SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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☒ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended September 30, 2017
or
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☐ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from
toCommission file number 001-35108
SERVICESOURCE INTERNATIONAL, INC.
(Exact name of registrant as specified in ourits charter)
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Delaware | 81-0578975 | |
(State or | | (I.R.S. Employer Identification No.) |
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707 17th Street, 25th Floor | | |
Denver,Colorado | | 80202 |
(Address of principal executive offices) | | (Zip Code) |
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(720) 889-8500 | |
(Registrant’s telephone number, including area code) |
Securities registered pursuant to Section 12(b) of the Act:
| | | | |
Title of | Trading Symbol | Name of each exchange on which registered | ||
Common Stock, $0.0001 Par Value | | SREV | | The Nasdaq Stock Market LLC |
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.
Yes
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).
Yes
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | ||
Large accelerated filer | ☐ | Accelerated | ☒ | |||
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
As of May 5, 2022, 99,938,408 shares outstanding of each of the issuer’s classes of common stock as of the latest practical date:ServiceSource International, Inc. were outstanding.
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Consolidated Statements of Cash Flows | | 7 |
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2
Consolidated Balance Sheets
(In thousands)
September 30, 2017 | December 31, 2016 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 39,585 | $ | 47,692 | |||
Short-term investments | 140,188 | 137,881 | |||||
Accounts receivable, net | 53,061 | 63,289 | |||||
Prepaid expenses and other | 7,326 | 7,607 | |||||
Total current assets | 240,160 | 256,469 | |||||
Property and equipment, net | 35,703 | 38,180 | |||||
Deferred income taxes, net of current portion | 69 | 64 | |||||
Goodwill and intangibles, net | 6,797 | 7,932 | |||||
Other assets, net | 3,556 | 3,445 | |||||
Total assets | $ | 286,285 | $ | 306,090 | |||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 1,129 | $ | 1,916 | |||
Accrued taxes | 387 | 1,388 | |||||
Accrued compensation and benefits | 17,470 | 21,579 | |||||
Convertible notes, net | 141,726 | — | |||||
Deferred revenue | 1,713 | 4,152 | |||||
Accrued expenses | 6,127 | 5,891 | |||||
Other current liabilities | 1,241 | 2,958 | |||||
Total current liabilities | 169,793 | 37,884 | |||||
Convertible notes, net | — | 134,775 | |||||
Other long-term liabilities | 7,127 | 6,495 | |||||
Total liabilities | 176,920 | 179,154 | |||||
Commitments and contingencies (Note 5) | |||||||
Stockholders’ equity: | |||||||
Common stock; $0.0001 par value; 1,000,000 shares authorized; 90,266 shares issued and 90,145 shares outstanding as of September 30, 2017; 88,304 shares issued and 88,183 shares outstanding as of December 31, 2016 | 8 | 8 | |||||
Treasury stock | (441 | ) | (441 | ) | |||
Additional paid-in capital | 355,969 | 344,521 | |||||
Accumulated deficit | (246,281 | ) | (216,361 | ) | |||
Accumulated other comprehensive income | 110 | (791 | ) | ||||
Total stockholders’ equity | 109,365 | 126,936 | |||||
Total liabilities and stockholders’ equity | $ | 286,285 | $ | 306,090 |
(unaudited)
| | | | | | |
|
| March 31, 2022 |
| December 31, 2021 | ||
Assets | | | | | | |
Current assets: | | | | | | |
Cash and cash equivalents | | $ | 29,518 | | $ | 28,507 |
Accounts receivable, net | | | 37,938 | | | 43,571 |
Prepaid expenses and other | | | 7,858 | | | 8,995 |
Total current assets | | | 75,314 | | | 81,073 |
| | | | | | |
Property and equipment, net | | | 15,898 | | | 18,721 |
ROU assets | | | 23,110 | | | 23,043 |
Contract acquisition costs | | | 497 | | | 558 |
Goodwill | | | 6,334 | | | 6,334 |
Other assets | | | 2,717 | | | 2,719 |
Total assets | | $ | 123,870 | | $ | 132,448 |
| | | | | | |
Liabilities and Stockholders' Equity | | | | | | |
Current liabilities: | | | | | | |
Accounts payable | | $ | 1,612 | | $ | 832 |
Accrued expenses | | | 3,299 | | | 4,152 |
Accrued compensation and benefits | | | 13,955 | | | 19,999 |
Revolver | | | 10,000 | | | 10,000 |
Operating lease liabilities | | | 7,740 | | | 8,614 |
Other current liabilities | | | 648 | | | 793 |
Total current liabilities | | | 37,254 | | | 44,390 |
| | | | | | |
Operating lease liabilities, net of current portion | | | 20,481 | | | 19,869 |
Other long-term liabilities | | | 1,180 | | | 1,155 |
Total liabilities | | | 58,915 | | | 65,414 |
| | | | | | |
Commitments and contingencies (Note 8) | | | | | | |
| | | | | | |
Stockholders' equity: | | | | | | |
Preferred stock, $0.0001 par value; 20,000 shares authorized and NaN issued and outstanding | | | — | | | — |
Common stock, $0.0001 par value; 1,000,000 shares authorized; 100,059 shares issued and 99,938 shares outstanding as of March 31, 2022; 99,233 shares issued and 99,112 shares outstanding as of December 31, 2021 | | | 10 | | | 10 |
Treasury stock | | | (441) | | | (441) |
Additional paid-in capital | | | 388,213 | | | 385,827 |
Accumulated deficit | | | (323,710) | | | (319,328) |
Accumulated other comprehensive income | | | 883 | | | 966 |
Total stockholders' equity | | | 64,955 | | | 67,034 |
Total liabilities and stockholders' equity | | $ | 123,870 | | $ | 132,448 |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.Statements
3
ServiceSource International, Inc.
Consolidated Statements of Operations
(Inin thousands, except per share amounts)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net revenue | $ | 58,132 | $ | 62,514 | $ | 173,103 | $ | 184,233 | |||||||
Cost of revenue | 40,803 | 40,789 | 121,729 | 122,568 | |||||||||||
Gross profit | 17,329 | 21,725 | 51,374 | 61,665 | |||||||||||
Operating expenses: | |||||||||||||||
Sales and marketing | 7,829 | 8,847 | 24,790 | 30,626 | |||||||||||
Research and development | 1,048 | 1,952 | 4,534 | 6,132 | |||||||||||
General and administrative | 12,543 | 14,638 | 40,029 | 38,233 | |||||||||||
Restructuring and other | 545 | — | 6,259 | — | |||||||||||
Total operating expenses | 21,965 | 25,437 | 75,612 | 74,991 | |||||||||||
Loss from operations | (4,636 | ) | (3,712 | ) | (24,238 | ) | (13,326 | ) | |||||||
Interest expense and other, net | (2,839 | ) | (2,291 | ) | (7,555 | ) | (5,499 | ) | |||||||
Gain (loss) on cost basis equity investment | 2,100 | (2,300 | ) | 2,100 | (2,300 | ) | |||||||||
Loss before income taxes | (5,375 | ) | (8,303 | ) | (29,693 | ) | (21,125 | ) | |||||||
Income tax (benefit) provision | (180 | ) | 968 | 227 | 2,505 | ||||||||||
Net loss | $ | (5,195 | ) | $ | (9,271 | ) | $ | (29,920 | ) | $ | (23,630 | ) | |||
Net loss per share, basic and diluted | $ | (0.06 | ) | $ | (0.11 | ) | $ | (0.34 | ) | $ | (0.27 | ) | |||
Weighted average common shares outstanding, basic and diluted | 89,511 | 86,283 | 88,907 | 85,981 |
(unaudited)
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| | For the Three Months Ended March 31, | ||||
|
| 2022 |
| 2021 | ||
Net revenue | | $ | 48,893 | | $ | 45,023 |
Cost of revenue | | | 35,745 | | | 34,067 |
Gross profit | | | 13,148 | | | 10,956 |
Operating expenses: | | | | | | |
Sales and marketing | | | 3,996 | | | 4,030 |
Research and development | | | 1,386 | | | 1,160 |
General and administrative | | | 11,321 | | | 12,190 |
Restructuring and other related costs | | | — | | | 920 |
Total operating expenses | | | 16,703 | | | 18,300 |
Loss from operations | | | (3,555) | | | (7,344) |
Interest and other expense, net | | | (178) | | | (1,160) |
Loss before provision for income taxes | | | (3,733) | | | (8,504) |
Provision for income tax expense | | | (649) | | | (331) |
Net loss | | $ | (4,382) | | $ | (8,835) |
Net loss per common share: | | | | | | |
Basic and diluted | | $ | (0.04) | | $ | (0.09) |
Weighted-average common shares outstanding: | | | | | | |
Basic and diluted | | | 99,398 | | | 97,234 |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
4
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net loss | $ | (5,195 | ) | $ | (9,271 | ) | $ | (29,920 | ) | $ | (23,630 | ) | |||
Other comprehensive income (loss), net of tax: | |||||||||||||||
Foreign currency translation adjustments | 285 | (110 | ) | 783 | (1,229 | ) | |||||||||
Unrealized gain (loss) on short-term investments | 13 | (81 | ) | 118 | 849 | ||||||||||
Other comprehensive income (loss), net of tax | 298 | (191 | ) | 901 | (380 | ) | |||||||||
Total comprehensive loss, net of tax | $ | (4,897 | ) | $ | (9,462 | ) | $ | (29,019 | ) | $ | (24,010 | ) |
ServiceSource International, Inc.
Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)
| | | | | | |
| | For the Three Months Ended March 31, | ||||
|
| 2022 |
| 2021 | ||
Net loss | | $ | (4,382) | | $ | (8,835) |
Other comprehensive (loss) income: | | | | | | |
Foreign currency translation adjustments | | | (83) | | | 325 |
Other comprehensive (loss) income: | | | (83) | | | 325 |
Comprehensive loss | | $ | (4,465) | | $ | (8,510) |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
5
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Cash flows from operating activities | |||||||
Net loss | $ | (29,920 | ) | $ | (23,630 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depreciation and amortization | 17,167 | 11,636 | |||||
Amortization of debt discount and issuance costs | 6,951 | 6,464 | |||||
Amortization of premium on short-term investments | (172 | ) | 888 | ||||
Deferred income taxes | 177 | 1,698 | |||||
Stock-based compensation | 10,396 | 7,441 | |||||
Restructuring and other | 2,522 | — | |||||
(Gain) loss on cost basis equity investment | (2,100 | ) | 2,300 | ||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable, net | 12,307 | 2,778 | |||||
Deferred revenue | (2,440 | ) | (805 | ) | |||
Prepaid expenses and other | 387 | 1,306 | |||||
Accounts payable | (813 | ) | 407 | ||||
Accrued taxes | (1,019 | ) | (627 | ) | |||
Accrued compensation and benefits | (4,713 | ) | (1,509 | ) | |||
Accrued expenses | (839 | ) | 1,670 | ||||
Other liabilities | (1,375 | ) | (311 | ) | |||
Net cash provided by operating activities | 6,516 | 9,706 | |||||
Cash flows from investing activities | |||||||
Acquisition of property and equipment | (13,843 | ) | (21,203 | ) | |||
Proceeds from sale of cost basis equity investment | 2,100 | — | |||||
Purchases of short-term investments | (56,589 | ) | (86,365 | ) | |||
Sales of short-term investments | 51,119 | 83,331 | |||||
Maturities of short-term investments | 3,506 | 350 | |||||
Net cash used in investing activities | (13,707 | ) | (23,887 | ) | |||
Cash flows from financing activities | |||||||
Repayment on capital lease obligations | (52 | ) | (120 | ) | |||
Repurchase of common stock | — | (8,921 | ) | ||||
Proceeds from common stock issuances | 1,062 | 5,034 | |||||
Minimum tax withholding requirement | (735 | ) | (770 | ) | |||
Net cash provided by (used in) financing activities | 275 | (4,777 | ) | ||||
Net decrease in cash and cash equivalents | (6,916 | ) | (18,958 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | (1,191 | ) | (1,681 | ) | |||
Cash and cash equivalents at beginning of period | 47,692 | 72,334 | |||||
Cash and cash equivalents at end of period | $ | 39,585 | $ | 51,695 |
ServiceSource International, Inc.
Consolidated Statements of Stockholders’ Equity
(in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | Accumulated | | | | |
| | | | | | | | | | | | Additional | | | | | Other | | | | ||
| | Common Stock | | Treasury Shares/Stock | | Paid-in | | Accumulated- | | Comprehensive | | | | |||||||||
|
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Income |
| Total | ||||||
Balance at January 1, 2022 | | 99,233 | | $ | 10 | | (121) | | $ | (441) | | $ | 385,827 | | $ | (319,328) | | $ | 966 | | $ | 67,034 |
Net loss | | — | | | — | | — | | | — | | | — | | | (4,382) | | | — | | | (4,382) |
Other comprehensive loss | | — | | | — | | — | | | — | | | — | | | — | | | (83) | | | (83) |
Stock-based compensation | | — | | | — | | — | | | — | | | 2,633 | | | — | | | — | | | 2,633 |
Issuance of common stock, RSUs and PSUs | | 826 | | | — | | — | | | — | | | — | | | — | | | — | | | — |
Net cash paid for payroll taxes on RSU releases | | — | | | — | | — | | | — | | | (247) | | | — | | | — | | | (247) |
Balance at March 31, 2022 | | 100,059 | | $ | 10 | | (121) | | $ | (441) | | $ | 388,213 | | $ | (323,710) | | $ | 883 | | $ | 64,955 |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | Accumulated | | | | |
| | | | | | | | | | | | Additional | | | | | Other | | | | ||
| | Common Stock | | Treasury Shares/Stock | | Paid-in | | Accumulated- | | Comprehensive | | | | |||||||||
|
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Income |
| Total | ||||||
Balance at January 1, 2021 | | 97,248 | | $ | 10 | | (121) | | $ | (441) | | $ | 379,696 | | $ | (304,607) | | $ | 618 | | $ | 75,276 |
Net loss | | — | | | — | | — | | | — | | | — | | | (8,835) | | | — | | | (8,835) |
Other comprehensive income | | — | | | — | | — | | | — | | | — | | | — | | | 325 | | | 325 |
Stock-based compensation | | — | | | — | | — | | | — | | | 2,486 | | | — | | | — | | | 2,486 |
Issuance of common stock, RSUs | | 73 | | | — | | — | | | — | | | — | | | — | | | — | | | — |
Proceeds from the exercise of stock options and ESPP | | 149 | | | — | | — | | | — | | | 132 | | | — | | | — | | | 132 |
Balance at March 31, 2021 | | 97,470 | | $ | 10 | | (121) | | $ | (441) | | $ | 382,314 | | $ | (313,442) | | $ | 943 | | $ | 69,384 |
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
6
ServiceSource International, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| | | | | | |
| | For the Three Months Ended March 31, | ||||
|
| 2022 |
| 2021 | ||
Cash flows from operating activities: | | | | | | |
Net loss | | $ | (4,382) | | $ | (8,835) |
Adjustments to reconcile net loss to net cash provided by operating activities: | | | | | | |
Depreciation and amortization | | | 3,522 | | | 3,657 |
Amortization of contract acquisition costs | | | 90 | | | 167 |
Amortization of ROU assets | | | 2,051 | | | 2,391 |
Stock-based compensation | | | 2,620 | | | 2,475 |
Restructuring and other related costs | | | — | | | 902 |
Other | | | 15 | | | 265 |
Net changes in operating assets and liabilities: | | | | | | |
Accounts receivable, net | | | 5,557 | | | 4,131 |
Prepaid expenses and other assets | | | 1,088 | | | (2,099) |
Contract acquisition costs | | | (31) | | | (51) |
Accounts payable | | | 808 | | | 3,952 |
Accrued compensation and benefits | | | (5,913) | | | (3,673) |
Operating lease liabilities | | | (2,359) | | | (2,738) |
Accrued expenses | | | (828) | | | (511) |
Other liabilities | | | (59) | | | 504 |
Net cash provided by operating activities | | | 2,179 | | | 537 |
Cash flows from investing activities: | | | | | | |
Purchases of property and equipment | | | (741) | | | (1,019) |
Net cash used in investing activities | | | (741) | | | (1,019) |
Cash flows from financing activities: | | | | | | |
Repayment on finance lease obligations | | | (52) | | | (161) |
Proceeds from Revolver | | | 10,000 | | | — |
Repayment of Revolver | | | (10,000) | | | — |
Proceeds from issuance of common stock | | | — | | | 132 |
Payments related to minimum tax withholdings on RSU releases | | | (247) | | | — |
Net cash used in financing activities | | | (299) | | | (29) |
Effect of exchange rate changes on cash and cash equivalents and restricted cash | | | (128) | | | 650 |
Net change in cash and cash equivalents and restricted cash | | | 1,011 | | | 139 |
Cash and cash equivalents and restricted cash, beginning of period | | | 30,801 | | | 36,326 |
Cash and cash equivalents and restricted cash, end of period | | $ | 31,812 | | $ | 36,465 |
Supplemental disclosures of cash flow information: | | | | | | |
Cash paid for interest | | $ | 87 | | $ | 105 |
Supplemental disclosures of non-cash activities: | | | | | | |
Purchases of property and equipment accrued in accounts payable and accrued expenses | | $ | 2 | | $ | 9 |
ROU assets obtained in exchange for new lease liabilities | | $ | 2,334 | | $ | 618 |
The accompanying notes are an integral part of these Consolidated Financial Statements.
7
ServiceSource International, Inc.
Notes to Consolidated Financial Statements
(unaudited)
Note 1 — DescriptionThe Company
ServiceSource is a leading provider of BusinessBPaaS solutions that enable the transformation of go-to-market organizations and Basisfunctions for global technology clients. We design, deploy, and operate a suite of Presentation
“ServiceSource,” “the Company,” “we,” “us,” or “our,” as used herein, refer to ServiceSource International, Inc. (together withand its wholly owned subsidiaries, unless the “Company”) iscontext indicates otherwise.
For a global leader in outsourced, performance-based customer successsummary of commonly used industry terms and revenue growth solutions. Through the Company’s people, processes and technology, the Company finds, converts, grows and retains revenue on behalf of its clients—some of the world’s leading business-to-business companies—in more than 35 languages. The Company’s solutions help its clients strengthen their customer relationships, drive improved customer adoption, expansion and retention and minimize churn. The Company’s technology platform and best-practice business processes combined with its highly-trained, client-focused revenue delivery professionals and data from over 15 years of operating experience enable the Company to provide its clients greater value for its customer success services than attained by its clients’ in-house customer success teams.
Note 2 — Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements (“condensed consolidated financial statements”)Consolidated Financial Statements include the accounts of ServiceSource International, Inc. and its subsidiaries. Intercompany accountswholly owned subsidiaries and have been prepared in accordance with GAAP and with the instructions to Form 10-Q and Article 8 of Regulation S-X for interim financial information. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of the Consolidated Financial Statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts reported inof assets and liabilities, the Company’s condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates. Also, the results for the interim periods are not necessarily indicative of results for the entire year.
The Company continuesbases its estimates and judgments on historical experience and on various assumptions that it believes are reasonable under the circumstances. The Company has considered the effects of the COVID-19 pandemic and Russia’s invasion of Ukraine in determining its estimates. However, future events are difficult to assesspredict and subject to change, especially with the risks and uncertainties related to the impact of the standard,COVID-19 pandemic and has not yet determined whether the standard will have a material impact onRussia’s invasion of
8
Ukraine, which could cause estimates and judgments to require adjustment. Actual results and outcomes may differ from our consolidated financial statements. However, we currently believe the most significant impact is from the timing of recognition of certain sales commission expenses, which upon adoption will be recognized as costs over a period of time instead of immediately. We are also in the process of assessing the impact of the new standard on certain of our contracts that include performance-based fees. We currently recognize such fees in the period when the performance criteria have been met; however, under the new standard we would estimate the variable fees and recognize amounts as control of the promised deliverable is transferred to the client for which it is probable that a significant reversal would not occur. For certain contracts, this could result in accelerated recognition of the performance-based fees. We do not currently expect our recurring revenue management fees, based on a fixed percentage of overall sales value associated with the service contracts, to be significantly impacted by the new standard.
Cash Equivalents and Short-Term Investments
The Company follows a three-tier fair value hierarchy, which is described in detail in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
Cash equivalents consist of highly liquid fixed-income investments with original maturities of three months or less at the time of purchase includingand are classified as a Level 1 investment.
Restricted cash consists of cash in money market funds. Short-term investments consistaccounts that are used to secure letters of readily marketable securitiescredit in connection with 2 of our leased facilities. Restricted cash is recorded within “Prepaid expenses and other” and "Other assets" in the Consolidated Balance Sheets and is classified as a remaining maturity of more than three months from time of purchase.Level 1 investment. The Company classifies allhad restricted cash of its cash equivalents and short-term investments as “available for sale,” as these investments are free of trading restrictions and are available for use in the Company’s daily operations. These marketable securities are carried at fair value, with the unrealized gains and losses, net of tax, reported as accumulated other comprehensive income and included as a separate component of stockholders’ equity. Gains and losses are recognized when realized. When the Company determines that other-than-temporary declines in fair value have occurred, the amount of the decline that is related to a credit loss is recognized in earnings. Gains and losses are determined using the specific identification method. The Company’s realized gains and losses in the three and nine months ended September 30, 2017 and 2016 were insignificant.
Amortized Cost | Unrealized Gains | Unrealized Losses | Estimated Fair Value | ||||||||||||
Cash | $ | 39,514 | $ | — | $ | — | $ | 39,514 | |||||||
Cash equivalents: | |||||||||||||||
Money market mutual funds | 71 | — | — | 71 | |||||||||||
Total cash and cash equivalents | 39,585 | — | — | 39,585 | |||||||||||
Short-term investments: | |||||||||||||||
Corporate bonds | 55,874 | 60 | (92 | ) | 55,842 | ||||||||||
U.S. agency securities | 34,644 | — | (255 | ) | 34,389 | ||||||||||
Asset-backed securities | 23,937 | 5 | (48 | ) | 23,894 | ||||||||||
U.S. Treasury securities | 26,297 | — | (234 | ) | 26,063 | ||||||||||
Total short-term investments | 140,752 | 65 | (629 | ) | 140,188 | ||||||||||
Cash, cash equivalents and short-term investments | $ | 180,337 | $ | 65 | $ | (629 | ) | $ | 179,773 |
Amortized Cost | Unrealized Gains | Unrealized Losses | Estimated Fair Value | ||||||||||||
Cash | $ | 47,060 | $ | — | $ | — | $ | 47,060 | |||||||
Cash equivalents: | |||||||||||||||
Money market mutual funds | 632 | — | — | 632 | |||||||||||
Total cash and cash equivalents | 47,692 | — | — | 47,692 | |||||||||||
Short-term investments: | |||||||||||||||
Corporate bonds | 54,827 | 19 | (188 | ) | 54,658 | ||||||||||
U.S. agency securities | 34,658 | — | (281 | ) | 34,377 | ||||||||||
Asset-backed securities | 26,431 | 25 | (23 | ) | 26,433 | ||||||||||
U.S. Treasury securities | 22,701 | — | (288 | ) | 22,413 | ||||||||||
Total short-term investments | 138,617 | 44 | (780 | ) | 137,881 | ||||||||||
Cash, cash equivalents and short-term investments | $ | 186,309 | $ | 44 | $ | (780 | ) | $ | 185,573 |
Amortized Cost | Estimated Fair Value | ||||||
Less than 1 year | $ | 12,303 | $ | 12,302 | |||
Due in 1 to 3 years | 128,520 | 127,957 | |||||
Total | $ | 140,823 | $ | 140,259 |
Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | |||||||||
Cash equivalents: | |||||||||||
Money market mutual funds | $ | 71 | $ | 71 | $ | — | |||||
Total cash equivalents | 71 | 71 | — | ||||||||
Short-term investments: | |||||||||||
Corporate bonds | 55,842 | — | 55,842 | ||||||||
U.S. agency securities | 34,389 | — | 34,389 | ||||||||
Asset-backed securities | 23,894 | — | 23,894 | ||||||||
U.S. Treasury securities | 26,063 | — | 26,063 | ||||||||
Total short-term investments | 140,188 | — | 140,188 | ||||||||
Cash equivalents and short-term investments | $ | 140,259 | $ | 71 | $ | 140,188 |
Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | |||||||||
Cash equivalents: | |||||||||||
Money market mutual funds | $ | 632 | $ | 632 | $ | — | |||||
Total cash equivalents | 632 | 632 | — | ||||||||
Short-term investments: | |||||||||||
Corporate bonds | 54,658 | — | 54,658 | ||||||||
U.S. agency securities | 34,377 | — | 34,377 | ||||||||
Asset-backed securities | 26,433 | — | 26,433 | ||||||||
U.S. Treasury securities | 22,413 | — | 22,413 | ||||||||
Total short-term investments | 137,881 | — | 137,881 | ||||||||
Cash equivalents and short-term investments | $ | 138,513 | $ | 632 | $ | 137,881 |
The Company did not have any other financial instruments or long-term debt measured at fair value as of September 30, 2017March 31, 2022 and December 31, 2016.
New Accounting Standards Issued but Not Yet Adopted
Financial Instruments - Credit Losses
In August 2013,June 2016, the FASB issued an ASU that amends the measurement of credit losses on financial instruments and requires measurement and recognition of expected versus incurred credit losses for financial assets held. This ASU is effective for annual periods and interim periods for those annual periods beginning after December 15, 2022, with early adoption permitted. This standard will apply to the Company’s accounts receivable and contract assets. Based on our current analysis, the Company issued senior convertible notes due 2018 (the “Notes”)does not expect the adoption to have a material impact on the Consolidated Financial Statements as credit losses from trade receivables have historically been insignificant. The Company expects to adopt this standard effective January 1, 2023.
Note 3 — Debt
Revolving Line of Credit
In July 2021, ServiceSource, together with its wholly owned subsidiary, ServiceSource Delaware, Inc., entered into the 2021 Credit Agreement, which provides for a $35.0 million revolving line of credit allowing each borrower to borrow against its receivables subject to the terms and conditions set forth in exchangethe 2021 Credit Agreement. At the Company’s request and subject to customary conditions, the aggregate commitments under the 2021 Credit Agreement may be increased up to an additional $10.0 million, for gross proceedsa total maximum commitment amount of $150.0$45.0 million. The Notes will mature on August 1, 2018Revolver in the 2021 Credit Agreement matures in July 2024 and are recorded in current liabilities as
As of March 31, 2022, the Company had $10.0 million of borrowings under the Revolver in arrears on February 1 and August 1, beginning February 1, 2014.
The obligations under the interest method. The amount recorded to additional paid-in capital is not to be remeasured as long as it continues to meet the conditions2021 Credit Agreement are secured by substantially all assets of ServiceSource and certain of its subsidiaries, including pledges of equity classification. Upon issuancein certain of the $150.0 million of Notes,Company’s subsidiaries. The 2021 Credit Agreement has financial covenants that the Company recorded $111.5 million towas in compliance with as of March 31, 2022.
9
Interest Expense
Unamortized debt and $38.5 million to additional paid-in capital.
Interest expense related to the amortization of debt issuance costs and interest expense associated with the Company’s debt obligation was $0.1 million for the three months ended March 31, 2022 and 2021.
Note 4 — Leases
The Company has operating leases for office space and finance leases for certain equipment under non-cancelable agreements with various expiration dates through December 2032. Certain office leases include the option to extend the term between one to seven years and certain office leases include the option to terminate the lease upon written notice within one year after lease commencement. Leases with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheets.
Supplemental income statement information related to leases was as follows:
| | | | | | |
| | For the Three Months Ended March 31, | ||||
|
| 2022 |
| 2021 | ||
| | (in thousands) | ||||
Operating lease cost | | $ | 2,458 | | $ | 2,941 |
| | | | | | |
Finance lease cost: | | | | | | |
Amortization of leased assets | | | 53 | | | 159 |
Interest on lease liabilities | | | 1 | | | 11 |
Total finance lease cost | | | 54 | | | 170 |
| | | | | | |
Sublease income | | | (887) | | | (1,098) |
Net lease cost | | $ | 1,625 | | $ | 2,013 |
Supplemental balance sheet information related to leases was as follows:
| | | | | | |
|
| March 31, 2022 |
| December 31, 2021 | ||
| | (in thousands) | ||||
Operating leases: | | | | | | |
ROU assets | | $ | 23,110 | | $ | 23,043 |
| | | | | | |
Operating lease liabilities | | $ | 7,740 | | $ | 8,614 |
Operating lease liabilities, net of current portion | | | 20,481 | | | 19,869 |
Total operating lease liabilities | | $ | 28,221 | | $ | 28,483 |
| | | | | | |
Finance leases: | | | | | | |
Property and equipment | | $ | 2,852 | | $ | 2,861 |
Accumulated depreciation | | | (2,442) | | | (2,397) |
Property and equipment, net | | $ | 410 | | $ | 464 |
| | | | | | |
Other current liabilities | | $ | 11 | | $ | 63 |
Other long-term liabilities | | | 0 | | | 0 |
Total finance lease liabilities | | $ | 11 | | $ | 63 |
10
Lease term and discount rate information was as follows:
| | | | | | | |
| | For the Three Months Ended March 31, | |||||
|
| 2022 |
| 2021 | |||
Weighted-average remaining lease term (in years): | | | | | | | |
Operating lease | | | 5.6 | | | 5.6 | |
Finance lease | | | 0.2 | | | 0.8 | |
Weighted-average discount rate: | | | | | | | |
Operating lease | | | 5.9 | % | | 6.2 | % |
Finance lease | | | 6.5 | % | | 6.5 | % |
Maturities of lease liabilities were as follows as of March 31, 2022:
| | | | | | | | | | | | |
|
| Operating Leases |
| Operating Sublease |
| Finance Leases |
| Total | ||||
| | (in thousands) | ||||||||||
Remainder of 2022 | | $ | 7,548 | | $ | (2,646) | | $ | 11 | | $ | 4,913 |
2023 | | | 5,738 | | | (1,399) | | | 0 | | | 4,339 |
2024 | | | 4,376 | | | 0 | | | 0 | | | 4,376 |
2025 | | | 4,016 | | | 0 | | | 0 | | | 4,016 |
2026 | | | 3,300 | | | 0 | | | 0 | | | 3,300 |
Thereafter | | | 8,398 | | | 0 | | | 0 | | | 8,398 |
Total lease payments | | | 33,376 | | | (4,045) | | | 11 | | | 29,342 |
Less: interest | | | (5,155) | | | 0 | | | 0 | | | (5,155) |
Total(1) | | $ | 28,221 | | $ | (4,045) | | $ | 11 | | $ | 24,187 |
(1) | In March 2022 the Company entered into a ten-year lease agreement in Nashville, Tennessee with future undiscounted lease payments, net of tenant improvement reimbursements, totaling $10.1 million. This lease had not yet commenced, and is not included in the lease liabilities, as of March 31, 2022. |
Note 5 — Revenue Recognition
The following tables present the disaggregation of revenue from contracts with our clients:
Revenue by Performance Obligation
| | | | | | |
| | For the Three Months Ended March 31, | ||||
|
| 2022 |
| 2021 | ||
| | (in thousands) | ||||
Selling services | | $ | 48,281 | | $ | 44,328 |
Professional services | | | 612 | | | 695 |
Total revenue | | $ | 48,893 | | $ | 45,023 |
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Revenue by Geography
Revenue for each geography generally reflects commissions earned from sales of service contracts managed from revenue delivery centers in that geography and subscription sales and professional services to deploy the Company’s solutions. Predominantly all the service contracts sold and managed by the revenue delivery centers relate to end customers located in the same geography. All NALA revenue represents revenue generated within the U.S.
| | | | | | |
| | For the Three Months Ended March 31, | ||||
|
| 2022 |
| 2021 | ||
| | (in thousands) | ||||
NALA | | $ | 25,325 | | $ | 25,334 |
EMEA | | | 15,776 | | | 12,769 |
APJ | | | 7,792 | | | 6,920 |
Total revenue | | $ | 48,893 | | $ | 45,023 |
Revenue by Contract Pricing
| | | | | | |
| | For the Three Months Ended March 31, | ||||
|
| 2022 |
| 2021 | ||
| | (in thousands) | ||||
Variable consideration | | $ | 32,321 | | $ | 33,211 |
Fixed consideration | | | 16,572 | | | 11,812 |
Total revenue | | $ | 48,893 | | $ | 45,023 |
Contract Balances
As of March 31, 2022 and December 31, 2021, contract liabilities were $0.4 million and $0.5 million, respectively.
Transaction Price Allocated to Remaining Performance Obligations
As of March 31, 2022, assuming none of the Notes. In accounting for these costs,Company’s current contracts with fixed consideration are renewed, the Company allocatedestimates receiving approximately $33.8 million in future selling services fixed consideration and approximately $0.4 million in professional services fixed consideration, the majority to be received within one year.
Contract Acquisition Costs
As of March 31, 2022 and December 31, 2021, capitalized contract acquisition costs were $0.5 million and $0.6 million, respectively. The Company recorded amortization expense related to capitalized contract acquisition costs of $0.1 million and $0.2 million for the debtthree months ended March 31, 2022 and equity components2021, respectively.
Note 6 — Stock-Based Compensation
2022 PSU Awards
During March 2022, the Company granted PSUs under the 2020 Plan to certain executives in proportionwhich the number of shares ultimately received depends on the Company’s achievement of 2 performance goals for fiscal year 2022 and a rTSR modifier based on the Company’s rTSR for fiscal years 2022, 2023, and 2024 compared to a peer group. The aggregate target number of shares subject to these awards is 0.8 million. The awards were valued on the allocationgrant date using a Monte Carlo simulation for the rTSR modifier and using the Company’s closing stock price for the performance metrics for an aggregate grant date fair value of proceeds$1.1 million. The number of shares ultimately received related to these awards will range from the issuance0% to 173% of the Notes to such components. Transaction costs allocated toparticipant’s target award and will vest on the debt componentthird anniversary of $3.6 million are
12
September 30, 2017 | December 31, 2016 | ||||||
Principal amount | $ | 150,000 | $ | 150,000 | |||
Unamortized debt discount | (7,569 | ) | (13,928 | ) | |||
Unamortized debt issuance costs | (705 | ) | (1,297 | ) | |||
Net carrying amount | $ | 141,726 | $ | 134,775 |
Stock-Based Compensation Expense
The following table presents the interest expense recognized related to the Notes (in thousands):
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Contractual interest expense at 1.5% per annum | $ | 563 | $ | 563 | $ | 1,688 | $ | 1,688 | |||||||
Amortization of debt issuance costs | 204 | 189 | 592 | 551 | |||||||||||
Accretion of debt discount | 2,190 | 2,028 | 6,359 | 5,913 | |||||||||||
Total | $ | 2,957 | $ | 2,780 | $ | 8,639 | $ | 8,152 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Cost of revenue | $ | 385 | $ | 299 | $ | 969 | $ | 1,146 | |||||||
Sales and marketing | 982 | 565 | 2,834 | 2,152 | |||||||||||
Research and development | 42 | 106 | 107 | 448 | |||||||||||
General and administrative | 2,074 | 1,276 | 6,486 | 3,695 | |||||||||||
Restructuring and other | 352 | — | 352 | — | |||||||||||
Total stock-based compensation | $ | 3,835 | $ | 2,246 | $ | 10,748 | $ | 7,441 |
| | | | | | |
| | For the Three Months Ended March 31, | ||||
|
| 2022 | | 2021 | ||
| | (in thousands) | ||||
Cost of revenue | | $ | 138 | | $ | 130 |
Sales and marketing | | | 346 | | | 191 |
Research and development | | | 24 | | | 15 |
General and administrative | | | 2,112 | | | 2,139 |
Total stock-based compensation | | $ | 2,620 | | $ | 2,475 |
The above table does not include $0.1 million of capitalized stock-based compensation related to internal-use software duringthat was insignificant for the three months ended September 30, 2017March 31, 2022 and 2016, respectively,2021.
Stock Awards
A summary of the Company’s stock option activity and $0.4 million for the nine months ended September 30, 2017 and 2016, respectively.
Options Outstanding | Restricted Stock Outstanding | |||||||||||
Shares and Units Available for Grant | Number of Shares | Weighted- Average Exercise Price | Number of Shares | |||||||||
December 31, 2016 | 10,406 | 7,495 | $ | 4.63 | 4,237 | |||||||
Additional shares reserved under the 2011 Equity Incentive Plan | 3,527 | — | — | — | ||||||||
Granted | (2,973 | ) | 145 | 3.65 | 2,828 | |||||||
PSU Additional Goal Shares Achieved | (242 | ) | — | — | 242 | |||||||
Options exercised/Restricted stock released | — | (14 | ) | 4.86 | (1,834 | ) | ||||||
RSU shares withheld for taxes | 193 | — | — | — | ||||||||
Canceled/Forfeited | 1,499 | (922 | ) | 5.47 | (577 | ) | ||||||
September 30, 2017 | 12,410 | 6,704 | $ | 4.49 | 4,896 |
| | | | | | | | | | | | |
| | | | | | | | Weighted- | | | | |
| | | | | Weighted- | | Average | | | | ||
| | | | | Average | | Remaining | | | | ||
| | | | | Exercise | | Contractual | | | | ||
|
| Shares | | Price |
| Life (Years) |
| Intrinsic Value | ||||
| | (in thousands) | | | | | | | | (in thousands) | ||
Outstanding as of December 31, 2021 | | | 1,876 | | $ | 2.18 | | | | | $ | 16 |
Expired and/or forfeited | | | (17) | | $ | 4.42 | | | | | | |
Outstanding as of March 31, 2022 | | | 1,859 | | $ | 2.16 | | | 5.91 | | $ | 210 |
Exercisable as of March 31, 2022 | | | 1,771 | | $ | 2.22 | | | 5.84 | | $ | 179 |
As of employeeMarch 31, 2022, there was $0.02 million of unrecognized compensation expense related to previously granted stock options, which is expected to be recognized over a weighted-average period of 0.6 years.
A summary of the Company’s RSU and PSU activity and related information was as follows:
| | | | | | |
| | | | | Weighted- | |
| | | | | Average Grant | |
|
| Units | | Date Fair Value | ||
| | (in thousands) | | | | |
Non-vested as of December 31, 2021 | | | 8,231 | | $ | 1.49 |
Granted | | | 2,165 | | $ | 1.43 |
Vested(1) | | | (1,006) | | $ | 1.65 |
Forfeited | | | (271) | | $ | 1.46 |
Non-vested as of March 31, 2022 | | | 9,119 | | $ | 1.46 |
(1) | 826 shares of common stock were issued for RSUs and PSUs vested and the remaining 180 shares were withheld for taxes. |
As of March 31, 2022, there was $6.1 million of unrecognized compensation expense related to previously granted during the three months ended September 30, 2017RSUs and 2016 was $1.74 and $2.30 per share, respectively, and $1.90 and $2.03 per share for the nine months ended September 30, 2017 and 2016, respectively. The unamortized grant date fair valuePSUs, which is expected to be recognized over a weighted-average period of both stock options and restricted stock awards totaled $18.0 million at September 30, 2017.
Potential shares of common stock that are not included in the determination of diluted net loss per share because they are anti-dilutive for the periods presented consist of weighted stock options non-vested restricted stock and sharesunvested RSUs and PSUs. The Company excluded from diluted earnings per share the weighted-average common share equivalents related to be purchased under our Employee Stock Purchase Plan having an anti-dilutive effect of 7.04.0 million and 4.6 million shares for the1.2
13
million shares for the ninethree months ended September 30, 2017March 31, 2022 and 2016, respectively.
Note 7 — Income Taxes
The Company is subject to taxation in the United StatesU.S. and various state and foreign jurisdictions. Earnings from non-U.S. activities are subject to local country income tax. The Company computes its quarterly income tax provision by using a forecasted annual effective tax rate and adjusts for any discrete items arising during the quarter. The primary difference between the effective tax rate and the federal statutory tax rate relates to the valuation allowances on the Company’s net operating losses and foreign tax rate differences. IncomeThe "Provision for income tax expenseexpense" in the Consolidated Statements of Operations primarily consists of income and withholding taxes for foreign and state jurisdictions where the Company has profitable operations, as well as valuation allowance adjustments for certain U.S. tax jurisdictions. No tax benefit was provided for losses incurred in United Statesthe U.S. and SingaporeIreland because those losses are offset by a full valuation allowance. The tax years 20102017 through 20172021 generally remain subject to examination by federal, state, and foreign tax authorities.
The gross amount of the Company’s unrecognized tax benefits was $0.9$1.0 million as of September 30, 2017March 31, 2022 and December 31, 2016, none2021, NaN of which, if recognized, would affect the Company’s effective tax rate.
Note 8 — RestructuringCommitments and Other
Letters of Credit
In early May 2017,connection with 2 of our leased facilities, the Company announcedis required to maintain 2 letters of credit totaling $2.3 million. The letters of credit are secured by $2.3 million of cash in money market accounts, which are classified as restricted cash within “Prepaid expenses and other” and "Other assets" in the Consolidated Balance Sheets.
Non-cancelable Service Contract Commitments
The Company enters into various purchase obligations in the ordinary course of business, generally short-term in nature. Those that are binding primarily relate to non-cancelable service contract commitments. There have not been any significant changes in these commitments since what was disclosed in the last annual report.
Note 9 — Subsequent Event
On May 6, 2022, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Concentrix Corporation, a restructuring effortDelaware corporation (“Acquirer”), and Concentrix Merger Sub Inc., a Delaware corporation and a wholly-owned subsidiary of the Acquirer (“Acquisition Sub”). Pursuant to better align its cost structurethe Merger Agreement, and subject to the terms and conditions set forth therein, Acquisition Sub will merge with current business and marketinto the Company, which we refer to as the “Merger”, with the Company continuing as the surviving corporation in the Merger and a wholly-owned subsidiary of the Acquirer.
In the event the Merger is completed, except as otherwise provided in the Merger Agreement, each share of our common stock issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive $1.50 per share in cash, without interest (the “Merger Consideration”).
Consummation of the Merger is subject to customary closing conditions, including, a headcount reduction andamong other things, the reduction of office space in four locations. The restructuring plan is accounted for in accordance with ASC 420, Exit or Disposal Cost Obligations. The Company recognized restructuring and other charges of $0.5 million and $6.3 million during the three and nine months ended September 30, 2017, respectively. Severance and other employee costs include stock compensation related to the accelerated vesting of certain equity awards, severance payments, related employee benefits and employee-related legal fees. Lease and other contract termination costs include charges related to lease consolidation and abandonment of spaces no longer utilized and the cancellation of certain contracts with outside vendors. Asset impairments include charges related to leasehold improvements and furniture in spaces vacated or no longer in use. The Company expects to have restructuring and other related expenses through the remainder of 2017, as restructuring activities targeted at reducing the overall cost structureadoption of the business will continue over several quarters. Also, future cash outlays related to these restructuring activities are expected to total $1.3 million. These amounts are reflected in
14
Severance and Other Employee Costs | Lease and Other Contract Termination Costs | Asset Impairments | Total | ||||||||||||
Restructuring and other liability at January 1, 2017 | $ | — | $ | — | $ | — | $ | — | |||||||
Restructuring and other charges | 3,399 | 1,974 | 886 | 6,259 | |||||||||||
Cash paid | (2,908 | ) | (830 | ) | — | (3,738 | ) | ||||||||
Non-cash impairment charges | — | — | (886 | ) | (886 | ) | |||||||||
Acceleration of stock-based compensation expense in additional paid-in capital | (352 | ) | — | — | (352 | ) | |||||||||
Restructuring and other liability at September 30, 2017 | $ | 139 | $ | 1,144 | $ | — | $ | 1,283 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)&A should be read in conjunction with our unaudited consolidated financial statementsConsolidated Financial Statements and notes thereto which appear elsewhere in this Quarterly Reportquarterly report on Form 10-Q.
This report including this MD&A, includes estimates, projections, statements relating to our business plans, objectives, and expected operating results that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934.1934, as amended. Forward looking statements may appear throughout this report. These forward-looking statements are generally are identified by the words “believe,” “project,” "target," "forecast," “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and variations of such words or similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties that may cause actual results to differ materially. Factors that could cause or contribute to such differences include, but are not limited to, those identified elsewhere in this report, including the risks and uncertainties related to the consummation of the Merger, the impact and duration of the COVID-19 pandemic and fluctuations in general economic conditions including impacts from Russia's invasion of Ukraine, as well as those discussed in the sections of our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 23, 2022 entitled “Special Note Regarding Forward“Forward Looking Statements and Industry Data”Statements” and “Risk Factors” and in our other filings with the Securities and Exchange Commission (“SEC”).SEC. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events, or otherwise.
Overview
ServiceSource is a leading provider of BPaaS solutions that enable the transformation of go-to-market organizations and functions for global technology clients. We design, deploy, and operate a suite of innovative solutions and complex processes that support and augment our clients’ B2B customer acquisition, engagement, expansion, and retention activities. Our clients - ranging from Fortune 500 technology titans to high-growth disruptors and innovators - rely on our holistic customer engagement methodology and process excellence, global scale and delivery footprint, and data analytics and business insights to deliver trusted business outcomes that have a meaningful and material positive impact to their long-term revenue and profitability objectives. Through our unique integration of people, process, and technology - leveraged against our more than 20 years of experience and domain expertise in this MD&A arethe cloud, software, hardware, medical device and diagnostic equipment, and industrial IoT sectors - we effect and transact billions of dollars of B2B commerce in millions unless otherwise noted.
“ServiceSource,” “the Company,” “we,” “us,” or “our,” as used herein, refer to ServiceSource International, Inc. isand its wholly owned subsidiaries, unless the context indicates otherwise.
For a global leadersummary of commonly used industry terms and abbreviations used in outsourced, performance-based customer successthis Form 10-Q, see the Glossary of Terms.
Impact of the COVID-19 Pandemic
On March 11, 2020, we created a dedicated crisis team to proactively implement our business continuity plans in response to COVID-19. By April 1, 2020, we transitioned to a 100% virtual operating model. As a result of this successful work-from-home implementation, we have shifted to a virtual-first operating model whereby our employees primarily work from their home offices and revenue growth solutions. Through our people, processesfacilities are used for collaboration, innovation, and technology,connection. Additionally, this model includes virtual sourcing, hiring, and onboarding for new employees as well as a process for driving performance and culture in a virtual environment. As a result of the implementation of these business continuity measures, we find, convert, growhave not experienced material disruptions in our operations from COVID-19.
We believe we have sufficient liquidity on hand to continue business operations even during periods of volatility such as those experienced since early 2020. As of March 31, 2022, we had total available liquidity of $44.2 million consisting of cash on hand and retain revenueborrowing availability under our Revolver. See "Liquidity and Capital Resources" for additional information.
15
There was no material adverse impact on behalfthe results of operations for the three months ended March 31, 2022 as a result of the COVID-19 pandemic. We expect to continue to invest capital to allow our employees to function in our virtual, work-from-home operating model. However, we are benefiting and will continue to benefit from decreases in certain costs related to our facilities and reduced travel and entertainment costs.
The situation surrounding COVID-19 remains fluid and the potential for a negative impact on our financial condition and results of operations increases the longer the virus impacts the economic activity in the U.S. and globally. See “Risk Factors” in Part I, Item 1A of our clients—someannual report on Form 10-K for the year ended December 31, 2021 for additional information.
Key Financial Results For the Three Months Ended March 31, 2022
● | GAAP revenue was $48.9 million compared with $45.0 million reported for the same period in 2021. |
● | GAAP net loss was $4.4 million or $0.04 per diluted share, compared with GAAP net loss of $8.8 million or $0.09 per diluted share reported for the same period in 2021. |
● | Adjusted EBITDA, a non-GAAP financial measure, was $2.6 million compared with negative $0.2 million reported for the same period in 2021. See “Non-GAAP Financial Measurements” below for a reconciliation of Adjusted EBITDA from GAAP net loss. |
● | Cash, cash equivalents, and restricted cash of $31.8 million and borrowings under the Revolver of $10.0 million as of March 31, 2022. |
Results of Operations
For the world’s leading business-to-business companies—in more than 35 languages. Our solutions help our clients strengthen their customer relationships, drive improved customer adoption, expansion and retention and minimize churn. Our technology platform and best-practice business processes combined with our highly-trained, client-focused revenue delivery professionals and data from over 15 years of operating experience enable usThree Months Ended March 31, 2022 Compared to provide our clients greater value for our customer success services than attained by our clients’ in-house customer success teams.
Net Revenue,
Net revenue is primarily attributable to commissions we earn from the sale of renewals of maintenance, support and subscription agreements on behalf of our clients. We generally invoice our clients for our services in arrears on a monthly basis for sales commissions, and on a quarterly basis for certain performance sales commissions; accordingly, we typically have no deferred revenue related to thesealso generate revenues from selling professional services. We do not set the price, terms or scope of services in the service contracts with end customers and do not have any obligations related to the underlying service contracts between our clients and their end customers.
Cost of revenue from any of our top clients for any reason, including the failure to renew our contracts, termination of some or all of our services, a change of relationship with any of our key clients or their acquisition, can cause a significant decrease in our revenue.
| | | | | | | | | | | | | | | | | | | | |
| | For the Three Months Ended March 31, | | | | | | | ||||||||||||
| | 2022 | | 2021 | | | | | | | ||||||||||
| | | | | % of Net | | | | | % of Net | | | | | | | ||||
|
| Amount |
| Revenue |
| Amount |
| Revenue |
| $ Change |
| % Change | ||||||||
| | (in thousands) | | | | | | (in thousands) | | | | | | (in thousands) | | | | |||
Net revenue | | $ | 48,893 | | | 100 | % | | $ | 45,023 | | | 100 | % | | $ | 3,870 | | 9 | % |
Cost of revenue | | | 35,745 | | | 73 | % | | | 34,067 | | | 76 | % | | | 1,678 | | 5 | % |
Gross profit | | $ | 13,148 | | | 27 | % | | $ | 10,956 | | | 24 | % | | $ | 2,192 | | 20 | % |
Net revenue technology platformincreased $3.9 million, or 9%, for the three months ended March 31, 2022 compared to the same period in 2021, primarily due to increased bookings and cloud applications. Allocated costs for facilities consistlower client churn.
16
Cost of revenue may fluctuate significantly and increaseincreased $1.7 million, or decrease on an absolute basis and as a percentage of revenue in the near term, including5%, for the reasons discussed under, “Factors Affecting Our Performance—Implementation Cycle”three months ended March 31, 2022 compared to the same period in our 2016 Annual Report on Form 10-K.2021, primarily due to the following:
● | $1.7 million increase in employee related costs primarily due to increased compensation expense associated with an increase in headcount and higher revenue attainment; and |
● | $0.5 million increase in amortization expense related to internally developed software; partially offset by |
● | $0.5 million decrease in facility costs primarily related to the expiration of various office space leases in connection with transitioning to a virtual-first operating model. |
Operating Expenses
| | | | | | | | | | | | | | | | | | | | |
| | For the Three Months Ended March 31, | | | | | | | ||||||||||||
| | 2022 | | 2021 | | | | | | | ||||||||||
|
| | |
| % of Net | | | |
| % of Net | | | | | | | ||||
|
| Amount |
| Revenue |
| Amount |
| Revenue |
| $ Change |
| % Change | ||||||||
| | (in thousands) | | | | | | (in thousands) | | | | | | (in thousands) | | | | |||
Operating expenses: | | | | | | | | | | | | | | | | | | | | |
Sales and marketing | | $ | 3,996 | | | 8 | % | | $ | 4,030 | | | 9 | % | | $ | (34) | | (1) | % |
Research and development | | | 1,386 | | | 3 | % | | | 1,160 | | | 3 | % | | | 226 | | 19 | % |
General and administrative | | | 11,321 | | | 23 | % | | | 12,190 | | | 27 | % | | | (869) | | (7) | % |
Restructuring and other related costs | | | — | | | — | % | | | 920 | | | 2 | % | | | (920) | | (100) | % |
Total operating expenses | | $ | 16,703 | | | 34 | % | | $ | 18,300 | | | 41 | % | | $ | (1,597) | | (9) | % |
Sales and Marketing.
Sales and marketing expenses are a significant componentprimarily consist of our operating costs and consist primarily ofemployee compensation expensesexpense and sales commissions forpaid to our sales and marketing staff, allocated expenses andemployees, amortization of contract acquisition costs, marketing programs and events. We sell our solutions through our global sales organization,events, and allocated overhead expenses, which is organized acrossconsist of depreciation, amortization of internally developed software, and facility and technology costs.
Sales and marketing expenses remained flat for the three geographic regions: NALA, EMEA and APJ. Our commission plans provide that payment of commissionsmonths ended March 31, 2022 compared to our sales representatives is contingent on their continued employment, and we recognize expense over athe same period that is generally between the contract signing date and twelve to fourteen months following the execution of the applicable contract. When commissions are paid upon contract signing and are not contingent on future payments and continued employment, we consider that portion of the commission to be earned and therefore expensed at contract signing.
Research and Development.
Research and development expenses primarily consist primarily of employee compensation expense, allocatedthird-party consultant costs and the costallocated overhead expenses, which consist of third-party service providers. We focus our researchamortization of internally developed software, facility and technology costs.
Research and development efforts on developing new products and applications related to our technology platform. We capitalize certain expenditures relatedexpenses increased $0.2 million, or 19%, for the three months ended March 31, 2022 compared to the same period in 2021, primarily due to a reduction in third-party capitalizable software development and enhancement of internal-use software related to our technology platform.
General and Administrative.
General and administrative expenses primarily consist primarily of employee compensation expense for our executive, finance, human resources, finance and legal functions and related expenses for professional fees for accounting, tax and legal services, as well as allocated overhead expenses, which consistsconsist of depreciation, amortization of internally developed software, facilitiesfacility and technology costs.
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General and administrative expenses decreased $0.9 million, or 7%, for the three months ended March 31, 2022 compared to the same period in 2021, primarily due to the following:
● | $0.6 million decrease in employee related costs associated with a reduction in headcount; and |
● | $0.6 million decrease in depreciation expense primarily related to the expiration of various office space leases in connection with transitioning to a virtual-first operating model; partially offset by |
● | $0.3 million increase in facility costs. |
Restructuring and Other.Other Related Costs
Restructuring and other expensesrelated costs consist primarily of employees’ severance payments and related employee benefits, stock compensation related to the accelerated vesting of certain equity awards, related legal fees asset impairment charges and charges related to leaseslease termination costs.
Restructuring and other contract termination costs.
Interest Expense and Other Expense, Net
Interest and Gain (Loss) on Cost Basis Equity Investment
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||
(as % of net revenue) | |||||||||||
Net revenue | 100 | % | 100 | % | 100 | % | 100 | % | |||
Cost of revenue | 70 | % | 65 | % | 70 | % | 67 | % | |||
Gross profit | 30 | % | 35 | % | 30 | % | 33 | % | |||
Operating expenses: | |||||||||||
Sales and marketing | 13 | % | 14 | % | 14 | % | 17 | % | |||
Research and development | 2 | % | 3 | % | 3 | % | 3 | % | |||
General and administrative | 22 | % | 23 | % | 23 | % | 21 | % | |||
Restructuring and other | 1 | % | — | % | 4 | % | — | % | |||
Total operating expenses | 38 | % | 40 | % | 44 | % | 41 | % | |||
Loss from operations | (8 | )% | (5 | )% | (14 | )% | (8 | )% |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||
2017 | 2016 | Change | % Change | 2017 | 2016 | Change | % Change | ||||||||||||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||||||||||||||
Net Revenue | $ | 58,132 | $ | 62,514 | $ | (4,382 | ) | (7 | )% | $ | 173,103 | $ | 184,233 | $ | (11,130 | ) | (6 | )% | |||||||||||
Cost of Revenue | 40,803 | 40,789 | 14 | — | % | 121,729 | 122,568 | (839 | ) | (1 | )% | ||||||||||||||||||
Gross Profit | $ | 17,329 | $ | 21,725 | $ | (4,396 | ) | (20 | )% | $ | 51,374 | $ | 61,665 | $ | (10,291 | ) | (17 | )% | |||||||||||
| | | | | | | | | | | | | | | | | | | | |
| | For the Three Months Ended March 31, | | | | | | | ||||||||||||
| | 2022 | | 2021 | | | | | | | ||||||||||
| | | | | % of Net | | | | | % of Net | | | | | | | ||||
|
| Amount |
| Revenue |
| Amount |
| Revenue |
| $ Change |
| % Change | ||||||||
| | (in thousands) | | | | | | (in thousands) | | | | | | (in thousands) | | | | |||
Interest expense | | $ | (107) | | | — | % | | $ | (158) | | | — | % | | $ | 51 | | 32 | % |
Other expense, net | | $ | (71) | | | — | % | | $ | (1,002) | | | (2) | % | | $ | 931 | | 93 | % |
Interest expense decreased $4.4$0.1 million, or 7%32%, for the third quarter of 2017 compared to the third quarter of 2016. The overall decrease was due to contractions and lower production with certain existing customers that was not offset by production related to expansions and new business in the third quarter of 2017.
Other expense, net decreased $11.1$0.9 million, or 6%93%, for the ninethree months ended September 30, 2017 compared to the nine months ended September 30, 2016. The overall decrease was due to contractions and lower production with certain existing customers that was not offset by production related to expansions and new business.
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||
2017 | 2016 | Change | % Change | 2017 | 2016 | Change | % Change | ||||||||||||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||
Sales and marketing | $ | 7,829 | $ | 8,847 | $ | (1,018 | ) | (12 | )% | $ | 24,790 | $ | 30,626 | $ | (5,836 | ) | (19 | )% | |||||||||||
Research and development | 1,048 | 1,952 | (904 | ) | (46 | )% | 4,534 | 6,132 | (1,598 | ) | (26 | )% | |||||||||||||||||
General and administrative | 12,543 | 14,638 | (2,095 | ) | (14 | )% | 40,029 | 38,233 | 1,796 | 5 | % | ||||||||||||||||||
Restructuring and other | 545 | — | 545 | 100 | % | 6,259 | — | 6,259 | 100 | % | |||||||||||||||||||
Total operating expenses | $ | 21,965 | $ | 25,437 | $ | (3,472 | ) | (14 | )% | $ | 75,612 | $ | 74,991 | $ | 621 | 1 | % | ||||||||||||
Includes stock-based compensation of: | |||||||||||||||||||||||||||||
Sales and marketing | $ | 982 | $ | 565 | $ | 417 | $ | 2,834 | $ | 2,152 | $ | 682 | |||||||||||||||||
Research and development | 42 | 106 | (64 | ) | 107 | 448 | (341 | ) | |||||||||||||||||||||
General and administrative | 2,074 | 1,276 | 798 | 6,486 | 3,695 | 2,791 | |||||||||||||||||||||||
Restructuring and other | 352 | — | 352 | 352 | — | 352 | |||||||||||||||||||||||
Total stock-based compensation | $ | 3,450 | $ | 1,947 | $ | 1,503 | $ | 9,779 | $ | 6,295 | $ | 3,484 |
Provision for Income Tax
| | | | | | | | | | | | | | | | | | | | |
| | For the Three Months Ended March 31, | | | | | | | ||||||||||||
| | 2022 | | 2021 | | | | | | | ||||||||||
| | | | | % of Net | | | | | % of Net | | | | | | | ||||
|
| Amount |
| Revenue |
| Amount |
| Revenue |
| $ Change |
| % Change | ||||||||
| | (in thousands) | | | | | | (in thousands) | | | | | | (in thousands) | | | | |||
Provision for income tax expense | | $ | (649) | | | (1) | % | | $ | (331) | | | (1) | % | | $ | (318) | | (96) | % |
Provision for income tax expense increased $0.3 million, decrease in employee related costs associated with decrease in headcount and a $0.2 million decrease in temporary labor and $0.1 million decrease in overhead allocations.
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||
2017 | 2016 | Change | % Change | 2017 | 2016 | Change | % Change | ||||||||||||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||||||||||||||
Interest expense | $ | 2,965 | $ | 2,792 | $ | 173 | 6 | % | $ | 8,672 | $ | 8,191 | $ | 481 | 6 | % | |||||||||||||
Other, net | (126 | ) | (501 | ) | (375 | ) | (75 | )% | (1,117 | ) | (2,692 | ) | (1,575 | ) | (59 | )% | |||||||||||||
(Gain) loss on cost basis equity investment | (2,100 | ) | 2,300 | (4,400 | ) | 191 | % | (2,100 | ) | 2,300 | (4,400 | ) | 191 | % |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||
2017 | 2016 | Change | % Change | 2017 | 2016 | Change | % Change | ||||||||||||||||||||
(in thousands) | (in thousands) | ||||||||||||||||||||||||||
Income tax (benefit) provision | $ | (180 | ) | $ | 968 | $ | (1,148 | ) | * | $ | 227 | $ | 2,505 | $ | (2,278 | ) | * |
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Liquidity and Capital Resources
Our primary operating cash requirements include the payment of compensation and related employee costs working capital requirements related to accounts receivable and accounts payable, as well as costs for our facilities and information technology infrastructure. Historically, we have financed our operations principally from cash provided by our operating activities, proceeds from stock offerings and the exercise of stock options.activities. We believe our existing cash and cash equivalents and short-term investments will be sufficient to meet our working capital and capital expenditure needs for at leastover the next twelve months.
We have considered the effects of the COVID-19 pandemic, including customer purchasing and renewal decisions, in our assessment of the sufficiency of our liquidity and capital resources. We will continue to monitor our financial position to the extent that pandemic-related challenges continue.
As of March 31, 2022, we had cash and cash equivalents of $29.5 million, which primarily consist of demand deposits and money market mutual funds. Included in cash and cash equivalents was $6.4 million held by our foreign subsidiaries used to satisfy their operating requirements. We consider the undistributed earnings of ServiceSource Europe Ltd. and ServiceSource International Singapore Pte. Ltd. permanently reinvested in foreign operations and have not provided for U.S. income taxes on such earnings. As of March 31, 2022, the Company had no unremitted earnings from our foreign subsidiaries.
In August 2013, we issued $150July 2021, ServiceSource, together with its wholly owned subsidiary, ServiceSource Delaware, Inc., entered into the 2021 Credit Agreement, which provides for a $35.0 million revolving line of credit allowing each borrower to borrow against its receivables as defined in the 2021 Credit Agreement. At the Company’s request and subject to customary conditions, the aggregate principalcommitments under the 2021 Credit Agreement may be increased up to an additional $10.0 million, for a total maximum commitment amount of 1.50% convertible notes due August 1, 2018 (the “Notes”)$45.0 million. The Revolver in the 2021 Credit Agreement matures in July 2024 and concurrently entered into convertible notes hedges and separate warrant transactions. The Notes will mature on August 1, 2018, unless converted earlier. Upon conversion, the Notes will be settled in cash, shares of our stock,bears interest at a rate equal to BSBY plus 2.00% to 2.50% per annum or, any combination thereof, at our option. We received proceedselection, an alternate base rate plus 1.00% to 1.50% per annum.
As of $145.1March 31, 2022, the Company had $10.0 million of borrowings under the Revolver through a six-month BSBY borrowing at an effective interest rate of 3.04% maturing August 2022. An additional $14.6 million was available for borrowing under the Revolver as of March 31, 2022. The BSBY borrowings may be extended upon maturity, converted into a base rate borrowing upon maturity or require an incremental payment if the borrowing base decreases below the current amount outstanding during the term of the BSBY borrowing. Proceeds from the issuanceRevolver are used for working capital and general corporate purposes.
The obligations under the 2021 Credit Agreement are secured by substantially all the assets of ServiceSource and certain of its subsidiaries, including pledges of equity in certain of the convertible notes, netCompany’s subsidiaries. The 2021 Credit Agreement has financial covenants, which the Company was in compliance with as of associated fees, received $21.8 million from the issuance of the warrants and paid $31.4 million for the note hedges. The Notes were not subject to conversion or repurchase at September 30, 2017 and are classified as a current liability on our condensed consolidated balance sheet. We believe we will have sufficient cash and liquid short-term investments to repay the Note at maturity.
Letters of Credit and Restricted Cash
In connection with onetwo of our leased facilities, the Company is required to maintain a $1.2 million letter of credit. The lettertwo letters of credit istotaling $2.3 million. The letters of credit are secured by $1.2$2.3 million of acash in money market accountaccounts, which isare classified as
19
Cash Flows
The following table sets forthpresents a summary of our cash flows (in thousands):
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Net cash provided by operating activities | $ | 6,516 | $ | 9,706 | |||
Net cash used in investing activities | (13,707 | ) | (23,887 | ) | |||
Net cash provided by (used in) financing activities | 275 | (4,777 | ) | ||||
Net decrease in cash and cash equivalents, net of impact of exchange rate changes on cash | (8,107 | ) | (20,639 | ) |
| | | | | | |
| | For the Three Months Ended March 31, | ||||
|
| 2022 |
| 2021 | ||
| | (in thousands) | ||||
Net cash provided by operating activities | | $ | 2,179 | | $ | 537 |
Net cash used in investing activities | | | (741) | | | (1,019) |
Net cash used in financing activities | | | (299) | | | (29) |
Effect of exchange rate changes on cash and cash equivalents and restricted cash | | | (128) | | | 650 |
Net change in cash and cash equivalents and restricted cash | | $ | 1,011 | | $ | 139 |
Depreciation and amortization expense were comprised of the following:
| | | | | | |
| | For the Three Months Ended March 31, | ||||
|
| 2022 |
| 2021 | ||
| | (in thousands) | ||||
Internally developed software amortization | | $ | 2,596 | | $ | 2,192 |
Property and equipment depreciation | | | 926 | | | 1,465 |
Total depreciation and amortization | | $ | 3,522 | | $ | 3,657 |
Operating Activities
Net cash provided by operating activities was $6.5increased $1.6 million duringfor the ninethree months ended September 30, 2017. Net loss duringMarch 31, 2022 compared to the period was $29.9 million adjusted by non-cash charges of $17.2 million for depreciation and amortization, $7.0 million of amortization of debt discount and issuance costs, $0.2 million for deferred income taxes, $10.4 million for stock-based compensation, $2.5 million for restructuring and other costs and a $2.1 million gain on the sale of our cost basis equity investment. Cash provided by operationsthree months ended March 31, 2021, primarily as a result of the changes inimproved cash collections from our working capital include a $12.3 million decrease in accounts receivable, net. Uses ofclients and lower cash werepayments made related to a $2.4 million decrease in deferred revenue, a $0.8 million decrease in accounts payable, a $0.8 million decrease incosts previously accrued expenses, $1.0 million decrease in accrued taxes, $4.7 million decrease in accrued compensation and benefits and a $1.4 million decrease in other liabilities.
Investing Activities
Net cash used in investing activities was principally relateddecreased $0.3 million for the three months ended March 31, 2022 compared to the proceedsthree months ended March 31, 2021, due to decreased cash outflows from the salepurchases of cost basis equity investment of $2.1 million, net purchase, sale and maturities of short-term investments of $2.0 million and property and equipment additions of $13.8 million. Property and equipment additions include $9.8 million of capitalized internal-use software development cost.
Financing Activities
Net cash used in financing activities of $4.8increased $0.3 million infor the ninethree months ended September 30, 2016March 31, 2022 compared to the three months ended March 31, 2021, primarily resulted from the $8.9 million repurchase of common stock offset by the exercise of common stock options and the purchase of common stock under our employee stock purchase plan of $5.0 million.
Off-Balance Sheet Arrangements
As of March 31, 2022, we did not have any relationships with other entities or financial partnerships such as entities often referred to as structured finance or special-purpose entities, which have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, are those related to revenue recognition, stock-based compensation, goodwillincluding making estimates and intangible assets and income taxes. There have been no material changes in our criticalassumptions. The Company’s significant accounting policies and estimates during the nine months ended September 30, 2017 as compared to the critical accounting policies and estimates disclosedare described in “Management’s"Management’s Discussion and Analysis of Financial Condition and Results of Operations–Operations - Critical Accounting Policies and Estimates” ofEstimates" in our Annual Report on Form 10-K for the year ended December 31, 2016 as filed2021. These policies were followed in preparing the Consolidated Financial Statements for the three months ended March 31, 2022 and are consistent with the SEC on March 6, 2017.
Recent Accounting Pronouncements
For a discussion of recent accounting pronouncements, see Note 2 - "Summary of Significant Accounting Policies" to the Consolidated Financial Statements.
20
Non-GAAP Financial Measurements
ServiceSource believes net income (loss), as defined by GAAP, is the most appropriate financial measure of our operating performance; however, ServiceSource considers Adjusted EBITDA to be a useful supplemental, non-GAAP financial measure of our operating performance. We believe Adjusted EBITDA can assist investors in understanding and assessing our operating performance on a consistent basis, as it removes the impact of the Company’s capital structure and other non-cash or non-recurring items from operating results and provides an additional tool to compare ServiceSource’s financial results with other companies in the industry, many of which present similar non-GAAP financial measures.
EBITDA consists of net income (loss) plus provision for income tax expense (benefit), interest and other expense (income), net, and depreciation and amortization. Adjusted EBITDA consists of EBITDA plus stock-based compensation, restructuring and other related costs, and amortization of contract acquisition costs related to the initial adoption of ASC 606.
This non-GAAP measure should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP.
The information contained in Note 1following table presents the reconciliation of "Net loss" to our condensed consolidated financial statements in Item 1 under the heading, “Recent Accounting Pronouncements,” is incorporated by reference into this Item 2.
| | | | | | |
| | For the Three Months Ended March 31, | ||||
|
| 2022 |
| 2021 | ||
| | (in thousands) | ||||
Net loss | | $ | (4,382) | | $ | (8,835) |
Provision for income tax expense | | | 649 | | | 331 |
Interest and other expense, net | | | 178 | | | 1,160 |
Depreciation and amortization | | | 3,522 | | | 3,657 |
EBITDA | | | (33) | | | (3,687) |
Stock-based compensation | | | 2,620 | | | 2,475 |
Restructuring and other related costs | | | — | | | 920 |
Amortization of contract acquisition asset costs - ASC 606 initial adoption | | | 15 | | | 84 |
Adjusted EBITDA | | $ | 2,602 | | $ | (208) |
Item 3.
Quantitative and Qualitative Disclosures About Market RiskNot applicable to smaller reporting companies as compared with those discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.
Item 4.
Controls and ProceduresEvaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officerCEO and principal financial officer,CFO, we conducted an evaluation of the effectiveness of the design and operation of our 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”) of the end of the period covered by this report (the “Evaluation Date”).
In designing and evaluating our disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Based on management’s evaluation, our chief executive officerCEO and chief financial officerCFO concluded that our disclosure controls and procedures are designed to, and are effective to, provide assurance at a reasonable assurance level that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the
21
time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officerCEO and chief financial officer,CFO, as appropriate, to allow timely decisions regarding required disclosures.
Changes in Internal Control Over Financial Reporting
We continue to monitor the design and operating effectiveness of our internal controls for any effect resulting from the COVID-19 pandemic. There has not been any change in our internal control over financial reporting during the quarter covered by this report that materially affected or is reasonably likely to materially affect our internal control over financial reporting.
Item 1.
Legal ProceedingsItem 1A.
Risk FactorsFor a summary of factors which could affect results and cause results to differ materially from those expressed in any forward-looking statements made by us, or on our behalf, are further described under the captionsee “Risk Factors” in Part I, Item 1A of our 2016 Annual Reportannual report on Form 10-K. There10-K for the year ended December 31, 2021. Except as set forth below, there have been no material changes to the risk factors as disclosed in our annual report on Form 10-K for the year ended December 31, 2021.
Risks Related to Our Business
Global economic, political and social conditions may harm our ability to do business, increase our costs, and negatively affect our stock price.
Worldwide economic conditions remain uncertain due to various global disruptions, including geopolitical events, such as war, the threat of war (including collateral damage from cyberwarfare), or terrorist activity; natural disasters; power shortages or outages; major public health issues, including pandemics; and significant local, national, or global events capturing the attention of a large part of the population, which could prevent or hinder our ability to do business, increase our costs, and negatively affect our stock price. Adverse consequences resulting from the United States and China trade negotiations, Russia’s recent invasion of Ukraine and the subsequent economic sanctions imposed by the U.S., NATO and other countries, and various other market issues may have broader implications on economies outside the region, including increased instability in the natureworldwide financial markets and economy, increases in inflation, and enhanced volatility in foreign currency exchange rates. These uncertainties may cause our clients or potential clients to delay or reduce spending, which could negatively impact our revenue and operating results and make it difficult for us to accurately plan future business activities.
Risks Related to the Proposed Merger
The consummation of the Merger is subject to approval of our stockholders as well as the satisfaction of other closing conditions, some or all of which may not be satisfied or waived in a timely manner or at all.
In May 2022, we entered into the Merger Agreement with the Acquirer and Acquisition Sub. Consummation of the Merger is subject to customary closing conditions, including (i) receipt of the Requisite Stockholder Approval, (ii) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and the expiration of applicable waiting periods or clearance of the Merger, as applicable, under the antitrust and foreign investment laws of certain other jurisdictions, (iii) absence of any law or order issued by certain governmental authorities of competent jurisdiction, prohibiting the Merger, and (iv) the absence of a material adverse effect on the Company.
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We intend to pursue the satisfaction or waiver, as applicable, of each condition to the consummation of the Merger, including the receipt of the Requisite Stockholder Approval. However, no assurance can be given that such conditions to the consummation of the Merger will be satisfied or waived in a timely manner, or at all. We also cannot provide any assurance regarding whether the Company will have to comply with any terms or conditions imposed by third parties in order to satisfy or waive the conditions to the consummation of the Merger. Similarly, we cannot provide any assurance that the Acquirer will be able to comply with its obligation to consummate the Merger. Many of the conditions to the consummation of the Merger are not within our control, and we cannot predict if or when these conditions will be satisfied or waived.
The failure to satisfy or obtain waiver of conditions to the consummation of the Merger in a timely manner could delay the consummation of the Merger and exacerbate the risks and uncertainties associated with the announcement and pendency of the Merger, which are discussed below under the headings “The announcement of the Merger Agreement and pendency of the Merger could negatively impact our business, financial condition and results of operations” and “While the Merger remains pending, we will be required to comply with various interim operating covenants that may constrain our business operations and to take certain actions that may divert our management’s focus from our ongoing business.”
In addition, if all of the conditions to the consummation of the Merger are not satisfied or waived, we may be unable to consummate the Merger at all. The risks and uncertainties associated with a failure to consummate the Merger are discussed below under the heading “Failure to consummate the Merger could adversely affect our stock price, business, financial condition and results of operation.”
Future litigation challenging the Merger could prevent the Merger from occurring or adversely affect our business, financial condition or results of operations.
In connection with the announcement of the Merger Agreement, as is common in the context of mergers and acquisitions of publicly-traded companies, the Company (along with its directors and officers) may attract lawsuits seeking to enjoin us from proceeding with or consummating the Merger, or seeking to have the Merger rescinded after its consummation. One of the conditions to the consummation of the Merger is the absence of any order issued by certain governmental authorities of competent jurisdiction prohibiting the Merger. If any future plaintiffs are successful in obtaining an injunction or other order prohibiting the Merger, we may be unable to consummate the Merger. The risks and uncertainties associated with a failure to consummate the Merger are discussed below under the heading “Failure to consummate the Merger could adversely affect our stock price, business, financial condition and results of operation.”
In addition, responding to any litigation targeting the Merger, even those without merit, will cause us to incur legal costs and expenses, which may negatively impact our financial condition. Responding to lawsuits may also divert the time and attention of our management away from our ongoing business operations and adversely affect our business and results of operations.
Failure to consummate the Merger could adversely affect our stock price, business, financial condition and results of operations.
As noted above, the various conditions to the consummation of the Merger may not be satisfied or waived in a timely manner, or at all. Some of these factors since December 31, 2016.conditions are not within our control. We cannot provide assurance that any of the conditions to the consummation of the Merger will be satisfied or waived. Pursuant to the Merger Agreement, the Merger will not be consummated until all of the conditions are satisfied or waived.
In addition, either the Company or the Acquirer may terminate the Merger Agreement in certain circumstances, including if (i) the Merger has not been consummated by November 1, 2022, (ii) any of certain governmental authorities of competent jurisdiction has issued a final non-appealable law or order prohibiting the Merger, (iii) the Requisite Stockholder Approval is not obtained at the stockholders’ meeting duly convened therefor, or (iv) the other party materially breaches, and does not cure, any of its representations or covenants in the Merger Agreement that would cause the related condition to such party’s obligation to consummate the Merger to not be satisfied, in each case subject
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to the terms and conditions set forth in the Merger Agreement. The terms and conditions, and other circumstances under which the Merger Agreement may be terminated in accordance with its terms are described in more detail in the Merger Agreement, which is attached as Exhibit 2.1 to the Current Report on Form 8-K we filed with the SEC on May 9, 2022.
If the Merger is not consummated for any reason, holders of our common stock will not receive the Merger Consideration for their shares in connection with the Merger. Instead, our common stock will continue to be listed and traded on the Nasdaq and registered under the Exchange Act, and we will continue to file periodic reports with the SEC on account of our common stock. In addition, we would be subject to a number of risks and uncertainties, including but not limited to:
● | the completion of the Merger on the anticipated terms and timing, including obtaining required stockholder and regulatory approvals, and the satisfaction of other conditions to the completion of the acquisition; |
● | potential litigation relating to the Merger that could be instituted against the Company or its directors or officers, including the effects of any outcomes related thereto; |
● | the risk that disruptions from the Merger will harm the Company’s business, including current plans and operations; |
● | the ability of the Company to retain and hire key personnel; |
● | potential adverse reactions or changes to business relationships resulting from the announcement or completion of the Merger; |
● | continued availability of capital and financing and rating agency actions; |
● | legislative, regulatory and economic developments; |
● | potential business uncertainty, including changes to existing business relationships, during the pendency of the Merger that could affect the Company’s financial performance; |
● | certain restrictions during the pendency of the Merger that may impact the Company’s ability to pursue certain business opportunities or strategic transactions; |
● | unpredictability and severity of catastrophic events, including but not limited to acts of terrorism, outbreaks of war or hostilities or the COVID-19 pandemic, as well as management’s response to any of the aforementioned factors; |
● | the possibility that the Merger may be more expensive to complete than anticipated, including as a result of unexpected factors or events; and |
● | the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger, including in circumstances requiring the Company to pay a termination fee or reimburse the Acquirer’s expenses. |
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If the Merger is not consummated, the risk and uncertainties described above may materialize and adversely affect our business, financial condition or results of operations.
If the Merger Agreement is terminated, under certain conditions, we may be obligated to reimburse the Acquirer for its expenses and / or pay the Acquirer a substantial termination fee, which could require us to incur additional debt or reduce the amount of cash we have available to fund our operations.
Subject to the terms and conditions set forth in the Merger Agreement, if the Merger Agreement is terminated because the Requisite Stockholder Approval is not obtained, the Company will have to reimburse the Acquirer for it expenses incurred in connection with the Merger, in an amount not to exceed $1.5 million.
If the Company’s board of directors (the “Board”) (i) withdraws or changes its recommendation that our stockholders approve and adopt the Merger Agreement in a manner adverse to the Acquirer or Acquisition Sub, (ii) fails to include its recommendation in the proxy statement filed by the Company to solicit proxies in connection with the Merger, (iii) approves or recommends a competing acquisition proposal, or (iv) fails to recommend against a competing acquisition proposal under certain circumstances, then the Acquirer will have the right to terminate the Merger Agreement (before the Requisite Stockholder Approval is received) and receive a termination fee in the amount of $5.73 million (the “Termination Fee”) from the Company, subject to the terms and conditions set forth in the Merger Agreement.
In addition, subject to the terms and conditions set forth in the Merger Agreement, the Company would be required to pay the Acquirer the Termination Fee if prior to receiving the Requisite Stockholder Approval the Company terminates the Merger Agreement, and with the authorization of the Board, it enters into an Alternative Acquisition Agreement with respect to a Superior Proposal (as each term is defined in the Merger Agreement).
The Company would also be required to pay the Acquirer the Termination Fee, subject to the terms and conditions set forth in the Merger Agreement, if (i) a third party makes a Competing Proposal (as defined in the Merger Agreement) to the Company or its stockholders, (ii) the Merger Agreement is subsequently terminated by either the Company or the Acquirer because the Company did not obtain the Requisite Stockholder Approval or by the Acquirer because the Company knowingly and intentionally breached any covenant or agreement under the Merger Agreement, which breach would give rise to the failure of any conditions to the Company’s obligations to effect the Merger, and any such Competing Proposal was not withdrawn at least five business days prior to the event that gave rise to such termination, and (iii) within twelve months of such termination, the Company consummates a transaction involving a Competing Proposal or enters into an Alternative Acquisition Agreement providing for the consummation of a Competing Proposal (which is subsequently consummated).
If the Company is required to pay the Termination Fee, the Company may be required to incur additional debt or use funds that it would otherwise have been able to use for general corporate expenses, capital expenditures or for other purposes.
The announcement of the Merger Agreement and pendency of the Merger could negatively impact our business, financial condition and results of operations.
Our business could experience material disruptions due to the announcement of our entry into the Merger Agreement and during the pendency of the Merger. Our current and prospective employees, including certain key personnel, may experience uncertainty regarding their future roles with the Company or desire different employment in anticipation of the consummation of the Merger. As a result, we may not be able to retain such employees, find adequate replacements for any employees we are unable to retain, or otherwise recruit new employees to join the Company. The uncertainty caused by the pendency of the Merger could also negatively impact our employees’ performance. If the announcement or pendency of the Merger causes us to lose and be unable to replace our employees, impairs our ability to attract new employees, or negatively affects the performance of our employees, our business, financial condition and results of operations could suffer.
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In addition, third parties, including our lenders, vendors and customers, may experience uncertainty regarding our business relationships due to the announcement of our entry into the Merger Agreement and during the pendency of the Merger. As a result, such third parties may seek to terminate or renegotiate our existing business relationships in connection with the potential Merger. Such disruptions to our business relationships could negatively impact our business, financial condition and results of operations.
The announcement of the Merger Agreement may also cause regulators to apply additional scrutiny to our business, potentially increasing our regulatory burden, including costs of compliance. If we are required to expend additional employee time or other resources to address such additional scrutiny or increased regulatory burden, our business, financial condition and results of operations could be negatively impacted.
While the Merger remains pending, we will be required to comply with various interim operating covenants that may constrain our business operations and to take certain actions that may divert our management’s focus from our ongoing business.
Pursuant to the Merger Agreement, following the execution of the Merger Agreement and until the earlier to occur of (i) the consummation of the Merger or (ii) the termination of the Merger Agreement (the “Interim Operating Period”), we agreed to use reasonable best efforts to conduct our business in the ordinary course of business and to not engage in certain types of actions, subject to certain terms, limitations and exceptions. In particular, among other things, we agreed to refrain from taking certain actions without the Acquirer's consent, including (i) making acquisitions, (ii) incurring indebtedness above a certain threshold, (iii) granting equity awards other than as specified in the Merger Agreement, (iv) entering into, amending or terminating certain material contracts, and (v) declaring or paying dividends to stockholders, in each case subject to the terms, limitations and exceptions set forth in the Merger Agreement. Complying with these obligations could limit our ability to operate our business as previously conducted, to pursue strategic transactions, or to otherwise exploit business opportunities as they arise. Our management will be primarily responsible for ensuring that the Company complies with such obligations during the Interim Operating Period, and this additional responsibility may divert the focus of our management away from our ongoing business operations.
In addition, our management will also need to take certain other actions during the Interim Operating Period in connection with the proposed Merger, including, among other things, convening a meeting of our stockholders for the purpose of considering and voting on the Merger, filing a proxy statement, in both preliminary and definitive form, in connection with our solicitation of proxies from our stockholders for such meeting, using reasonable best efforts to obtain all necessary consents and approvals required in connection with the Merger and to satisfy the other conditions to the consummation of the Merger, addressing any litigation brought against the Company in connection with the Merger, and responding to questions we may receive from our stockholders, employees, vendors and other interested stakeholders regarding the Merger. Taking these actions could require our management to expend time and resources, reducing the time and resources our management could otherwise direct towards our ongoing business operations. If our management is unable to expend the necessary time and resources on our business, our results of operations could be negatively impacted.
The Merger Agreement contains provisions that could make it difficult for a third party to make a superior acquisition proposal.
The Merger Agreement contains certain customary restrictions on our ability to solicit proposals from third parties for an acquisition of the Company during the Interim Operating Period. In addition, subject to certain customary “fiduciary out” exceptions, the Board is required to recommend that our stockholders vote in favor of the approval of the Merger, the Merger Agreement and the transactions contemplated thereby.
As discussed in further detail above under the heading “If the Merger Agreement is terminated, under certain conditions, we may be obligated to pay the Acquirer a substantial termination fee, which could require us to incur additional debt or reduce the amount of cash we have available to fund our operations,” we would also be required to pay the Acquirer the Termination Fee under certain conditions in connection with the termination of the Merger Agreement.
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These provisions might discourage an otherwise-interested third party from considering or proposing an acquisition of the Company, including proposals that may be deemed to offer greater value to our stockholders than the Merger Consideration of $1.50 per share. Furthermore, even if a third party elects to propose an acquisition, the requirement that we must pay a termination fee to accept any such proposal may cause that third party to offer a lower price to our stockholders than such third party might otherwise have offered.
Item 2.
Unregistered Sales of Equity Securities and Use of ProceedsNone.
Item 3.
Defaults Upon Senior SecuritiesNone.
Item 4.
Mine Safety DisclosuresNone.
Item 5.
Other InformationOn May 6, 2022, we entered into the Merger Agreement with Acquirer and Acquisition Sub. Pursuant to the Merger Agreement, and subject to the terms and conditions set forth therein, Acquisition Sub will merge with and into the Company, with the Company continuing as the surviving corporation in the Merger and a wholly-owned subsidiary of the Acquirer.
In the event the Merger is completed, except as otherwise provided in the Merger Agreement, each share of our common stock issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive the Merger Consideration.
In addition, pursuant to the Merger Agreement, at the Effective Time:
● | each Company stock option, whether or not vested, shall automatically and without any required action on the part of the holder thereof, vest (if unvested) and if not exercised by the holder thereof as of the Effective Time (after notice and a reasonable period to elect the exercise of such Company stock option) be cancelled and, if the exercise price per share is less than the Merger Consideration, be converted into the right to receive an amount in cash, without interest, equal to the product of (i) the excess, if any, of (A) the Merger Consideration over (B) the per-share exercise price for such option, multiplied by (ii) the total number of shares of common stock underlying such option; if the exercise price per share is equal to or greater than the Merger Consideration, such option if not exercised shall be cancelled without any cash payment or other consideration being made in respect thereof; |
● | each then-outstanding Company restricted stock unit (“RSU”) will automatically and without any required action on the part of the holder thereof, be assumed by Acquirer and converted into the right to receive an amount of cash, without interest, equal to the product of (i) the total number of shares of common stock underlying such RSU, multiplied by (ii) the Merger Consideration, plus any dividend equivalent amounts accrued with respect to such RSU (the “RSU Consideration”), and each converted RSU held by an individual who is expected to be a continuing employee shall continue to have and be subject to substantially the same terms and conditions as were applicable to such RSU immediately before the Merger, including payment terms and remaining vesting conditions, but with vesting terms adjusted for any right to accelerated vesting that may apply after the Effective Time under the terms of any Company equity plan, equity award agreement, or Company severance plan currently in effect that may be applicable; |
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● | each then-outstanding Company performance stock unit (“PSU”) will automatically and without any required action on the part of the holder thereof, be assumed by Acquirer and converted into the right to receive an amount of cash, without interest, equal to the product of (i) the total number of shares of common stock earned under such PSU, with performance measured in accordance with the terms of the applicable governing documents (e.g. based on the attainment of the applicable performance metrics through the date of the Merger) as determined by the board of directors of the Company or a committee thereof after consultation with Acquirer, multiplied by (ii) the Merger Consideration, plus any dividend equivalent amounts accrued with respect to such PSU (the “PSU Consideration”), and each converted PSU held by an individual who is expected to be a continuing employee shall generally continue to have and be subject to substantially the same terms and conditions as were applicable to such PSU immediately before the Merger (aside from terms related to performance vesting that shall no longer apply following the Effective Time), including payment terms and remaining time-vesting conditions, but with vesting terms adjusted for any right to accelerated vesting that may apply after the Effective Time under the terms of any Company equity plan, equity award agreement, or Company severance plan currently in effect that may be applicable; and |
● | each RSU and PSU held by an individual (whether an employee, non-employee director, or independent contractor) who is not expected to be a continuing employee shall, automatically and without any required action on the part of the holder thereof, vest (if unvested) and be cancelled and converted into the right to receive an amount in cash, without interest, equal to the RSU Consideration or PSU Consideration, as applicable. |
Consummation of the Merger is subject to customary closing conditions, including, among other things, the Requisite Stockholder Approval.
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Item 6.
Exhibits
| | |
Exhibit Number | ||
Description of Document | ||
31.1* | ||
| ||
31.2* | ||
| ||
32.1** | ||
| ||
32.2** | ||
| ||
101.SCH* | | Inline XBRL Taxonomy Extension Schema Document. |
101.CAL* | | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF* | | Inline XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB* | | Inline XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE* | | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
104* | | Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set. |
* | Filed herewith. |
** | Furnished herewith. |
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GLOSSARY OF TERMS
The following abbreviations or acronyms used in this Form 10-Q are defined below:
| | |
Abbreviations or acronyms | Definition | |
2020 Plan | | 2020 Equity Incentive Plan |
2021 Credit Agreement | | Loan and Security Agreement, dated as of July 23, 2021, among ServiceSource International, Inc. and ServiceSource Delaware, Inc., as the Borrowers, and Bank of America, N.A., as Lender |
APJ | | Asia Pacific-Japan |
ASC 606 | | Accounting Standards Codification Topic 606, Revenue from Contracts with Customers |
ASU | | Accounting Standards Update |
B2B | | Business-to-business |
BPaaS | | Business Process-as-a-Service |
BSBY | | Bloomberg Short-Term Bank Yield Index Rate |
CEO | | Chief Executive Officer |
CFO | | Chief Financial Officer |
COVID-19 | | Coronavirus disease 2019 |
EMEA | | Europe, Middle East and Africa |
ESPP | | 2011 Employee Stock Purchase Plan |
Exchange Act | | Securities Exchange Act of 1934, as amended |
FASB | | Financial Accounting Standards Board |
GAAP | | United States Generally Accepted Accounting Principles |
IoT | | Internet of things |
MD&A | | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
NALA | | North America and Latin America |
PSU | | Performance-based restricted stock unit |
Revolver | | Senior secured revolving line of credit pursuant to |
ROU | | Right-of-use |
RSU | | Restricted stock unit |
rTSR | | Relative total stockholder return |
SEC | | Securities and |
U.S. | | United States |
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SIGNATURE
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.
| | | | ||
| |||||
SERVICESOURCE INTERNATIONAL, INC. | |||||
| (Registrant) | ||||
Date: | May 10, 2022 | By: | /s/ | ||
| | | Chad W. Lyne | ||
| | | Chief Financial Officer | ||
| | | (Principal Financial and Accounting Officer) |
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