of the seats (other than vacant seats) on the Board of Directors of the Borrower by Persons other than Persons (x) who were directors of the Borrower on the Effective Date, (y) whose election or nomination to the Board of Directors was approved by individuals referred to in clause (x) above constituting at the time of such election or nomination at least a majority of the Board of Directors or (z) whose election or nomination to the Board of Directors was approved by individuals referred to in clauses (x) and (y) above constituting at the time of such election or nomination at least a majority of the Board of Directors.
“Change in Law” means the occurrence after the date of this Agreement of any of the following: (a) the adoption of or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (c) compliance by any Lender or the Issuing Bank (or, for purposes of Section 2.15(b), by any lending office of such Lender or by such Lender’s or the Issuing Bank’s holding company, if any) with any request, guideline, requirement or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement; provided that, notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines, requirements or directives thereunder or issued in connection therewith or in the implementation thereof, and (y) all requests, rules, guidelines, requirements or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the U.S. or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted, issued or implemented.
“Charges” has the meaning assigned to such term in Section 9.17.
“Class”, when used in reference to (a) any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans and (b) any Lender, refers to whether such Lender has a Loan of a particular Class.
“CME Term SOFR Administrator” means CME Group Benchmark Administration Limited as administrator of the forward-looking term SOFR (or a successor administrator).
“Code” means the Internal Revenue Code of 1986, as amended from time to time.
“Collateral” means any and all property owned, leased or operated by a Person covered by the Collateral Documents and any and all other property of any Loan Party, now existing or hereafter acquired, that may at any time be, become or be intended to be, subject to a security interest or Lien in favor of the Administrative Agent, on behalf of itself and the Lenders and other Secured Parties, to secure the Secured Obligations, provided that, owned or leased real property shall not constitute Collateral.
“Collateral Documents” means, collectively, the Security Agreement and any other agreements, instruments and documents executed in connection with this Agreement that are intended to create, perfect or evidence Liens to secure the Secured Obligations, including, without limitation, all other security agreements, pledge agreements, mortgages, deeds of trust, loan agreements, notes, guarantees, subordination agreements, pledges, powers of attorney, consents, assignments, contracts, fee letters, notices, leases, financing statements and all other written matter whether theretofore, now or hereafter executed by any Loan Party and delivered to the Administrative Agent.
“Commitment Schedule” means the Schedule attached hereto identified as such.
10
“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.
“Communications” has the meaning assigned to such term in Section 8.03(c).
“Compliance Certificate” means a certificate of a Financial Officer in substantially the form of Exhibit D.
“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.
“Consolidated EBITDA” means, for any period, Consolidated Net Income for the Borrower and its Subsidiaries for such period plus (a) without duplication and to the extent deducted in determining Consolidated Net Income for such period, the sum of (i) Consolidated Interest Expense for such period, (ii) income tax expense for such period net of tax refunds, (iii) all amounts attributable to depreciation and amortization expense for such period, (iv) any extraordinary non-cash charges for such period, (v) any other non-cash charges for such period (but excluding any non-cash charge in respect of an item that was included in Consolidated Net Income in a prior period and any non-cash charge that relates to the write-down or write-off of inventory), (vi) any extraordinary, unusual or non-recurring losses or expenses for such period to the extent paid in cash such during such period; provided that the aggregate amount of add-backs pursuant to this clause (vi) shall not exceed 20% of Consolidated EBITDA (calculated prior to giving effect to this clause (vi)) for any four quarter period, (vii) any fees, costs and expenses incurred in connection with the IPO, (viii) non-cash stock-based compensation expenses for such period, (ix) the net amount, if any, by which consolidated deferred revenues increased during such period, (x) reasonable expenses and fees incurred in connection with the negotiation, execution and delivery of the Loan Documents during such period, (xi) expenses that are actually reimbursed in cash by a third party (and not the Borrower, a Subsidiary of the Borrower or one of their Affiliates) during such period (except to the extent such payment gives rise to reimbursement obligations) and (xii) currency translation losses and losses related to currency re-measurements minus (b) without duplication and to the extent included in Consolidated Net Income, (i) any cash payments made during such period in respect of non-cash charges described in clause (a)(v) taken in a prior period, (ii) any extraordinary gains and any non-cash items of income for such period, (iii) Capitalized Software Expenditures and (iv) the net amount, if any, by which consolidated deferred revenues decreased during such period, all calculated for the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP.
“Consolidated Interest Expense” means, with reference to any period, total interest expense (including that attributable to Capital Lease Obligations) of the Borrower and its Subsidiaries for such period with respect to all outstanding Indebtedness of the Borrower and its Subsidiaries (including all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptances and net costs under Swap Agreements in respect of interest rates, to the extent such net costs are allocable to such period in accordance with GAAP), calculated for the Borrower and its Subsidiaries on a consolidated basis for such period in accordance with GAAP.
“Consolidated Net Income” means, for any period, the consolidated net income (or loss) determined for the Borrower and its Subsidiaries, on a consolidated basis in accordance with GAAP; provided that there shall be excluded (a) the income (or deficit) of any Person accrued prior to the date it becomes a Subsidiary or is merged into or consolidated with the Borrower or any Subsidiary, (b) the income (or deficit) of any Person (other than a Subsidiary) in which the Borrower or any Subsidiary has an ownership interest, except to the extent that any such income is actually received by the Borrower or such Subsidiary in the form of dividends or similar distributions and (c) the undistributed earnings of any Subsidiary, to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time
11
permitted by the terms of any contractual obligation (other than under any Loan Document) or Requirement of Law applicable to such Subsidiary.
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.
“Control Investment Affiliate” means, as to any Person, any other Person that (a) directly or indirectly, is in control of, is controlled by, or is under common control with, such Person and (b) is organized by such Person primarily for the purpose of making equity or debt investments in one or more companies.
“Corresponding Tenor” with respect to any Available Tenor means, as applicable, either a tenor (including overnight) or an interest payment period having approximately the same length (disregarding business day adjustment) as such Available Tenor.
“Covered Entity” means any of the following:
(i) a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b);
(ii) a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or
(iii) a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b).
“Covered Party” has the meaning assigned to it in Section 9.21(b).
“Credit Exposure” means, as to any Lender, at any time, the sum of the aggregate outstanding principal amount of such Lender’s Revolving Loans and its LC Exposure at such time.
“Credit Party” means the Administrative Agent, the Issuing Bank or any other Lender.
“Daily Simple SOFR” means, for any day (a “SOFR Rate Day”), a rate per annum equal to SOFR for the day (such day “SOFR Determination Date”) that is five (5) U.S. Government Securities Business Days prior to (i) if such SOFR Rate Day is a U.S. Government Securities Business Day, such SOFR Rate Day or (ii) if such SOFR Rate Day is not a U.S. Government Securities Business Day, the U.S. Government Securities Business Day immediately preceding such SOFR Rate Day, with the conventions for this rate being established by the Administrative Agent in accordance with the conventions for this rate selected or recommended by the Relevant Governmental Body for determining “in each case, as such SOFR is published by the SOFR Administrator on the SOFR Administrator’s Website. Any change in Daily Simple SOFR” for business loans; provided, that if the Administrative Agent decides that any such convention is not administratively feasible for the Administrative Agent, then the Administrative Agent may establish another convention in its reasonable discretion. due to a change in SOFR shall be effective from and including the effective date of such change in SOFR without notice to the Borrower.
“Default” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.
12
“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.
“Defaulting Lender” means any Lender that (a) has failed, within two (2) Business Days of the date required to be funded or paid, to (i) fund any portion of its Loans, (ii) fund any portion of its participations in Letters of Credit or (iii) pay over to any Credit Party any other amount required to be paid by it hereunder, unless, in the case of clause (i) above, such Lender notifies the Administrative Agent in writing that such failure is the result of such Lender’s good faith determination that a condition precedent to funding (specifically identified and including the particular default, if any) has not been satisfied, (b) has notified the Borrower or any Credit Party in writing, or has made a public statement to the effect, that it does not intend or expect to comply with any of its funding obligations under this Agreement (unless such writing or public statement indicates that such position is based on such Lender’s good faith determination that a condition precedent (specifically identified and including the particular default, if any) to funding a Loan under this Agreement cannot be satisfied) or generally under other agreements in which it commits to extend credit, (c) has failed, within three (3) Business Days after request by a Credit Party, acting in good faith, to provide a certification in writing from an authorized officer of such Lender that it will comply with its obligations (and is financially able to meet such obligations as of the date of certification) to fund prospective Loans and participations in then outstanding Letters of Credit under this Agreement, provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon such Credit Party’s receipt of such certification in form and substance satisfactory to it and the Administrative Agent, or (d) has become the subject of (i) a Bankruptcy Event or (ii) a Bail-In Action.
“Disclosed Matters” means the actions, suits, proceedings and environmental matters disclosed in Schedule 3.06.
“Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition (in one transaction or in a series of transactions and whether effected pursuant to a Division or otherwise) of any property by any Person (including any sale and leaseback transaction and any issuance of Equity Interests by a Subsidiary of such Person), including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith.
“Disqualified Equity Interest” means any Equity Interest which, by its terms (or by the terms of any security or other Equity Interest into which it is convertible or for which it is exchangeable), or upon the happening of any event or condition (a) matures or is mandatorily redeemable (other than solely for an Equity Interest that is not a Disqualified Equity Interest and/or cash in lieu of fractional shares), pursuant to a sinking fund obligation or otherwise (except as a result of a change in control or asset sale so long as any right of the holders thereof upon the occurrence of a change in control or asset sale event shall be subject to the occurrence of the repayment in full of all the Loans and all other Obligations that are accrued and payable, the cancellation, expiration or cash collateralization of all Letters of Credit and the termination or expiration of the Revolving Commitments), (b) is redeemable at the option of the holder thereof (other than solely for an Equity Interest that is not a Disqualified Equity Interest and/or cash in lieu of fractional shares), in whole or in part (except as a result of a change in control, asset sale or, in the case of any Equity Interest issued to an employee or director of the Borrower or a Subsidiary, the death, disability, retirement, severance or termination of employment or service of such holder, in each case so long as any right of the holders thereof upon the occurrence of such event shall be subject to the occurrence of the repayment in full of all the Loans and all other Obligations that are accrued and payable, the cancellation, expiration or cash collateralization of all Letters of Credit and the termination or expiration of the Revolving Commitments), (c) requires the payment of any cash dividend or any other scheduled cash payment constituting a return of capital or (d) is or becomes convertible into or exchangeable for Indebtedness or any other Equity Interests that would constitute Disqualified Equity Interests, in each case, prior to the date that is ninety-one (91) days after the later of the Maturity Date; provided that if such Equity Interests are
13
issued to any plan for the benefit of employees of the Borrower or its Subsidiaries or by any such plan to such employees, such Equity Interests shall not constitute Disqualified Equity Interests solely because they may be required to be repurchased by the Borrower or any Subsidiary of the Borrower in order to satisfy applicable statutory or regulatory obligations.
“Dividing Person” has the meaning assigned to it in the definition of “Division.”
“Division” means the division of the assets, liabilities and/or obligations of a Person (the “Dividing Person”) among two or more Persons (whether pursuant to a “plan of division” or similar arrangement), which may or may not include the Dividing Person and pursuant to which the Dividing Person may or may not survive.
“Division Successor” means any Person that, upon the consummation of a Division of a Dividing Person, holds all or any portion of the assets, liabilities and/or obligations previously held by such Dividing Person immediately prior to the consummation of such Division. A Dividing Person which retains any of its assets, liabilities and/or obligations after a Division shall be deemed a Division Successor upon the occurrence of such Division.
“Document” has the meaning assigned to such term in the Security Agreement.
“Dollars”, “dollars” or “$” refers to lawful money of the U.S.
“Domestic Subsidiary” means a Subsidiary of the Borrower or any other Loan Party to the extent such Subsidiary is organized under the laws of a jurisdiction located in the United States, any state thereof or the District of Columbia.
“Early Opt-in Election” means, if the then-current Benchmark is LIBO Rate, the occurrence of:
(1) a notification by the Administrative Agent to (or the request by the Borrower to the Administrative Agent to notify) each of the other parties hereto that at least five currently outstanding Dollar-denominated syndicated credit facilities at such time contain (as a result of amendment or as originally executed) a SOFR-based rate (including SOFR, a term SOFR or any other rate based upon SOFR) as a benchmark rate (and such syndicated credit facilities are identified in such notice and are publicly available for review), and
(2) the joint election by the Administrative Agent and the Borrower to trigger a fallback from LIBO Rate and the provision, as applicable, by the Administrative Agent of written notice of such election to the Borrower and to the Lenders.
“Earn-Outs” means unsecured liabilities of a Loan Party or any of its Subsidiaries arising under an agreement to make any deferred payment as a part of the purchase price for a Permitted Acquisition including performance bonuses, earn-outs or consulting payments in any related services, employment, non-compete, deferred compensation or similar agreement, in an amount that is subject to or contingent upon the revenues, income, cash flow or profits (or the like) of the underlying target.
“ECP” means an “eligible contract participant” as defined in Section 1(a)(18) of the Commodity Exchange Act or any regulations promulgated thereunder and the applicable rules issued by the Commodity Futures Trading Commission and/or the SEC.
14
“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.
“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.
“EEA Resolution Authority” means any public administrative authority or any Person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.
“Effective Date” means the date on which the conditions specified in Section 4.01 are satisfied (or waived in accordance with Section 9.02).
“Electronic Signature” means an electronic sound, symbol, or process attached to, or associated with, a contract or other record and adopted by a Person with the intent to sign, authenticate or accept such contract or record.
“Electronic System” means any electronic system, including e-mail, e-fax, web portal access for the Borrower and any other Internet or extranet-based site, whether such electronic system is owned, operated or hosted by the Administrative Agent or the Issuing Bank and any of its respective Related Parties or any other Person, providing for access to data protected by passcodes or other security system.
“Environmental Laws” means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to (i) the environment, (ii) preservation or reclamation of natural resources, (iii) the management, Release or threatened Release of any Hazardous Material or (iv) health and safety matters.
“Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) any violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) any exposure to any Hazardous Materials, (d) the Release or threatened Release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.
“Equipment” has the meaning assigned to such term in the Security Agreement.
“Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any of the foregoing, but excluding any debt securities convertible into any of the foregoing.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder.
15
“ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or Section 4001(14) of ERISA or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.
“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder, with respect to a Plan (other than an event for which the 30 day notice period is waived); (b) the failure to satisfy the “minimum funding standard” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(c) of the Code or Section 302(c) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Borrower or any ERISA Affiliate of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the Borrower or any ERISA Affiliate of any liability with respect to the withdrawal or partial withdrawal of the Borrower or any ERISA Affiliate from any Plan or Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice, concerning the imposition upon the Borrower or any ERISA Affiliate of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent, in critical status or in reorganization, within the meaning of Title IV of ERISA.
“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor Person), as in effect from time to time.
“Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, bear interest at a rate determined by reference to the Adjusted LIBO Rate.
“Event of Default” has the meaning assigned to such term in Article VII.
“Excluded Swap Obligation” means, with respect to any Guarantor, any Swap Obligation if, and to the extent that, all or a portion of the Guarantee of such Guarantor of, or the grant by such Guarantor of a security interest to secure, such Swap Obligation (or any Guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Guarantor’s failure for any reason to constitute an ECP at the time the Guarantee of such Guarantor or the grant of such security interest becomes or would become effective with respect to such Swap Obligation. If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such Guarantee or security interest is or becomes illegal.
“Excluded Taxes” means any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient: (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan, Letter of Credit or Revolving Commitment pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan, Letter of Credit or Revolving Commitment (other than pursuant to an assignment request by the Borrower under Section 2.19(b)) or (ii) such Lender
16
changes its lending office, except in each case to the extent that, pursuant to Section 2.17, amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender acquired the applicable interest in a Loan, Letter of Credit or Revolving Commitment or to such Lender immediately before it changed its lending office, (c) Taxes attributable to such Recipient’s failure to comply with Section 2.17(f), and (d) any withholding Taxes imposed under FATCA.
“FATCA” means Sections 1471 through 1474 of the Code as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreement entered into pursuant to Section 1471(b)(1) of the Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement, treaty or convention among Governmental Authorities and implementing such Sections of the Code.
“FCA” has the meaning assigned to such term in Section 1.05.
“Federal Funds Effective Rate” means, for any day, the rate calculated by the NYFRB based on such day’s federal funds transactions by depositary institutions, as determined in such manner as shall be set forth on the NYFRB’s Website from time to time, and published on the next succeeding Business Day by the NYFRB as the effective federal funds rate, provided that, if the Federal Funds Effective Rate as so determined would be less than 0.00%, such rate shall be deemed to be 0.00% for the purposes of this Agreement.
“Federal Reserve Board” means the Board of Governors of the Federal Reserve System of the United States of America.
“Financial Officer” means the chief financial officer, principal accounting officer, treasurer or controller of the Borrower.
“First Amendment” means that certain Amendment No. 1 to Credit Agreement and to Pledge and Security Agreement, dated as of the First Amendment Effective Date, by and among the Borrower, the other Loan Parties party thereto, the Lenders party thereto and the Administrative Agent.
“First Amendment Effective Date” means June 6, 2022.
“Fixtures” has the meaning assigned to such term in the Security Agreement.
“Flood Laws” has the meaning assigned to such term in Section 8.10.
“Floor” means the benchmark rate floor, if any, provided in this Agreement initially (as of the execution of this Agreement, the modification, amendment or renewal of this Agreement or otherwise) with respect to the LIBO Rate.Adjusted Term SOFR Rate or the Adjusted Daily Simple SOFR, as applicable. For the avoidance of doubt, the initial Floor for each of Adjusted Term SOFR Rate or Adjusted Daily Simple SOFR shall be 0.00%.
“Foreign Lender” means (a) if the Borrower is a U.S. Person, a Lender that is not a U.S. Person, and (b) if the Borrower is not a U.S. Person, a Lender that is resident or organized under the laws of a jurisdiction other than that in which the Borrower is resident for tax purposes.
“Foreign Subsidiary” means any Subsidiary which is not a Domestic Subsidiary.
17
“Foreign Subsidiary Holding Company” means a Subsidiary (a) substantially all of the assets of which are Equity Interests, or Equity Interests and Indebtedness, in one or more CFCs or (b) that is treated as a disregarded entity for U.S. federal income tax purposes and holds Equity Interests in one or more CFCs.
“Funding Account” has the meaning assigned to such term in Section 4.01(i).
“GAAP” means generally accepted accounting principles in the U.S.
“Governmental Authority” means the government of the U.S., any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.
“Guarantee” of or by any Person (the “guarantor”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business.
“Guaranteed Obligations” has the meaning assigned to such term in Section 10.01.
“Guarantor Payment” has the meaning assigned to such term in Section 10.11(a).
“Guarantors” means all Loan Guarantors and the term “Guarantor” means each or any one of them individually.
“Hazardous Materials” means: (a) any substance, material, or waste that is included within the definitions of “hazardous substances,” “hazardous materials,” “hazardous waste,” “toxic substances,” “toxic materials,” “toxic waste,” or words of similar import in any Environmental Law; (b) those substances listed as hazardous substances by the United States Department of Transportation (or any successor agency) (49 C.F.R. 172.101 and amendments thereto) or by the Environmental Protection Agency (or any successor agency) (40 C.F.R. Part 302 and amendments thereto); and (c) any substance, material, or waste that is petroleum, petroleum-related, or a petroleum by-product, asbestos or asbestos-containing material, polychlorinated biphenyls, flammable, explosive, radioactive, freon gas, radon, or a pesticide, herbicide, or any other agricultural chemical.
“Impacted LIBO Rate Interest Period” has the meaning assigned to such term in the definition of “LIBO Rate.”
“Indebtedness” of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in
18
respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty, (j) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances, (k) obligations under any earn-out (which for all purposes of this Agreement, shall be valued at the maximum potential amount payable with respect to each such earn-out), (l) any other Off-Balance Sheet Liability, (m) all obligations of such Person, whether or not contingent, in respect of Disqualified Equity Interests and (n) obligations, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (i) any and all Swap Agreements, and (ii) any and all cancellations, buy backs, reversals, terminations or assignments of any Swap Agreement transaction. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor.
“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Loan Document and (b) to the extent not otherwise described in the foregoing clause (a), Other Taxes.
“Indemnitee” has the meaning assigned to such term in Section 9.03(c).
“Ineligible Institution” has the meaning assigned to such term in Section 9.04(b).
“Information” has the meaning assigned to such term in Section 9.12.
“Integration Appliance” means Integration Appliance, Inc., a Delaware corporation.
“Interest Election Request” means a request by the Borrower to convert or continue a Borrowing in accordance with Section 2.08, which shall be substantially in the form of Exhibit B‑2 hereto or any other form approved by the Administrative Agent.
“Interest Payment Date” means (a) with respect to any ABR Loan, the first day of each calendar quarter and the Maturity Date and, (b) with respect to any EurodollarRFR Loan, (1) each date that is on the numerically corresponding day in each calendar month that is one month after the Borrowing of such Loan (or, if there is no such numerically corresponding day in such month, then the last day of such month) and (2) the Maturity Date, and (c) with respect to any Term Benchmark Loan, the last day of each Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a EurodollarTerm Benchmark Borrowing with an Interest Period of more than three (3) months’ duration, each day prior to the last day of such Interest Period that occurs at intervals of three (3) months’ duration after the first day of such Interest Period and the Maturity Date.
“Interest Period” means with respect to any EurodollarTerm Benchmark Borrowing, the period commencing on the date of such Eurodollar Borrowing and ending on the numerically corresponding day in the calendar month that is one, three or six months thereafter (in each case, subject to the availability for the Benchmark applicable to the relevant Loan or (Commitment), as the Borrower may elect; provided that (ai) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would
19
fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and, (bii) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period, and (ciii) no tenor that has been removed from this definition pursuant to Section 2.14(ge) shall be available for specification in such Borrowing Request or Interest Election Request. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter, in the case of a Revolving Borrowing, shall be the effective date of the most recent conversion or continuation of such Borrowing.
“Inventory” has the meaning assigned to such term in the Security Agreement.
“IPO” means the issuance and sale of shares of common stock of the Borrower in the Borrower’s in underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended.
“IRS” means the United States Internal Revenue Service.
“ISDA Definitions” means the 2006 ISDA Definitions published by the International Swaps and Derivatives Association, Inc. or any successor thereto, as amended or supplemented from time to time, or any successor definitional booklet for interest rate derivatives published from time to time by the International Swaps and Derivatives Association, Inc. or such successor thereto.
“Issuing Bank” means, individually and collectively, each of JPMorgan, in its capacity as the issuer of Letters of Credit hereunder, and any other Revolving Lender from time to time designated by the Borrower as an Issuing Bank, with the consent of such Revolving Lender and the Administrative Agent, and their respective successors in such capacity as provided in Section 2.06(i). Any Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by its Affiliates, in which case the term “Issuing Bank” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate (it being agreed that such Issuing Bank shall, or shall cause such Affiliate to, comply with the requirements of Section 2.06 with respect to such Letters of Credit). At any time there is more than one Issuing Bank, all singular references to the Issuing Bank shall mean any Issuing Bank, either Issuing Bank, each Issuing Bank, the Issuing Bank that has issued the applicable Letter of Credit, or both (or all) Issuing Banks, as the context may require.
“Issuing Bank Sublimit” means, as of the Effective Date, (a) $10,000,000, in the case of JPMorgan and (b) in the case of any other Issuing Bank, such amount as shall be designated to the Administrative Agent and the Borrower in writing by an Issuing Bank; provided that any Issuing Bank shall be permitted at any time to increase or reduce its Issuing Bank Sublimit upon providing five (5) Business Days’ prior written notice thereof to the Administrative Agent and the Borrower.
“Joinder Agreement” means a Joinder Agreement in substantially the form of Exhibit E.
“JPMorgan” means JPMorgan Chase Bank, N.A., a national banking association, in its individual capacity, and its successors.
“LC Collateral Account” has the meaning assigned to such term in Section 2.06(j).
“LC Disbursement” means any payment made by an Issuing Bank pursuant to a Letter of Credit.
“LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit and (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed
20
by or on behalf of the Borrower. The LC Exposure of any Revolving Lender at any time shall be its Applicable Percentage of the aggregate LC Exposure at such time.
“Lender-Related Person” has the meaning assigned to such term in Section 9.03(b).
“Lenders” means the Persons listed on the Commitment Schedule and any other Person that shall have become a Lender hereunder pursuant to Section 2.09 or an Assignment and Assumption or otherwise, other than any such Person that ceases to be a Lender hereunder pursuant to an Assignment and Assumption or otherwise. Unless the context otherwise requires, the term “Lenders” includes the Issuing Bank. The term “Lender” means each or any one of the Lenders individually.
“Letter of Credit Agreement” has the meaning assigned to it in Section 2.06(b).
“Letters of Credit” means the letters of credit issued pursuant to this Agreement and the term “Letter of Credit” means any one of them or each of them singularly, as the context may require.
“Liabilities” means any losses, claims (including intraparty claims), demands, damages or liabilities of any kind.
“LIBO Interpolated Rate” means, at any time, with respect to any Eurodollar Borrowing denominated in Dollars and for any Interest Period, the rate per annum (rounded to the same number of decimal places as the LIBO Screen Rate) determined by the Administrative Agent (which determination shall be conclusive and binding absent manifest error) to be equal to the rate that results from interpolating on a linear basis between: (a) the LIBO Screen Rate for the longest period (for which the LIBO Screen Rate is available) that is shorter than the Impacted LIBO Rate Interest Period and (b) the LIBO Screen Rate for the shortest period (for which the LIBO Screen Rate is available) that exceeds the Impacted LIBO Rate Interest Period, in each case, at such time; provided, that, if any LIBO Interpolated Rate shall be less than 0.00%, such rate shall be deemed to be 0.00% for purposes of this Agreement.
“LIBO Rate” means, with respect to any Eurodollar Borrowing for any applicable Interest Period or for any ABR Borrowing, the LIBO Screen Rate at approximately 11:00 a.m., London time, two (2) Business Days prior to the commencement of such Interest Period; provided that, if the LIBO Screen Rate shall not be available at such time for such Interest Period (an “Impacted LIBO Interest Period”), then the LIBO Rate shall be the LIBO Interpolated Rate, subject to Section 2.14 in the event that the Administrative Agent shall conclude that it shall not be possible to determine such LIBO Interpolated Rate (which conclusion shall be conclusive and binding absent manifest error). Notwithstanding the above, to the extent that “LIBO Rate” or “Adjusted LIBO Rate” is used in connection with an ABR Borrowing, such rate shall be determined as modified by the definition of Alternate Base Rate.
“LIBO Screen Rate” means, for any day and time, with respect to any Eurodollar Borrowing for any Interest Period or for any ABR Borrowing, the London interbank offered rate as administered by ICE Benchmark Administration (or any other Person that takes over the administration of such rate for Dollars) for a period equal in length to such Interest Period as displayed on such day and time on pages LIBOR01 or LIBOR02 of the Reuters screen that displays such rate (or, in the event such rate does not appear on a Reuters page or screen, on any successor or substitute page on such screen that displays such rate, or on the appropriate page of such other information service that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion); provided that, if the LIBO Screen Rate as so determined would be less than 0.00%, such rate shall be deemed to 0.00% for the purposes of this Agreement.
21
“LIBOR” has the meaning assigned to such term in Section 1.05.
“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.
“Liquidity” means, as of any date of determination, the sum of (a) unrestricted cash of the Loan Parties plus (b) the amount of the Revolving Commitments available to be drawn as of such date.
“Loan Documents” means, collectively, this Agreement, the First Amendment, each promissory note issued pursuant to this Agreement, each Letter of Credit Agreement, each Collateral Document, each Compliance Certificate, the Loan Guaranty and each other agreement, instrument, document and certificate executed and delivered to, or in favor of, the Administrative Agent or any Lender and including each other pledge, power of attorney, consent, assignment, contract, notice, letter of credit agreement, letter of credit applications and any agreements between the Borrower and the Issuing Bank regarding the Issuing Bank’s Issuing Bank Sublimit or the respective rights and obligations between the Borrower and the Issuing Bank in connection with the issuance of Letters of Credit, and each other written matter whether heretofore, now or hereafter executed by or on behalf of any Loan Party, or any employee of any Loan Party, and delivered to the Administrative Agent or any Lender in connection with this Agreement or the transactions contemplated hereby. Any reference in this Agreement or any other Loan Document to a Loan Document shall include all appendices, exhibits or schedules thereto, and all amendments, restatements, supplements or other modifications thereto, and shall refer to this Agreement or such Loan Document as the same may be in effect at any and all times such reference becomes operative.
“Loan Guarantor” means each Loan Party.
“Loan Guaranty” means Article X of this Agreement.
“Loan Parties” means, collectively, the Borrower, each Material Domestic Subsidiary of the Borrower party to this Agreement as of the Effective Date and each other Person who becomes a party to this Agreement pursuant to a Joinder Agreement (or in the case of any of the Borrower’s Material Foreign Subsidiaries, a Joinder Agreement and/or such other joinders or other documents required pursuant to Section 5.14) and their respective successors and assigns, and the term “Loan Party” shall mean any one of them or all of them individually, as the context may require.
“Loans” means the loans and advances made by the Lenders pursuant to this Agreement.
“Margin Stock” means margin stock within the meaning of Regulations T, U and X, as applicable.
“Material Acquisition” means any Permitted Acquisition by any Loan Party in which the aggregate acquisition price or consideration paid for the assets acquired pursuant thereto exceeds $15,000,000 (which includes the aggregate amount of any earn-outs or other contingent purchase price obligations, seller notes or other seller financing and any Indebtedness otherwise assumed on such date in connection with such Permitted Acquisition).
“Material Adverse Effect” means a material adverse effect on (a) the business, assets, operations or financial condition of the Borrower and its Subsidiaries taken as a whole, (b) the ability of the Loan Parties (taken as a whole) to perform their Obligations under the Loan Documents, (c) the Collateral, or the
22
Administrative Agent’s Liens (on behalf of itself and the other Secured Parties) on the Collateral or the priority of such Liens, or (d) the rights of or benefits (taken as a whole) available to the Administrative Agent, the Issuing Bank or the Lenders under any of the Loan Documents.
“Material Agreement” means any contract or agreement, the loss, breach or termination of which could reasonably be expected to result in a Material Adverse Effect.
“Material Domestic Subsidiary” means any Domestic Subsidiary of the Borrower that has, on a pro forma basis, greater than 2.5% of the consolidated total assets of the Borrower and its Subsidiaries or 2.5% of Consolidated EBITDA of the Borrower and its Subsidiaries, as reflected on the most recent financial statements required to be delivered pursuant to Section 5.01; provided that, Domestic Subsidiaries which are not Guarantors will not account for more than 5.0% of such consolidated total assets or 5.0% of such Consolidated EBITDA in the aggregate.
“Material Foreign Subsidiary” means any Foreign Subsidiary of the Borrower that has, on a pro forma basis, greater than 7.5% of the consolidated total assets of the Borrower and its Subsidiaries or 7.5% of Consolidated EBITDA of the Borrower and its Subsidiaries, as reflected on the most recent financial statements required to be delivered pursuant to Section 5.01; provided that, in the event that Foreign Subsidiaries which are not Guarantors account for more than 15.0% of such consolidated total assets or 15.0% of such Consolidated EBITDA in the aggregate, the Borrower shall designate at its sole discretion one or more of such Foreign Subsidiaries which are not Guarantors as may be necessary such that the foregoing 15.0% limit shall not be exceeded, and any such Foreign Subsidiary shall thereafter be deemed to be a Material Foreign Subsidiary hereunder (as consented to by the Administrative Agent, taking into account whether or not such acquired or formed Subsidiary is formed or organized in a Specified Jurisdiction); provided further, that, notwithstanding the foregoing, the Borrower shall not be required to designate any Foreign Subsidiary as a Guarantor and/or Material Foreign Subsidiary if such designation and guarantee of obligations could reasonably be expected, individually or in the aggregate with all such other designations and guarantees, to result in materially adverse tax consequences to the Borrower and of its Subsidiaries, taken as a whole (as determined by the Borrower and the Administrative Agent); provided further, that, for purposes of determining whether a Foreign Subsidiary is a Material Foreign Subsidiary, the assets held by such Foreign Subsidiary shall exclude intercompany assets, goodwill, and other intangible assets (as reasonably agreed between the Borrower and Administrative Agent).
“Material Indebtedness” means Indebtedness (other than the Loans and Letters of Credit), or obligations in respect of one or more Swap Agreements, of any one or more of the Borrower and its Subsidiaries in an aggregate principal amount exceeding $2,000,000. For purposes of determining Material Indebtedness, the “principal amount” of the obligations of the Borrower or any Subsidiary in respect of any Swap Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the Borrower or such Subsidiary would be required to pay if such Swap Agreement were terminated at such time.
“Maturity Date” means October 5, 2026 (if the same is a Business Day, or if not, then the immediately next succeeding Business Day).
“Maximum Rate” has the meaning assigned to such term in Section 9.17.
“Moody’s” means Moody’s Investors Service, Inc.
“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.
“Non-Consenting Lender” has the meaning assigned to such term in Section 9.02(d).
23
“NYFRB” means the Federal Reserve Bank of New York.
“NYFRB Rate” means, for any day, the greater of (a) the Federal Funds Effective Rate in effect on such day and (b) the Overnight Bank Funding Rate in effect on such day(or for any day that is not a Business Day, for the immediately preceding Business Day); provided that if none of such rates are published for any day that is a Business Day, the term “NYFRB Rate” means the rate for a federal funds transaction quoted at 11:00 a.m. New York City time on such day received by the Administrative Agent from a federal funds broker of recognized standing selected by it; provided, further, that if any of the aforesaid rates as so determined would be less than 0.00%, such rate shall be deemed to be 0.00% for purposes of this Agreement.
“NYFRB’s Website” means the website of the NYFRB at http://www.newyorkfed.org, or any successor source.
“Obligated Party” has the meaning assigned to such term in Section 10.02.
“Obligations” means all unpaid principal of and accrued and unpaid interest on the Loans, all LC Exposure, all accrued and unpaid fees and all expenses, reimbursements, indemnities and other obligations and indebtedness (including interest and fees accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), obligations and liabilities of any of the Loan Parties to any of the Lenders, the Administrative Agent, the Issuing Bank or any indemnified party, individually or collectively, existing on the Effective Date or arising thereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law or otherwise, arising or incurred under this Agreement or any of the other Loan Documents or in respect of any of the Loans made or reimbursement or other obligations incurred or any of the Letters of Credit or other instruments at any time evidencing any thereof.
“Off-Balance Sheet Liability” of a Person means (a) any repurchase obligation or liability of such Person with respect to accounts or notes receivable sold by such Person, (b) any indebtedness, liability or obligation under any so-called “synthetic lease” transaction entered into by such Person, or (c) any indebtedness, liability or obligation arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the balance sheet of such Person (other than operating leases).
“Other Benchmark Rate Election” means, with respect to any Loan denominated in Dollars, if the then-current Benchmark is the LIBO Rate, the occurrence of:
(a) a request by the Borrower to the Administrative Agent to notify each of the other parties hereto that, at the determination of the Borrower, Dollar-denominated syndicated credit facilities at such time contain (as a result of amendment or as originally executed), in lieu of a LIBOR-based rate, a term benchmark rate as a benchmark rate; and
(b) the Administrative Agent, in its sole discretion, and the Borrower jointly elect to trigger a fallback from the LIBO Rate and the provision, as applicable, by the Administrative Agent of written notice of such election to the Borrower and the Lenders.
“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Taxes (other than a connection arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any
24
other transaction pursuant to, or enforced, any Loan Document, or sold or assigned an interest in any Loan, Letter of Credit, or any Loan Document).
“Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 2.19).
“Overnight Bank Funding Rate” means, for any day, the rate comprised of both overnight federal funds and overnight Eurodollar borrowingseurodollar transactions denominated in Dollars by U.S.-managed banking offices of depository institutions (, as such composite rate shall be determined by the NYFRB as set forth on the NYFRB’s Website from time to time), and published on the next succeeding Business Day by the NYFRB as an overnight bank funding rate.
“Paid in Full” or “Payment in Full” means, (a) the payment in full in cash of all outstanding Loans and LC Disbursements, together with accrued and unpaid interest thereon, (b) the termination, expiration, or cancellation and return of all outstanding Letters of Credit (or alternatively, with respect to each such Letter of Credit, the furnishing to the Administrative Agent of a cash deposit, or at the discretion of the Administrative Agent a back-up standby letter of credit satisfactory to the Administrative Agent and the Issuing Bank, in an amount equal to 103% of the LC Exposure as of the date of such payment), (c) the payment in full in cash of the accrued and unpaid fees, (d) the payment in full in cash of all reimbursable expenses and other Secured Obligations (other than Unliquidated Obligations for which no claim has been made and other obligations expressly stated to survive such payment and termination of this Agreement), together with accrued and unpaid interest thereon, (e) the termination of all Revolving Commitments, and (f) the termination of the Swap Agreement Obligations and the Banking Services Obligations or entering into other arrangements satisfactory to the Secured Parties counterparties thereto.
“Parent” means, with respect to any Lender, any Person as to which such Lender is, directly or indirectly, a subsidiary.
“Participant” has the meaning assigned to such term in Section 9.04(c).
“Participant Register” has the meaning assigned to such term in Section 9.04(c).
“Payment” has the meaning assigned to it in Section 8.06(c).
“Payment Notice” has the meaning assigned to it in Section 8.06(c).
“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.
“Permitted Acquisition” means any Acquisition by any Loan Party in a transaction that satisfies each of the following requirements:
(a) such Acquisition is not a hostile or contested acquisition;
(b) the business acquired in connection with such Acquisition is not engaged, directly or indirectly, in any line of business that would be prohibited by Section 6.03(c);
25
(c) both immediately before and after giving effect (including giving effect on a pro forma basis) to such Acquisition and the Loans (if any) requested to be made in connection therewith, no Event of Default exists, will exist, or would result therefrom;
(d) as soon as available, but not less than five (5) Business Days prior to such Acquisition, the Borrower has provided the Administrative Agent (i) notice of such Acquisition, (ii) a copy of all business, due diligence and financial information reasonably requested by the Administrative Agent including pro forma financial statements (but excluding any quality of earnings report, except to the extent required pursuant to clause (iii) of this paragraph (d)) and (iii) with respect to any Acquisition in which the aggregate acquisition price or consideration paid pursuant thereto exceeds $20,000,000, a quality of earnings report reasonably satisfactory to the Administrative Agent;
(e) if such Acquisition involves a merger or a consolidation involving the Borrower or any other Loan Party, the Borrower or such Loan Party, as applicable, shall be the surviving entity;
(f) immediately prior to and after giving effect (including giving effect on a pro forma basis) to such Acquisition, the Total Net Leverage Ratio (based on the financial statements most recently required to be delivered pursuant to Section 5.01(a) or 5.01(b) (or, if prior to the date of the delivery of the first financial statements to be delivered pursuant to Section 5.01(a) or 5.01(b), the most recent financial statements referred to in Section 3.04(a)), is not greater than the maximum Total Net Leverage Ratio permitted under Section 6.12 at such time (after giving effect to any step-up election of the Borrower, made in connection with such acquisition or otherwise, pursuant to the first proviso in Section 6.12);
(g) all actions required to be taken with respect to any newly acquired or formed Subsidiary of the Borrower or a Loan Party and any newly acquired assets, as applicable, required under Section 5.14 shall have been taken (taking into account whether or not such acquired or formed Subsidiary is formed or organized in a Specified Jurisdiction); and
(h) the Borrower shall have delivered to the Administrative Agent the final executed documentation relating to such Acquisition within seven (7) Business Days following the consummation thereof;
provided that notwithstanding the foregoing provisions of this definition, the Brightstar Acquisition shall be deemed to be a Permitted Acquisition.
“Permitted Encumbrances” means:
(a) Liens imposed by law for Taxes that are not yet due or are being contested in compliance with Section 5.04;
(b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than ninety (90) days or are being contested in compliance with Section 5.04;
(c) pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security laws or regulations;
26
(d) deposits to secure the performance of bids, trade contracts, leases, government contracts, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business;
(e) judgment Liens in respect of judgments that do not constitute an Event of Default under clause (k) of Article VII;
(f) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Borrower or any Subsidiary; and
(g) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;
provided that the term “Permitted Encumbrances” shall not include any Lien securing Indebtedness, except with respect to clause (e) above.
“Permitted Holder” means, collectively, (a) Great Hill Equity Partners IV, L.P., (b) Anderson Investments Pte. Ltd. and (c) any of their respective Control Investment Affiliates.
“Permitted Investments” means:
(a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the U.S. (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the U.S.), in each case maturing within one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from S&P or from Moody’s;
(c) investments in certificates of deposit, bankers’ acceptances and time deposits maturing within 180 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the U.S. or any state thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000;
(d) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (c) above; and
(e) money market funds that (i) comply with the criteria set forth in Securities and Exchange Commission Rule 2a‑7 under the Investment Company Act of 1940, (ii) are rated AAA by S&P and Aaa by Moody’s and (iii) have portfolio assets of at least $5,000,000,000.
“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.
“Plan” means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of
27
which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.
“Plan Asset Regulations” means 29 CFR § 2510.3-101 et seq., as modified by Section 3(42) of ERISA, as amended from time to time.
“Prime Rate” means the rate of interest last quoted by The Wall Street Journal as the “Prime Rate” in the U.S. or, if The Wall Street Journal ceases to quote such rate, the highest per annum interest rate published by the Federal Reserve Board in Federal Reserve Statistical Release H.15 (519) (Selected Interest Rates) as the “bank prime loan” rate or, if such rate is no longer quoted therein, any similar rate quoted therein (as determined by the Administrative Agent) or any similar release by the Federal Reserve Board (as determined by the Administrative Agent). Each change in the Prime Rate shall be effective from and including the date such change is publicly announced or quoted as being effective.
“Proceeding” means any claim, litigation, investigation, action, suit, arbitration or administrative, judicial or regulatory action or proceeding in any jurisdiction.
“Projections” has the meaning assigned to such term in Section 5.01(e).
“PTE” means a prohibited transaction class exemption issued by the U.S. Department of Labor, as any such exemption may be amended from time to time.
“Public-Sider” means a Lender whose representatives may trade in securities of the Borrower or its Controlling person or any of its Subsidiaries while in possession of the financial statements provided by the Borrower under the terms of this Agreement.
“QFC” has the meaning assigned to the term “qualified financial contract” in, and shall be interpreted in accordance with, 12 U.S.C. 5390(c)(8)(D).
“QFC Credit Support” has the meaning assigned to it in Section 9.21.
“Qualified ECP Guarantor” means, in respect of any Swap Obligation, each Loan Party that has total assets exceeding $10,000,000 at the time the relevant Loan Guaranty or grant of the relevant security interest becomes or would become effective with respect to such Swap Obligation or such other person as constitutes an “eligible contract participant” under the Commodity Exchange Act or any regulations promulgated thereunder and can cause another person to qualify as an “eligible contract participant” at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.
“Recipient” means, as applicable, (a) the Administrative Agent, (b) any Lender and (c) any Issuing Bank, or any combination thereof (as the context requires).
“Reference Period” means, as of the last day of any fiscal quarter, the period of four (4) consecutive fiscal quarters of the Borrower and its Subsidiaries ending on such date.
“Reference Time” with respect to any setting of the then-current Benchmark means (1) if such Benchmark is LIBO Rate, 11:00 a.m. (London time) on the day that is two London banking days preceding the date of such setting, (2) if such Benchmark is the Benchmark set forth in clause (1) of the definition of “Benchmark Replacement”the Term SOFR Rate, 5:00 a.m. (Chicago time) on the day that is two (2) Business Days preceding the date of such setting, (32) if the RFR for such Benchmark is the Benchmark set forth in clause (2) of the definition of “Benchmark Replacement”, on the day that isDaily Simple SOFR, then four (4) Business Days preceding the date ofprior to such setting andor (43)
28
if such Benchmark is none of the Benchmarks referred to in the foregoing clauses (1) through (3)Term SOFR Rate or Daily Simple SOFR, the time determined by the Administrative Agent in its reasonable discretion.
“Refinance Indebtedness” has the meaning assigned to such term in Section 6.01(f).
“Register” has the meaning assigned to such term in Section 9.04(b).
“Regulation D” means Regulation D of the Federal Reserve Board, as in effect from time to time and all official rulings and interpretations thereunder or thereof.
“Regulation T” means Regulation T of the Federal Reserve Board, as in effect from time to time and all official rulings and interpretations thereunder or thereof.
“Regulation U” means Regulation U of the Federal Reserve Board, as in effect from time to time and all official rulings and interpretations thereunder or thereof.
“Regulation X” means Regulation X of the Federal Reserve Board, as in effect from time to time and all official rulings and interpretations thereunder or thereof.
“Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, partners, members, trustees, employees, agents, administrators, managers, representatives and advisors of such Person and such Person’s Affiliates.
“Release” means any releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, migrating, disposing, or dumping of any substance into the environment.
“Relevant Governmental Body” means the Federal Reserve Board and/or the NYFRB, as applicable, or a committee officially endorsed or convened by the Federal Reserve Board and/or the NYFRB, or, in each case, any successor thereto.
“Relevant Rate” means (i) with respect to any Term Benchmark Borrowing, the Adjusted Term SOFR Rate or (ii) with respect to any RFR Borrowing, the Adjusted Daily Simple SOFR, as applicable.
“Report” means reports prepared by the Administrative Agent or another Person showing the results of appraisals, field examinations or audits pertaining to the Borrower’s assets from information furnished by or on behalf of the Borrower, after the Administrative Agent has exercised its rights of inspection pursuant to this Agreement, which Reports may be distributed to the Lenders by the Administrative Agent.
“Required Lenders” means, subject to Section 2.20, (a) at any time prior to the earlier of the Loans becoming due and payable pursuant to Article VII or the Revolving Commitments terminating or expiring, Lenders having Credit Exposure and Unfunded Commitments representing more than 50% of the sum of the Aggregate Credit Exposure and Unfunded Commitments at such time; provided that, solely for purposes of declaring the Loans to be due and payable pursuant to Article VII, the Unfunded Commitment of each Lender shall be deemed to be zero in determining the Required Lenders; and (b) for all purposes after the Loans become due and payable pursuant to Article VII or the Revolving Commitments expire or terminate, Lenders having Credit Exposure representing more than 50% of the Aggregate Credit Exposure at such time; provided further, that, if there are two or more unaffiliated Lenders, then Required Lenders shall
29
include at least two unaffiliated Lenders. Except to the extent expressly provided under this Agreement, the Credit Exposure and Unfunded Commitment held or deemed to be held by any Defaulting Lender shall be disregarded in determining the Required Lenders.
“Requirement of Law” means, with respect to any Person, (a) the charter, articles or certificate of organization or incorporation and bylaws or operating, management or partnership agreement, or other organizational or governing documents of such Person and (b) any statute, law (including common law), treaty, rule, regulation, code, ordinance, order, decree, writ, judgment, injunction or determination of any arbitrator or court or other Governmental Authority (including Environmental Laws), in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
“Resolution Authority” means an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.
“Responsible Officer” means the president, Financial Officer or other executive officer of the Borrower.
“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests in the Borrower or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interests or any option, warrant or other right to acquire any such Equity Interests.
“Reuters” means, as applicable, Thomson Reuters Corp, Refinitiv, or any successor thereto.
“Revolving Borrowing” means Revolving Loans of the same Type, made, converted or continued on the same date and, in the case of EurodollarTerm Benchmark Loans, as to which a single Interest Period is in effect.
“Revolving Commitment” means, with respect to each Lender, the amount set forth on the Commitment Schedule opposite such Lender’s name, or in the Assignment and Assumption or other documentation or record (as such term is defined in Section 9-102(a)(70) of the New York Uniform Commercial Code) as provided in Section 9.04(b)(ii)(C), pursuant to which such Lender shall have assumed its Revolving Commitment, as applicable, as such Revolving Commitment may be reduced or increased from time to time pursuant to (a) Section 2.09 and (b) assignments by or to such Lender pursuant to Section 9.04; provided, that at no time shall the Credit Exposure of any Lender exceed its Revolving Commitment. The initial aggregate amount of the Lenders’ Revolving Commitments is $100,000,000.
“Revolving Lender” means, as of any date of determination, a Lender with a Revolving Commitment or, if the Revolving Commitments have terminated or expired, a Lender with Credit Exposure.
“Revolving Loan” means a Loan made pursuant to Section 2.01.
“RFR Borrowing” means, as to any Borrowing, the RFR Loans comprising such Borrowing.
“RFR Loan” means a Loan that bears interest at a rate based on the Adjusted Daily Simple SOFR.
“S&P” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business.
30
“Sale and Leaseback Transaction” has the meaning assigned to such term in Section 6.06.
“Sanctioned Country” means, at any time, a country, region or territory which is itself the subject or target of any Sanctions (at the time of this Agreement, Crimea, Cuba, Iran, North Korea and Syria).
“Sanctioned Person” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the U.S. Department of State or by the United Nations Security Council, the European Union, any European Union member state, HerHis Majesty’s Treasury of the United Kingdom or other relevant sanctions authority, (b) any Person operating, organized or resident in a Sanctioned Country, (c) any Person owned or controlled by any such Person or Persons described in the foregoing clauses (a) or (b), or (d) any Person otherwise the subject of any Sanctions.
“Sanctions” means all economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State, or (b) the United Nations Security Council, the European Union, any European Union member state or Her Majesty’s Treasury of the United Kingdom or other relevant sanctions authority.
“SEC” means the Securities and Exchange Commission of the U.S.
“Second Amendment” means that certain Amendment No.2 to Credit Agreement, dated as of the Second Amendment Effective Date, by and among the Borrower, the other Loan Parties party thereto, the Lenders party thereto and the Administrative Agent.
“Second Amendment Effective Date” means November 17, 2022.
“Secured Obligations” means all Obligations, together with all (a) Banking Services Obligations and (b) Swap Agreement Obligations owing to one or more Lenders or their respective Affiliates; provided, that the definition of “Secured Obligations” shall not create any guarantee by any Guarantor of (or grant of security interest by any Guarantor to support, as applicable) any Excluded Swap Obligations of such Guarantor for purposes of determining any obligations of any Guarantor.
“Secured Parties” means (a) the Lenders, (b) the Administrative Agent, (c) each Issuing Bank, (d) each provider of Banking Services, to the extent the Banking Services Obligations in respect thereof constitute Secured Obligations, (e) each counterparty to any Swap Agreement, to the extent the obligations thereunder constitute Secured Obligations, (f) the beneficiaries of each indemnification obligation undertaken by any Loan Party under any Loan Document, and (g) the successors and permitted assigns of each of the foregoing.
“Security Agreement” means that certain Pledge and Security Agreement (including any and all supplements thereto), dated as of the Effective Date, among the Loan Parties party thereto and the Administrative Agent, for the benefit of the Administrative Agent and the other Secured Parties, and any other pledge or security agreement securing the Secured Obligations entered into, after the date of this Agreement by any other Loan Party (as required by this Agreement or any other Loan Document) or any other Person for the benefit of the Administrative Agent and the other Secured Parties, as the same may be amended, restated, supplemented or otherwise modified from time to time.
“SOFR” means, with respect to any Business Day, a rate per annum equal to the secured overnight financing rate for such Business Day published by the SOFR Administrator on the SOFR Administrator’sNYFRB’s Website on the immediately succeeding Business Day.
31
“SOFR Administrator” means the NYFRB (or a successor administrator of the secured overnight financing rate).
“SOFR Administrator’s Website” means the NYFRB’s Website, currently at http://www.newyorkfed.org, or any successor source for the secured overnight financing rate identified as such by the SOFR Administrator from time to time.
“SOFR Determination Date” has the meaning assigned to such term in the definition of “Daily Simple SOFR”.
“SOFR Rate Day” has the meaning assigned to such term in the definition of “Daily Simple SOFR”.
“Specified Jurisdiction” means each jurisdiction reasonably approved by the Administrative Agent from time to time after the Effective Date (such approval not to be unreasonably withheld or delayed, but which may be withheld if the Administrative Agent reasonably determines that (i) the amount and enforceability of the contemplated Guarantee that may be entered into by a person organized in the relevant jurisdiction is materially and adversely limited by applicable law or contractual limitations, (ii) the security interests (and the enforceability thereof) that may be granted with respect to assets (or various classes of assets) located in the relevant jurisdiction is materially and adversely limited by applicable law or (iii) there is any reasonably identifiable and material adverse political risk to the Secured Parties or the Administrative Agent associated with such jurisdiction).
“Statements” has the meaning assigned to such term in Section 2.18(f).
“Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentage (including any marginal, special, emergency or supplemental reserves) established by the Federal Reserve Board to which the Administrative Agent is subject with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as “Eurocurrency liabilities” in Regulation D) or any other reserve ratio or analogous requirement of any central banking or financial regulatory authority imposed in respect of the maintenance of the Commitments or the funding of the Loans. Such reserve percentages shall include those imposed pursuant to Regulation D of the Federal Reserve Board. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under Regulation D of the Federal Reserve Board or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.
“Subordinated Indebtedness” of a Person means any Indebtedness of such Person, the payment of which is subordinated to payment of the Secured Obligations to the written satisfaction of the Administrative Agent.
“subsidiary” means, with respect to any Person (the “parent”) at any date, any corporation, limited liability company, partnership, association or other entity, the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or
32
held , or (b) that is, as of such date, otherwise Controlled, by the parent and/or one or more subsidiaries of the parent.
“Subsidiary” means any direct or indirect subsidiary of the Borrower or a Loan Party, as applicable.
“Supported QFC” has the meaning assigned to it in Section 9.21.
“Swap Agreement” means any agreement with respect to any swap, forward, spot, future, credit default or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Borrower or the Subsidiaries shall be a Swap Agreement.
“Swap Agreement Obligations” means any and all obligations of the Loan Parties and their Subsidiaries, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (a) any Swap Agreement permitted hereunder with a Lender or an Affiliate of a Lender, and (b) any cancellations, buy backs, reversals, terminations or assignments of any Swap Agreement transaction permitted hereunder with a Lender or an Affiliate of a Lender.
“Swap Obligation” means, with respect to any Guarantor, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of section 1a(47) of the Commodity Exchange Act or any rules or regulations promulgated thereunder.
“Taxes” means any and all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), value added taxes, or any other goods and services, use or sales taxes, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
“Term Benchmark” when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted Term SOFR Rate.
“Term SOFR Determination Day” has the meaning assigned to it under the definition of Term SOFR Reference Rate.
“Term SOFR Rate” means, with respect to any Term Benchmark Borrowing and for any tenor comparable to the applicable Interest Period, the Term SOFR Reference Rate at approximately 5:00 a.m., Chicago time, two (2) U.S. Government Securities Business Days prior to the commencement of such tenor comparable to the applicable Interest Period, as such rate is published by the CME Term SOFR Administrator.
“Term SOFR” means, for the applicable Corresponding Tenor at approximately 5:00 a.m., Chicago Reference Rate” means, for any day and time on the day (such day, the “Term SOFR Determination Day”) that is two (2) U.S. Government Securities Business Days prior to the commencement of such Corresponding Tenor, , and for any tenor comparable to the applicable Interest Period, the rate per annum determined by the Administrative Agent as the forward-looking term rate based on SOFR that has been selected or recommended by the Relevant Governmental Body; provided that, if as of 5:00 a.m., Chicago. If by 5:00 pm (New York City time) on such Term SOFR Determination Day, the “Term
33
SOFR Reference Rate” for the applicable tenor has not been published by the administrator of such rate,CME Term SOFR Administrator and a Benchmark Replacement Date with respect to the Term SOFR Rate has not occurred, then, so long as such day is otherwise a U.S. Government Securities Business Day, the Term SOFR Reference Rate for such Term SOFR Determination Day will be the Term SOFR Reference Rate as published in respect of the first (1st) preceding U.S. Government Securities Business Day for which such Term SOFR Reference Rate was published by such administratorthe CME Term SOFR Administrator, so long as such first (1st) preceding U.S. Government Securities Business Day inis not more than five (5) U.S. Government Securities Business Days prior to such Term SOFR Determination Day.
“Term SOFR Determination Day” has the meaning assigned to such term in the definition of “Term SOFR”.
“Term SOFR Notice” means a notification by the Administrative Agent to the Lenders and the Borrower of the occurrence of a Term SOFR Transition Event.
“Term SOFR Transition Event” means the determination by the Administrative Agent that (a) Term SOFR has been recommended for use by the Relevant Governmental Body, (b) the administration of Term SOFR is administratively feasible for the Administrative Agent and (c) a Benchmark Transition Event or an Early Opt-in Election, as applicable (and, for the avoidance of doubt, not in the case of an Other Benchmark Rate Election), has previously occurred resulting in a Benchmark Replacement in accordance with Section 2.14 that is not Term SOFR.
“Total Indebtedness” means, at any date, the aggregate principal amount of all Indebtedness of the Borrower and its Subsidiaries on a consolidated basis comprised of (a) debt for borrowed money, (b) obligations evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person, whether or not contingent, in respect of Disqualified Equity Interests, (d) Capital Lease Obligations, (e) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit, letters of guaranty and bankers acceptances, (f) deferred acquisition costs and the amount of deferred purchase price to the extent such obligations become a liability on the balance sheet of the Borrower or its Subsidiaries in accordance with GAAP, (g) obligations under any earn-out to the extent such obligations become a liability on the balance sheet of the Borrower or its Subsidiaries in accordance with GAAP and (h) all Guarantees of the foregoing by the Borrower or its Subsidiaries.
“Total Net Leverage Ratio” means, as of such applicable date, the ratio of (a) Total Indebtedness on such date minus unrestricted cash of the Loan Parties as of such date; provided that, such unrestricted cash shall only be netted to the extent is subject to a perfected first priority lien in favor of the Administrative Agent, to (b) Consolidated EBITDA for the Reference Period ended on such date.
“Transaction Costs” shall mean the fees and expenses payable by the Borrower and its Subsidiaries in connection with the transactions described in clauses (a) and (b) of the definition of “Transactions.”
“Transactions” means (a) the execution, delivery and performance by the Loan Parties of this Agreement and the other Loan Documents, the borrowing of Loans and other credit extensions and the use of the proceeds thereof, and (b) the payment of all Transaction Costs.
“Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBOTerm SOFR Rate or, the Alternate Base Rate or the Adjusted Daily Simple SOFR.
34
“UCC” means the Uniform Commercial Code as in effect from time to time in the State of New York or in any other state, the laws of which are required to be applied in connection with the issue of perfection of security interests.
“UK Financial Institutions” means any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended from time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any person falling within IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or investment firms.
“UK Resolution Authority” means the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.
“Unadjusted Benchmark Replacement” means the applicable Benchmark Replacement excluding the related Benchmark Replacement Adjustment.
“Unfunded Commitment” means, with respect to each Lender, the Revolving Commitment of such Lender less its Credit Exposure.
“Unliquidated Obligations” means, at any time, any Secured Obligations (or portion thereof) that are contingent in nature or unliquidated at such time, including any Secured Obligation that is: (i) an obligation to reimburse a bank for drawings not yet made under a letter of credit issued by it; (ii) any other obligation (including any guarantee) that is contingent in nature at such time; or (iii) an obligation to provide collateral to secure any of the foregoing types of obligations.
“U.S.” means the United States of America.
“U.S. Government Securities Business Day” means any day except for (i) a Saturday, (ii) a Sunday or (iii) a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities.
“U.S. Person” means a “United States person” within the meaning of Section 7701(a)(30) of the Code.
“U.S. Special Resolution Regime” has the meaning assigned to it in Section 9.21.
“U.S. Tax Compliance Certificate” has the meaning assigned to such term in Section 2.17(f)(ii)(B)(3).
“USA PATRIOT Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001.
“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
“Write-Down and Conversion Powers” means, (a) with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule, and (b) with respect to the United Kingdom, any powers
35
of the applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of any UK Financial Institution or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers.
“RFR Borrowing”) or by Class and Type (e.g., a “Term Benchmark Revolving Borrowing” or an “RFR Revolving Borrowing”).
36
37
38
The Credits
39
If no election as to the Type of Revolving Borrowing is specified, then the requested Revolving Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested EurodollarTerm Benchmark Revolving Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender’s Loan to be made as part of the requested Borrowing.
40
An Issuing Bank shall not be under any obligation to issue any Letter of Credit if:
41
42
43
44
45
46
If any such Interest Election Request requests a EurodollarTerm Benchmark Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration.
47
48
49
50
51
then the Administrative Agent shall give notice thereof to the Borrower and the Lenders through Electronic System as provided in Section 9.01 as promptly as practicable thereafter and, until (x) the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist with respect to the relevant Benchmark and (y) the Borrower delivers a new Interest Election Request in accordance with the terms of Section 2.08 or a new Borrowing Request in accordance with the terms of Section 2.03, (A1) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective and any such Eurodollar Borrowing shallTerm Benchmark Borrowing and any Borrowing Request that requests a Term Benchmark Borrowing shall instead be deemed to be an Interest Election Request or a Borrowing Request, as applicable, for (x) an RFR Borrowing so long as the Adjusted Daily
52
Simple SOFR is not also the subject of Section 2.14(a)(i) or (ii) above or (y) be repaid or converted into an ABR Borrowing if the Adjusted Daily Simple SOFR also is the subject of Section 2.14(a)(i) or (ii) above and (2) any Borrowing Request that requests an RFR Borrowing shall instead be deemed to be a Borrowing Request, as applicable, for an ABR Borrowing; provided that if the circumstances giving rise to such notice affect only one Type of Borrowings, then all other Types of Borrowings shall be permitted. Furthermore, if any Term Benchmark Loan or RFR Loan is outstanding on the date of the Borrower’s receipt of the notice from the Administrative Agent referred to in this Section 2.14 with respect to a Relevant Rate applicable to such Term Benchmark Loan or RFR Loan, then until (x) the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist with respect to the relevant Benchmark and (y) the Borrower delivers a new Interest Election Request in accordance with the terms of Section 2.08 or a new Borrowing Request in accordance with the terms of Section 2.03, (1) any Term Benchmark Loan shall on the last day of the then current Interest Period applicable thereto, and (B) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as to such Loan (or the next succeeding Business Day if such day is not a Business Day), be converted by the Administrative Agent to, and shall constitute, (x) an RFR Borrowing so long as the Adjusted Daily Simple SOFR is not also the subject of Section 2.14(a)(i) or (ii) above or (y) an ABR Loan if the Adjusted Daily Simple SOFR also is the subject of Section 2.14(a)(i) or (ii) above, on such day, and (2) any RFR Loan shall on and from such day be converted by the Administrative Agent to, and shall constitute an ABR BorrowingLoan.
(b) If any Lender determines that any Requirement of Law has made it unlawful, or if any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable lending office to make, maintain, fund or continue any Eurodollar Borrowing, or any Governmental Authority has imposed material restrictions on the authority of such Lender to purchase or sell, or to take deposits of, dollars in the London interbank market, then, on notice thereof by such Lender to the Borrower through the Administrative Agent, any obligations of such Lender to make, maintain, fund or continue Eurodollar Loans or to convert ABR Borrowings to Eurodollar Borrowings will be suspended until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrower will upon demand from such Lender (with a copy to the Administrative Agent), either prepay or convert all Eurodollar Borrowings of such Lender to ABR Borrowings, either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurodollar Borrowings to such day, or immediately, if such Lender may not lawfully continue to maintain such Loans. Upon any such prepayment or conversion, the Borrower will also pay accrued interest on the amount so prepaid or converted.
53
(d) Notwithstanding anything to the contrary herein or in any other Loan Document and subject to the proviso below in this paragraph, if a Term SOFR Transition Event and its related Benchmark Replacement Date have occurred prior to the Reference Time in respect of any setting of the then-current Benchmark, then the applicable Benchmark Replacement will replace the then-current Benchmark for all purposes hereunder or under any Loan Document in respect of such Benchmark setting and subsequent Benchmark settings, without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Document; provided that, this clause (d) shall not be effective unless the Administrative Agent has delivered to the Lenders and the Borrower a Term SOFR Notice. For the avoidance of doubt, the Administrative Agent shall not be required to deliver a Term SOFR Notice after the occurrence a Term SOFR Transition Event and may do so in its sole discretion.
54
and the result of any of the foregoing shall be to increase the cost to such Lender or such other Recipient of making, continuing, converting into or maintaining any Loan (or of maintaining its obligation to make any such Loan) or to increase the cost to such Lender, the Issuing Bank or such other Recipient of participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender, the Issuing Bank or such other Recipient hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Lender, the Issuing Bank or such other Recipient, as the case may be, such additional amount or amounts as will compensate such Lender, the Issuing Bank or such other Recipient, as the case may be, for such additional costs incurred or reduction suffered.
55
56
57
58
59
Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Administrative Agent in writing of its legal inability to do so.
60
61
62
63
64
If (i) a Bankruptcy Event or a Bail-In Action with respect to the Parent of any Lender shall occur following the Effective Date and for so long as such event shall continue or (ii) the Issuing Bank has a good faith belief that any Lender has defaulted in fulfilling its obligations under one or more other agreements in which such Lender commits to extend credit, the Issuing Bank shall not be required to issue, amend or increase any Letter of Credit, unless the Issuing Bank shall have entered into arrangements with the Borrower or such Lender, satisfactory to the Issuing Bank to defease any risk to it in respect of such Lender hereunder.
In the event that each of the Administrative Agent, the Borrower and the Issuing Bank agrees that a Defaulting Lender has adequately remedied all matters that caused such Lender to be a Defaulting Lender, then the LC Exposure of the Lenders shall be readjusted to reflect the inclusion of such Lender’s Revolving Commitment and on the date of such readjustment such Lender shall purchase at par such of the Loans of the other Lenders as the Administrative Agent shall determine may be necessary in order for such Lender to hold such Loans in accordance with its Applicable Percentage.
65
Representations and Warranties
Each Loan Party represents and warrants to the Lenders that:
66
67
68
69
Conditions
70
71
72
Each Borrowing and each issuance, amendment or extension of a Letter of Credit shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in paragraphs (a) and (b) of this Section.
Notwithstanding the failure to satisfy the conditions precedent set forth in paragraphs (a) and (b) of this Section, unless otherwise directed by the Required Lenders, the Administrative Agent may, but shall have no obligation to, continue to make Loans and an Issuing Bank may, but shall have no obligation to, issue, amend or extend, or cause to be issued, amended or extended, any Letter of Credit for the ratable account and risk of Lenders from time to time if the Administrative Agent believes that making such Loans or issuing, amending or extending, or causing the issuance, amendment or extension of, any such Letter of Credit is in the best interests of the Lenders.
Affirmative Covenants
Until all of the Secured Obligations shall have been Paid in Full, each Loan Party executing this Agreement covenants and agrees, jointly and severally with all of the other Loan Parties, with the Lenders that:
73
74
Notwithstanding the foregoing, the obligations in paragraphs (a), (b) and (c)(2) of this Section 5.01 may be delivered electronically and, if so delivered, shall be deemed to have been delivered on the date (i) on which such materials are publicly available as posted on the Electronic Data Gathering, Analysis and Retrieval system (EDGAR); or (ii) on which such documents are posted on the Borrower’s behalf on an Internet or intranet website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether made available by the Administrative Agent); provided that: (A) upon written request by the Administrative Agent (or any Lender through the Administrative Agent) to the Borrower, the Borrower shall deliver paper copies of Form 10-K or 10-Q (or the equivalent), as applicable, of the Borrower, to the Administrative Agent or such Lender until a written request to cease delivering paper copies is given by the Administrative Agent or such Lender and (B) the Borrower shall notify the Administrative Agent and each Lender (by facsimile or through Electronic System) of the posting of any such documents and provide to the Administrative Agent through Electronic System electronic versions (i.e., soft copies) of such documents; provided further that, to the extent such financial information is in lieu of information required to be provided under Section 5.01(a), such materials are accompanied by a report and opinion of any independent registered public accounting firm of nationally recognized standing, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit. The Administrative Agent shall have no obligation to request the delivery of or to maintain paper copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Borrower with any such request by a Lender for delivery, and each Lender shall be solely responsible for timely accessing posted documents or requesting delivery of paper copies of such document to it and maintaining its copies of such documents.
The Borrower represents and warrants that each of it and its Controlling and Controlled entities, in each case, if any (collectively with the Borrower, the “Relevant Entities”), either (i) has no SEC registered or unregistered, publicly traded securities outstanding, or (ii) files its financial statements with the SEC and/or makes its financial statements available to potential holders of its securities, and, accordingly, the Borrower hereby (i) authorizes the Administrative Agent to make the financial statements to be provided under Sections 5.01(a) and (b) above, along with copies of Loan Documents contained in the Borrower’s public filings with the SEC, available to Public-Siders and (ii) agrees that at the time such financial statements are provided hereunder, they shall already have been (or are contemporaneously being) made available to holders of any such securities. The Borrower will not request that any other material be posted to Public-Siders without (i) conspicuously marking such material as “PUBLIC” or (ii) expressly representing and warranting to the Administrative Agent in writing that such materials do not constitute material non-public information within the meaning of the federal securities laws or that the Relevant Entities have no outstanding SEC registered or unregistered, publicly traded securities. Notwithstanding anything herein to the contrary, in no event shall the Borrower request that the Administrative Agent make available to Public-Siders budgets or any certificates, reports or calculations with respect to the Borrower’s compliance with the covenants contained herein.
75
Each notice delivered under this Section shall be in writing and shall be accompanied by a statement of a Financial Officer or other executive officer of the Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.
76
77
78
Negative Covenants
Until all of the Secured Obligations shall have been Paid in Full, Each Loan Party executing this Agreement covenants and agrees, jointly and severally with all of the other Loan Parties, with the Lenders that:
79
80
(k) Indebtedness under Swap Agreements permitted by Section 6.07;
(l) unsecured Indebtedness incurred in respect of netting services, overdraft protection, automatic clearinghouse arrangements, and cash management and other like services, in each case, incurred in the ordinary course of business, provided that the aggregate amount of Indebtedness incurred pursuant to this clause (l) shall not exceed $1,000,000 at any time outstanding;
(m) unsecured Indebtedness of the Borrower owing to current or former employees, officers, managers, consultants or directors (or any spouses, ex-spouses, successors, executors, administrators, heirs, legatees, distributees or estates of any of the foregoing) incurred in connection with the redemption or repurchase by the Borrower of the Equity Interests of the Borrower that has been issued to such Persons, so long as (i) no Default or Event of Default has occurred and is continuing or would result from the incurrence of such Indebtedness, (ii) the aggregate amount of all such Indebtedness at any time outstanding does not exceed $1,000,000, and (iii) such Indebtedness is contractually subordinated to the Obligations on terms and conditions reasonably acceptable to the Administrative Agent;
(n) unsecured Indebtedness of a Loan Party that is incurred on the date of the consummation of a Permitted Acquisition solely for the purpose of financing all or part of the acquisition consideration (including working capital adjustments) in connection with such Permitted Acquisition so long as (i) no Event of Default has occurred and is continuing or would result therefrom, (ii) such unsecured Indebtedness is not incurred for working capital purposes, (iii) such unsecured Indebtedness does not mature prior to the date that is six (6) months after the Maturity Date, (iv) such Indebtedness is subordinated in right of payment to the Obligations on terms and conditions reasonably satisfactory to Administrative Agent, and (v) the only interest that accrues with respect to such Indebtedness is payable in kind, and Refinance Indebtedness in respect thereof;
(o) unsecured Indebtedness owing to sellers of assets or Equity Interests to a Loan Party that is incurred by the applicable Loan Party in connection with the consummation of one or more Permitted Acquisitions (excluding Indebtedness in respect of Earnouts in connection with the Brightstar Acquisition) so long as (i) the aggregate principal amount for all such unsecured Indebtedness, together with the
81
maximum amount payable on account of all Indebtedness incurred pursuant to clause (p) below, does not exceed $27,500,000 at any one time outstanding, (ii) such Indebtedness (other than Indebtedness incurred in connection with the Brightstar Acquisition) is contractually subordinated to the Obligations on terms and conditions reasonably acceptable to the Administrative Agent, and (iii) such Indebtedness is otherwise on terms and conditions (including all economic terms and the absence of covenants) reasonably acceptable to the Administrative Agent; provided that any such Indebtedness incurred in connection with the Brightstar Acquisition in accordance with the Brightstar Acquisition Agreement shall be deemed to satisfy the requirement contained in this subclause (iii);
(p) Indebtedness in respect of Earn-Outs (including without limitation, Earn-Outs in connection with the Brightstar Acquisition) so long as (i) no Event of Default has occurred and is continuing as of the date of such incurrence or would immediately result therefrom and (ii) the maximum amount payable on account of such Earn-Outs, together with the aggregate principal amount of all Indebtedness incurred pursuant to clause (o) above, does not exceed $27,500,000 at any one time outstanding;
(q) endorsement of instruments or other payment items for deposit or the financing of insurance premiums;
(r) obligations with respect to letters of credit (other than Letters of Credit issued under the Loan Documents) with an aggregate maximum face amount not exceeding $3,000,000 at any time outstanding;
(s) unsecured guarantees arising with respect to customary indemnification obligations to purchasers in connection with Dispositions permitted under Section 6.05 of this Agreement;
(t) unsecured obligations, contingent or otherwise, not to exceed £325,000 in the aggregate, in favor of Invest Northern Ireland in respect of grant moneys received by Repstor Limited, and any guarantees thereof; and
(u) other unsecured Indebtedness (other than Indebtedness in respect of Earn-Outs in connection with the Brightstar Acquisition) in an aggregate principal amount not exceeding $6,000,000 at any time outstanding.
82
(l) Liens granted in the ordinary course of business on the unearned portion of insurance premiums securing the financing of insurance premiums to the extent the financing is permitted under Section 6.01;
(m) Liens solely on any cash earnest money deposits made by the Borrower or any of its Subsidiaries in connection with any letter of intent or purchase agreement with respect to a Permitted Acquisition;
83
(n) landlords’ and lessors’ Liens in respect of rent and other lease obligations that are not past due by ninety (90) days or which are being contested in good faith for which adequate reserves have been established in accordance with GAAP, which proceedings (or court orders entered into connection with such proceedings) have the effect of preventing the forfeiture or sale of the property subject to any such Lien;
(o) Liens of a collecting bank arising in the ordinary course of business under Section 4-208 of the UCC covering only the items being collected upon;
(p) Liens on cash collateral accounts securing letters of credit permitted under Section 6.01(r); and
(q) other Liens securing amounts in an aggregate principal amount not exceeding $2,000,000 at any time outstanding.
84
85
86
87
provided that all Dispositions permitted under this Section 6.05 (other than those permitted by paragraphs (b) (excluding dispositions from Loan Parties to non-Loan Parties), (d), (f), (i) and (j) above) shall be made for fair value and for at least 75% cash consideration.
88
89
Events of Default
If any of the following events (“Events of Default”) shall occur:
90
91
92
then, and in every such event (other than an event with respect to the Borrower described in clause (h) or (i) of this Article), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate the Revolving Commitments, whereupon the Revolving Commitments shall terminate immediately, (ii) declare the Loans then outstanding to be due and payable in whole (or in part, but ratably as among the Classes of Loans and the Loans of each Class at the time outstanding, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), whereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees (including, for the avoidance of doubt, any break funding payment) and other obligations of the Borrower accrued hereunder and under any other Loan Document, shall become due and payable immediately, in each case without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower, and (iii) require cash collateral for the LC Exposure in accordance with Section 2.06(j) hereof; and in the case of any event with respect to the Borrower described in clause (h) or (i) of this Article, the Revolving Commitments shall automatically terminate and the principal of the Loans then outstanding, and cash collateral for the LC Exposure, together with accrued interest thereon and all fees (including, for the avoidance of doubt, any break funding payments) and other obligations of the Borrower accrued hereunder and under any other Loan Documents, shall automatically become due and payable, in each case without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Loan Parties. Upon the occurrence and during the continuance of an Event of Default, the Administrative Agent may, and at the request of the Required Lenders shall, increase the rate of interest applicable to the Loans and other Obligations as set forth in this Agreement and exercise any rights and remedies provided to the Administrative Agent under the Loan Documents or at law or equity, including all remedies provided under the UCC.
The Administrative Agent
93
94
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such proceeding is hereby authorized by each Lender, each Issuing Bank and each other Secured Party to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, the Issuing Banks or the other Secured Parties, to pay to the Administrative Agent any amount due to it, in its capacity as the Administrative Agent, under the Loan Documents (including under Section 9.03). Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender or Issuing Bank any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or Issuing Bank or to authorize the Administrative Agent to vote in respect of the claim of any Lender or Issuing Bank in any such proceeding.
95
96
“Communications” means, collectively, any notice, demand, communication, information, document or other material provided by or on behalf of any Loan Party pursuant to any Loan Document or the transactions contemplated therein which is distributed by the Administrative Agent, any Lender or any Issuing Bank by means of electronic communications pursuant to this Section, including through an Approved Electronic Platform.
97
98
99
100
101
102
103
Miscellaneous
Intapp, Inc.
3101 Park Blvd
Palo Alto, CA 94306
Attention: Stephen Robertson, Chief Financial Officer
Telephone: (650) 852-0400
Email: stephen.robertson@intapp.com
With a copy to:
Steven Todd, Senior Vice President & General Counsel
Email: steven.todd@intapp.com
104
JPMorgan Chase Bank, N.A.
10 South Dearborn, Floor L2
Suite IL1-0480
Chicago, IL 60603-2300
Attention: August Dunn
Phone No: 312-385-7048
Fax No: 312-385-7045
Email: August.dunn@chase.com
With a copy to:
JPMorgan Chase Bank, N.A.
10 South Dearborn, Floor L2
Suite IL1-0480
Chicago, IL, 60603-2300
Attention: Commercial Banking Group
Fax No: (844) 490-5663
Email: jpm.agency.cri@jpmorgan.com
jpm.agency.servicing.1@jpmorgan.com
JPMorgan Chase Bank, N.A.
10 South Dearborn, Floor L2
Suite IL1-0480
Chicago, IL, 60603-2300
Attention: LC Agency Team
Tel: 800-364-1969
Fax: 856-294-5267
Email: chicago.lc.agency.activity.team@jpmchase.com
With a copy to:
JPMorgan Chase Bank, N.A.
10 South Dearborn, Floor L2
Suite IL1-0480
Chicago, IL, 60603-2300
Attention: Loan & Agency Services Group
Attention: August Dunn
Phone No: 312-385-7048
Fax No: 312-385-7045
Email: August.dunn@chase.com
All such notices and other communications (i) sent by hand or overnight courier service, or mailed by certified or registered mail shall be deemed to have been given when received, (ii) sent by fax shall be deemed to have been given when sent, provided that if not given during normal business hours for the recipient, such notice or communication shall be deemed to have been given at the opening of business on
105
the next Business Day of the recipient, or (iii) delivered through Electronic System or Approved Electronic Platforms, as applicable, to the extent provided in paragraph (b) below shall be effective as provided in such paragraph.
106
107
108
Upon the occurrence and during the continuance of an Event of Default, all of the foregoing fees, costs and expenses may be charged to the Borrower as Revolving Loans or to another deposit account, all as described in Section 2.18(c).
109
110
111
For the purposes of this Section 9.04(b), the terms “Approved Fund” and “Ineligible Institution” have the following meanings:
“Approved Fund” means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.
“Ineligible Institution” means a (a) natural person, (b) a Defaulting Lender or its Parent, (c) company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural person or relative(s) thereof; provided that, with respect to clause (c), such company, investment vehicle or trust shall not constitute an Ineligible Institution if it (x) has not been established for the primary purpose of acquiring any Loans or Revolving Commitments, (y) is managed by a professional advisor, who is not such natural person or a relative thereof, having significant experience in the business of making or purchasing commercial loans, and (z) has assets greater than $25,000,000 and a significant part of its activities consist of making or purchasing commercial loans and similar extensions of credit in the ordinary course of its business; provided that upon the occurrence and during the continuance of an Event of Default, any Person (other than a Lender) shall be an Ineligible Institution if after giving effect to any proposed assignment to such Person, such Person would hold more than 25% of the then outstanding Aggregate Credit Exposure or Revolving Commitments, as the case may be or (d) a Loan Party or a Subsidiary or other Affiliate of a Loan Party.
112
Each Lender that sells a participation agrees, at the Borrower’s request and expense, to use reasonable efforts to cooperate with the Borrower to effectuate the provisions of Section 2.19(b) with
113
respect to any Participant. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.08 as though it were a Lender, provided that such Participant agrees to be subject to Section 2.18(d) as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under this Agreement or any other Loan Document (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any Revolving Commitments, Loans, Letters of Credit or its other obligations under this Agreement or any other Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such Revolving Commitment, Loan, Letter of Credit or other obligation is in registered form under Section 5f.103‑1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.
114
115
116
117
EACH LENDER ACKNOWLEDGES THAT INFORMATION AS DEFINED IN SECTION 9.12 FURNISHED TO IT PURSUANT TO THIS AGREEMENT MAY INCLUDE MATERIAL NON-PUBLIC INFORMATION CONCERNING THE BORROWER, THE OTHER LOAN PARTIES AND THEIR RELATED PARTIES OR THEIR RESPECTIVE SECURITIES, AND CONFIRMS THAT IT HAS DEVELOPED COMPLIANCE PROCEDURES REGARDING THE USE OF MATERIAL NON-PUBLIC INFORMATION AND THAT IT WILL HANDLE SUCH MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH THOSE PROCEDURES AND APPLICABLE LAW, INCLUDING FEDERAL AND STATE SECURITIES LAWS.
ALL INFORMATION, INCLUDING REQUESTS FOR WAIVERS AND AMENDMENTS, FURNISHED BY THE BORROWER OR THE ADMINISTRATIVE AGENT PURSUANT TO, OR IN THE COURSE OF ADMINISTERING, THIS AGREEMENT WILL BE SYNDICATE-LEVEL INFORMATION, WHICH MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION ABOUT THE BORROWER, THE OTHER LOAN PARTIES AND THEIR RELATED PARTIES OR THEIR RESPECTIVE SECURITIES. ACCORDINGLY, EACH LENDER REPRESENTS TO THE BORROWER AND THE ADMINISTRATIVE AGENT THAT IT HAS IDENTIFIED IN ITS ADMINISTRATIVE QUESTIONNAIRE A CREDIT CONTACT WHO MAY RECEIVE INFORMATION THAT MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH ITS COMPLIANCE PROCEDURES AND APPLICABLE LAW, INCLUDING FEDERAL AND STATE SECURITIES LAWS.
118
119
120
Loan Guaranty
121
122
123
124
[Signature Pages Follows]
125
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective authorized officers as of the day and year first above written.
INTAPP, INC., a Delaware corporation
By:
Name:
Title:
INTEGRATION APPLIANCE, INC., a Delaware corporation
By:
Name:
Title:
INTAPP US, INC., a Delaware corporation
By:
Name:
Title:
THE FRAYMAN GROUP, INC., a Delaware corporation
By:
Name:
Title:
[Signature Page to Credit Agreement]
GWABBIT, INC., a Delaware corporation
By:
Name:
Title:
DEALCLOUD, INC., a Delaware corporation
By:
Name:
Title:
[Signature Page to Credit Agreement]
JPMORGAN CHASE BANK, N.A., individually, and as Administrative Agent and Issuing Bank
By:
Name:
Title:
[Signature Page to Credit Agreement]
[LENDERS]
By:
Name:
Title:
[Signature Page to Credit Agreement]
Exhibit B
Amended and Restated Exhibit B-1 ([Form of] Borrowing Request)
to Credit Agreement
[See attached]
Execution Version
EXHIBIT B-1
[FORM OF] BORROWING REQUEST
INTAPP, INC.
JPMorgan Chase Bank, N.A.
10 South Dearborn, Floor L2
Suite IL1-1145
Chicago, IL, 60603-2300
Attention: ___________________
Fax No: (312) ___________
Date:
Ladies and Gentlemen:
This Borrowing Request is furnished pursuant to Section 2.03 of that certain Credit Agreement dated as of [●], 2021 (as amended, restated, supplemented or otherwise modified from time to time, the “Agreement”) by and among Intapp, Inc., a Delaware corporation (the “Borrower”), the other Loan Parties, the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent. Unless otherwise defined herein, capitalized terms used in this Borrowing Request have the meanings ascribed thereto in the Agreement. The Borrower represents that, as of this date, the conditions precedent set forth in [Section 4.011 and] Section 4.02 are satisfied.
The Borrower hereby notifies the Administrative Agent of its request for the following Borrowing:
1. Revolving Borrowing
2. Aggregate Amount of the Revolving Borrowing2:
$[_________________]
3. Borrowing Date of the Borrowing (must be a Business Day):
[___________________]
4. The Borrowing shall be an [ABR Borrowing], [RFR Borrowing]3 or [Term Benchmark Borrowing]4
Exhibit B-1 - 1
5. If a Term Benchmark Borrowing, the duration of Interest Period5:
1 To be included for the initial borrowing on the Effective Date
2 Must comply with Section 2.02(c) of the Agreement
3 Except as otherwise set forth in Section 2.14 of the Agreement, there shall be no RFR Borrowings prior to there being a Benchmark Transition Event that results in Daily Simple SOFR being the Benchmark Replacement in accordance with Section 2.14 for Borrowings of any Loans.
4 If no election as to the Type of Revolving Borrowing is specified, then the requested Revolving Borrowing shall be an ABR Borrowing.
5 Shall be subject to the definition of “Interest Period.” Cannot extend beyond the Maturity Date. If an Interest Period is not specified, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration.
One Month
Three Months
Six Months
INTAPP, INC.
By: ________________________
Name:
Title:
Exhibit B-1 - 2
Exhibit C
Amended and Restated Exhibit B-2 ([Form of] Interest Election Request)
to Credit Agreement
[See attached]
EXHIBIT B-2
[FORM OF] INTEREST ELECTION REQUEST
INTAPP, INC.
JPMorgan Chase Bank, N.A.
10 South Dearborn, Floor L2
Suite IL1-1145
Chicago, IL, 60603-2300
Attention: ___________________
Fax No: (312) ___________
Date:
Ladies and Gentlemen:
This Interest Election Request is furnished pursuant to Section 2.08(c) of that certain Credit Agreement dated as of [●], 2021 (as amended, restated, supplemented or otherwise modified from time to time, the “Agreement”) by and among Intapp, Inc., a Delaware corporation (the “Borrower”), the other Loan Parties, the Lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent. Unless otherwise defined herein, capitalized terms used in this Borrowing Request have the meanings ascribed thereto in the Agreement.
The Borrower is hereby requesting to convert or continue certain Borrowings as follows:
1. Borrowing to which this Interest Election Request applies:
[________________________________]
2. Date of conversion/continuation (must be a Business Day): [__________________], 20[____]
3. Amount of Borrowings being converted/continued: $[_______________]
4. Nature of conversion/continuation:
a. Conversion of ABR Borrowings to Term Benchmark Borrowings [or RFR Borrowings]6
Exhibit B-2 - 1
b. Conversion of Term Benchmark Borrowings [or RFR Borrowings]6 to ABR Borrowings
c. Continuation of Term Benchmark Borrowings or RFR Borrowings as such
5. If Borrowings are being continued as or converted to Term Benchmark Borrowings, the duration of the new Interest Period that commences on the conversion/continuation date7:
One Month __________ Three Months __________ Six Months __________
6. [The undersigned officer of Borrower certifies that, both before and after giving effect to the request above, no Default or Event of Default has occurred and is continuing under the Agreement.]8
6 Except as otherwise set forth in Section 2.14 of the Agreement, there shall be no RFR Borrowings prior to there being a Benchmark Transition Event that results in Daily Simple SOFR being the Benchmark Replacement in accordance with Section 2.14 for Borrowings of any Loans.
7 Shall be subject to the definition of “Interest Period.” Cannot extend beyond the Maturity Date. If an Interest Period is not specified, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration.
8 To be included with elections of 4(a) and 4(c) above.
INTAPP, INC.
By: ______________________
Name:
Title:
Exhibit B-2 - 2
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, John Hall, certify that:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: February 8, 2023 |
|
By: |
/s/ John Hall |
|
|
|
John Hall |
|
|
|
Chief Executive Officer |
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Stephen Robertson, certify that:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: February 8, 2023 |
|
By: |
/s/ Stephen Robertson |
|
|
|
Stephen Robertson |
|
|
|
Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Intapp, Inc. (the “Company”) on Form 10-Q for the period ending December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company as of and for the period covered by the Report.
Date: February 8, 2023 |
|
By: |
/s/ John Hall |
|
|
|
John Hall |
|
|
|
Chief Executive Officer |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Intapp, Inc. (the “Company”) on Form 10-Q for the period ending December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company as of and for the period covered by the Report.
Date: February 8, 2023 |
|
By: |
/s/ Stephen Robertson |
|
|
|
Stephen Robertson |
|
|
|
Chief Financial Officer |