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Financial report summary
?Risks
- The Merger Agreement entered into with our Principal Stockholders may not be adopted, may increase the volatility of the market price of our common stock and will result in certain costs and expenses.
- We have no assurance of future business from any of our customers.
- We rely upon third parties for the data we need to deliver our services.
- We rely upon third-party contractors to help us fulfill our service obligations to our customers.
- Cost increases, failure, or termination by our third-party data and services providers could impair the effectiveness and competitiveness of our services.
- We rely upon commercial providers of human capital management and applicant tracking systems for integration with many of our customers.
- We intend to rely, in part, on acquisitions to help grow our business. Any acquisitions we undertake may not produce the benefits we expect, and may disrupt our business, adversely affect operations, dilute stockholders, and expose us to costs and liabilities.
- We must attract, motivate, train, and retain the management, technical, market-facing, and operational personnel we need to enable the success and growth of our business.
- COVID-19 has had, and may continue to have, an adverse effect on our business.
- Forecasts of market growth may prove to be inaccurate, and even if the market in which we compete achieves the forecasted growth, our business may not grow at similar rates, if at all.
- As a result of various factors, our operating results and stock price may be volatile and fall below analysts’ and investors’ expectations.
- Our balance sheet includes significant amounts of goodwill and intangible assets. An impairment charge on our goodwill and other intangible assets could negatively affect our financial condition or results of operations.
- Litigation, inquiries, investigations, examinations or other legal proceedings in which we are involved, in which we may become involved, or in which our customers or competitors are involved could subject us to significant monetary damages or restrictions on our ability to do business.
- The FCRA, the ICRAA and other laws that regulate our business impose significant operational requirements and liability risks.
- We are subject to rapidly changing and increasingly stringent laws and industry standards relating to privacy, data security, and data protection. The requirements and costs imposed by these laws, or our actual or perceived failure to comply with them, could subject us to liabilities that adversely affect our business.
- We can incur significant liability for omitting adverse information in a background report if the subject of that report causes harm that could have been foreseen and avoided if we had reported the omitted information.
- We may be subject to and in violation of state private investigator licensing laws and regulations, which could adversely affect our ability to do business in certain states and subject us to liability.
- We are subject to government regulations concerning our employees, including wage-hour laws and taxes.
- We may be subject to intellectual property claims by third parties, which are costly to defend, could require us to pay significant damages and could limit our ability to use certain technologies and intellectual property.
- If we are unable to protect our proprietary technology and other intellectual property rights, it may reduce our ability to compete for business and we may experience reduced revenue and incur costly litigation to protect our rights.
- Our business relationships expose us to risk of substantial liability for contract breach, violation of laws and regulations, intellectual property infringement and other acts and omissions by us and others, and our contractual indemnities, limitations of liability, and insurance may not protect us adequately.
- Liabilities we incur in the course of our business may be uninsurable, or insurance may be very expensive and limited in scope.
- Breaches or misuse of our networks or systems, our customers’ networks or systems that are integrated with ours, or networks or systems of third parties upon which we rely, or any improper access to our information or platform may negatively impact our business and harm our reputation.
- We rely significantly on the use of information technology. System failures, including failures due to natural disasters or other catastrophic events, could delay and disrupt our services, cause harm to our business and reputation and result in a loss of customers.
- If we fail to enhance and expand our technology and services to meet customer needs and preferences, our competitiveness and profitability will be adversely affected.
- Real or perceived errors, failures, or bugs in our unified platform could adversely affect our business.
- The use of open-source software may expose us to additional risks and compromise our intellectual property.
- We have technology development operations in Estonia and India, exposing us to risks that may be difficult to manage.
- If our ability to use data to train our proprietary machine-learning models is lost or limited, our business could be adversely affected.
- If the data we use to train our proprietary machine-learning models is significantly inaccurate, our business could be adversely affected.
- Our machine-learning models may not operate properly or as we expect them to, which could cause us to inaccurately evaluate applicant information.
- Our machine-learning models could lead to unintentional discrimination and be subject to evolving regulation.
- Changes to the availability and permissible uses of consumer data may reduce the demand for our services.
- We operate in an intensely competitive market, and we may not be able to develop and maintain competitive advantages necessary to support our growth and profitability.
- Growth will require us to improve our operating capabilities.
- Our business is vulnerable to economic downturns and seasonality.
- If we do not introduce successful new products, services, and analytical capabilities in a timely manner, or if the market does not adopt our new services, our competitiveness and operating results will suffer.
- Inflation may reduce our profitability.
- Our existing indebtedness and other future payment obligations could adversely affect our business and growth prospects.
- The terms and conditions of our Credit Facility restrict our current and future operations, particularly our ability to respond to changes or to take certain actions.
- We are required to pay our pre-IPO equityholders (or their transferees or assignees) for certain tax benefits, which amounts are expected to be material.
- We will not be reimbursed for any payments made to our pre-IPO equityholders (or their transferees or assignees) under the TRA in the event that any tax benefits are disallowed.
- In certain cases, payments under the TRA to our pre-IPO equityholders (or their transferees or assignees) may be accelerated or significantly exceed any actual benefits we realize in respect of the tax attributes subject to the TRA.
- We may not be able to generate sufficient cash flow to meet our payment obligations under the Credit Facility and TRA and may be forced to take other actions to satisfy our obligations, including refinancing indebtedness, which may not be successful.
- We may require additional capital to support our business, and such capital might not be available on terms acceptable to us, if at all. Inability to obtain financing could limit our ability to conduct necessary operating activities and make strategic investments.
- We may have exposure to greater than anticipated tax liabilities and may be affected by changes in tax laws or interpretations, any of which could adversely impact our results of operations.
- The multinational nature of our business can expose us to unexpected tax consequences, which may be adverse.
- We may be subject to examinations of our tax returns by the IRS or other tax authorities. An adverse outcome of any such audit or examination by the IRS or other tax authority could have a material adverse effect on our results of operations, financial condition, and liquidity.
- We may be subject to state and local tax on certain of our services which could subject us to material liability and increase the cost our customers would have to pay for our services.
- Our international operations require increased expenditures and impose additional risks and compliance imperatives, and failure to successfully execute our international plans will adversely affect our growth and operating results.
- Operating in multiple countries requires us to comply with different legal and regulatory requirements.
- We are subject to governmental export and import controls that could subject us to liability or impair our ability to compete in international markets.
- Fluctuations in the exchange rates of foreign currencies could result in currency transaction losses.
- The Principal Stockholders control us, and their interests may conflict with other stockholders.
- We are an “emerging growth company,” and we expect to elect to comply with reduced public company reporting requirements, which could make our common stock less attractive to investors.
- Failure to maintain effective internal control over financial reporting could cause our investors to lose confidence in us and adversely affect the market price of our common stock. If our internal control over financial reporting is not effective, we may not be able to accurately report our financial results or prevent fraud.
- Provisions of our corporate governance documents could make an acquisition of us more difficult and may prevent attempts by our stockholders to replace or remove our current management, even if beneficial to our stockholders.
- Our certificate of incorporation provides that certain courts in the State of Delaware or the federal district courts of the United States for certain types of lawsuits will be the sole and exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
- Future sales of substantial amounts of our common stock, or the possibility that such sales could occur, could adversely affect the market price of our common stock, even if our business is doing well. Recent decreases in our public float increase this risk.
- Because we have no current plans to pay regular cash dividends on our common stock, you may not receive any return on investment unless you sell your common stock for a price greater than what you paid for it.
- If securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding our shares, or if our results of operations do not meet their expectations, our stock price and trading volume could decline.
- Our equity-based compensation and acquisition practices expose our stockholders to dilution.
- We could be negatively affected by actions of activist stockholders.
- We may issue shares of preferred stock in the future, which could make it difficult for another company to acquire us or could otherwise adversely affect holders of our common stock, which could depress the price of our common stock.
Management Discussion
- Revenues for the year ended December 31, 2023 decreased to $721.9 million, a decrease of $84.8 million, or 10.5%, from the prior-year period, primarily driven by lower order volumes from existing customers due to their efforts to rightsize their workforce in response to macroeconomic pressures and uncertainties. These effects were more pronounced in our technology and services verticals, which represented $63.5 million of the total $84.8 million decrease. Revenues from our remaining customer groups represented a net decrease of $21.3 million for the same reasons noted above.
- From a geographical perspective, revenues from international and United States regions decreased by $7.5 million, or 12.0%, and by $77.3 million, or 10.4%, respectively, during the year ended December 31, 2023 compared to the year ended December 31, 2022. Declining revenues from our technology and services verticals were particularly noted in our APAC and India regions.
- Revenues for the year ended December 31, 2022 increased to $806.7 million, an increase of $76.6 million, or 10.5%, from the prior-year period, primarily driven by higher average order values associated with existing customers and sales to new customers. Revenues from international and United States regions increased by $7.5