INTAPP, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q) – marketscreener.com

Cautionary Notes Regarding Forward-Looking Statements

  The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements and related notes and other financial information included in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended June 30, 2021 filed with the SEC on September 15, 2021. The following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K, particularly in the section titled "Risk Factors." Our historical results are not necessarily indicative of the results that may be expected for any period in the future. Unless otherwise noted, any reference to a year preceded by the word "fiscal" refers to the fiscal year ended June 30 of that year.  

Overview

Intapp is a leading provider of industry-specific, cloud-based software solutions for the professional and financial services industry globally. We empower the world’s premier private capital, investment banking, legal, accounting, and consulting firms with the technology they need to meet rapidly changing client, investor, and regulatory requirements, deliver the right insights to the right professionals, and operate more competitively.

  Our Intapp Platform is purpose-built to modernize these firms. The platform facilitates greater team collaboration, digitizes complex workflows to optimize deal and engagement execution, and leverages proprietary AI to help nurture relationships and originate new business. By better connecting their most important assets-people, processes, and data-our platform helps firms increase client fees and investment returns, operate more efficiently, and better manage risk and compliance.  How We Generate Revenue  We generate revenues primarily from software subscriptions, typically with one-year or multi-year contract terms. We sell our software through a direct enterprise sales model, which targets clients based on end market, geography, firm size, and business need. Historically, most of our clients hosted our software on-premise. However, as we saw the potential for the cloud to impact the professional and financial services industries, we invested in developing a multi-tenant cloud version of our platform and launched our initial software-as-a-service ("SaaS") solutions in 2017. We recognize revenues from SaaS subscriptions ratably over the term of the contract, while we recognize revenues from the license component of on-premise subscriptions upfront and the support component of such subscriptions ratably over the support term. We generally price our subscriptions based on the modules deployed as well as the number of users adopting our solution.  

We expect the vast majority of our new ARR growth in the future to be from the sale of SaaS subscriptions.

  We generate a majority of our non-recurring revenues from professional services. Our clients utilize these services to configure and implement one or more modules of the Intapp Platform, integrate those modules with the existing platform and with other core systems in their IT environment, upgrade their existing deployment, and provide training for their employees. Other professional services include strategic consulting and advisory work, which are generally provided on a standalone basis.  

Recent Developments

  On July 2, 2021, in conjunction with the IPO, our amended and restated Certificate of Incorporation became effective, pursuant to which our authorized capital stock was increased to 700 million shares of common stock and 50 million shares of preferred stock.  On July 2, 2021, we completed our IPO and sold 10,500,000 shares of our common stock at a public offering price of $26.00 per share. The net proceeds to us were $244.8 million, after deducting the underwriters' discounts and offering expenses payable by us.  On July 2, 2021, upon the closing of the IPO, all outstanding shares of Series A and Series A-1 convertible preferred stock were automatically converted into 19,034,437 shares of our common stock on a one-for-one basis.  On July 8, 2021, the underwriters of our IPO exercised in full their right to purchase an additional 1,575,000 shares of our common stock at the public offering price of $26.00 per share. The net proceeds to us were $38.2 million, after deducting the underwriters' discounts.  On July 12, 2021, we repaid the outstanding $273.0 million borrowing under the term loan and $5.0 million borrowing under the revolving credit facility from the proceeds of the IPO. As a result, we recognized a loss on extinguishment of debt of $2.4 million on this date in connection with the write-off of the unamortized financing costs related to the term loan.                                           20

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    On October 5, 2021, we entered into the Credit Agreement with a group of lenders led by JPMorgan. The Credit Agreement provides for a five-year, senior secured revolving credit facility of $100.0 million with a sub-facility for letters of credit in the aggregate amount of up to $10.0 million. The Credit Agreement also provides that we may seek additional revolving credit commitments in an aggregate amount not to exceed $50.0 million. No amounts have been borrowed under the JPMorgan Credit Facility.  

Factors affecting our performance

  Market adoption of our cloud platform. Our future growth depends on our ability to win new professional and financial services clients and expand within our existing client base, primarily through the continued acceptance of our cloud business. Our cloud business has historically grown faster than our overall business, and represents an increasing proportion of our ARR. We must demonstrate to new and existing clients the benefits of selecting our cloud platform, and support those deployments once live with reliable and secure service. From a sales perspective, our ability to add new clients and expand within existing accounts depends upon a number of factors, including the quality and effectiveness of our sales personnel and marketing efforts, and our ability to convince key decision makers within professional and financial services firms to embrace the Intapp Platform over point solutions, internally developed solutions, and horizontal solutions.  Net Revenue Retention. We measure our ability to grow and retain ARR from existing clients using a metric we refer to as net revenue retention. We calculate this by starting with the ARR from the cohort of all clients as of the twelve months prior to the applicable fiscal period, or prior period ARR. We then calculate the ARR from these same clients as of the current fiscal period, or current period ARR. We then divide the current period ARR by the prior period ARR to calculate the net revenue retention.  This metric accounts for changes in our recurring revenue base from cross-sell (additional solution capabilities sold), upsell (additional seats sold), price changes, and client attrition (including contraction of solution capabilities, contraction of seats and client churn). We have averaged a net revenue retention rate of over 110% in each of the twelve-month periods ended December 31, 2021 and 2020 due to a steady increase in client adoption of our platform's capabilities and a low level of client attrition. However, if our clients do not continue to see the ability of our platform to generate return on investment relative to other software alternatives, net revenue retention could suffer and our operating results may be adversely affected.  Continued investment in innovation and growth. We have made substantial investments in research and development and sales and marketing to achieve a leadership position in our market and grow our revenues and client base. We intend to continue to invest in research and development to build new capabilities and maintain the core technology underpinning our differentiated platform. In addition, we expect to increase investment in sales and marketing to broaden our reach with new clients in the United States and abroad and deepen our penetration with existing clients. We are continuing to increase our general and administrative spending to support our growing operational needs as a public company. With our revenue growth objectives, we expect to continue to make such investments for the foreseeable future.  We have a track record of successfully identifying and integrating complementary businesses within the professional and financial services industry. To complement our organic investment in innovation and accelerate our growth, we will continue to evaluate acquisition opportunities that help us extend our platform, broaden and deepen our market leadership, and add new clients.  COVID-19 expenses. In March 2020, in response to the COVID-19 pandemic to ensure the safety of our employees, we implemented a global work from home policy and suspended international and domestic travel. We began easing these restrictions as we entered fiscal year 2022, including by re-opening offices and resuming some essential business travel and in-person marketing events. As a result, we have seen a small increase in travel-related and marketing expenses. In December 2021, due to the surge in COVID-19 cases, we reinstated more stringent travel and meeting restrictions and continue to monitor the situation closely to ensure the safety of our employees and clients. We expect business travel to resume and marketing-related expenses to increase as the situation stabilizes.  

Key business metrics

  We review a number of operating and financial metrics, including the following key metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions.  

Annual recurring revenues (“ARR”)

  ARR represents the annualized recurring value of all active SaaS and on-premise subscription contracts at the end of a reporting period. Contracts with a term other than one year are annualized by taking the committed contract value for the current period divided by number of days in that period then multiplying by 365. As a metric, ARR mitigates fluctuations in revenue recognition due to certain factors, including contract term and the sales mix of SaaS contracts and subscription licenses. ARR does not have any standardized meaning and may not be comparable to similarly titled measures presented by other companies. ARR should be viewed independently of revenues and deferred revenues and is not intended to be combined with or to replace either of those elements of our financial statements. ARR is not a forecast and the active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our clients.                                           21 

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ARR was $240.0 million and $189.4 million as of December 31, 2021 and 2020, respectively, an increase of 27%.

Cloud ARR

  Cloud ARR is the portion of our ARR which represents the annualized recurring value of our active SaaS contracts. We believe Cloud ARR provides important information about our ability to sell new SaaS subscriptions to existing clients and to acquire new SaaS clients.  

Cloud ARR was $135.3 million and $88.9 million as of December 31, 2021 and 2020, respectively, an increase of 52%, and represented 56% and 47% of ARR as of December 31, 2021 and 2020, respectively.

Number of clients

  We believe our ability to increase the number of clients on our platform is a key indicator of the growth of our business and our future business opportunities. We define a client at the end of any reporting period as an entity with at least one active subscription as of the measurement date. As of December 31, 2021, we had more than 2,000 clients. No single client represented more than 10% of total revenues for the three and six months ended December 31, 2021 and 2020.  Our client base includes some of the largest and most reputable professional and financial services firms globally. These clients have the financial and operating resources needed to purchase, deploy, and successfully use the full capabilities of our software platform, and as such, we believe the number of our clients with contracts greater than $100,000 of ARR is an important metric for highlighting our progress on the path to full adoption of our platform by our professional and financial services clients. As of December 31, 2021 and 2020, we had 467 and 380 clients, respectively, with contracts greater than $100,000 of ARR.  

Components of Our Results of Operations

Revenues

  We generate recurring revenues from the sale of our SaaS solutions, subscriptions to our term software applications, and from providing support for those applications. We generate non-recurring revenues primarily by delivering professional services for the configuration, implementation and upgrade of our solutions. Our recurring revenues accounted for 87% and 90% of our total revenues during the six months ended December 31, 2021 and 2020, respectively.  

SaaS and support

  We recognize revenues from our SaaS solutions ratably over the term of the contract beginning once the SaaS environment is provisioned and made available to clients. The initial term of our SaaS contracts is generally one to three years in duration.  Support revenues consist of non-cancelable support which is included with our subscription licenses and entitles clients to receive technical support and software updates, on a when and if available basis. We recognize revenues for support ratably over the term of the support contract which corresponds to the underlying subscription license agreement. We expect to continue to generate a relatively consistent stream of revenues from support services we provide to our existing subscription license clients. However, over time as we focus on new sales of our SaaS solutions and encourage existing subscription license clients to migrate to SaaS solutions, we expect revenues from support to decrease as a percentage of total revenues.  

Subscription license

  Our subscription licenses provide the client with the right to functional intellectual property and are distinct performance obligations as the client can benefit from the subscription licenses on their own. The transaction price allocated to subscription license arrangements is recognized as revenues at a point in time when control is transferred to the client, which generally occurs at the time of delivery for a new contract or commencement of the renewal term for renewals. Subscription license fees are generally payable in advance on an annual basis over the term of the license arrangement, which is typically noncancelable.  

Professional services

  Our professional services primarily consist of implementation, configuration and upgrade services provided to clients. These engagements are billed to clients either on a time and materials or milestone basis; revenues are recognized as invoiced or in proportion to the work performed, respectively. We expect the demand for our professional services to increase due to client growth and the need for implementation, upgrade, and migration services for new and existing clients. This demand will be affected by the mix of professional services that are provided by us versus provided by our third-party implementation partners. Our professional services are currently loss making (after allocated overhead for facilities and IT) and accounted for 13% and 10% of our total revenues during the six months ended December 31, 2021 and 2020, respectively.                                           22

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  Table of Contents    Cost of revenues  Our cost of revenues consists primarily of expenses related to providing SaaS subscription, support and professional services to our clients, including personnel costs (salaries, bonuses, benefits, and stock-based compensation) and related expenses for client support and services personnel, as well as cloud infrastructure costs, third-party expenses, depreciation of fixed assets, amortization of capitalized internal-use software costs and acquired intangible assets, and allocated overhead. We do not have any cost of revenues related to our subscription licenses. We expect our cost of revenues to increase in absolute dollars as we expand our SaaS client base over time as this will result in increased cloud infrastructure costs and increased costs for additional personnel to provide technical support services to our growing client base.  

Cost of SaaS and support

  Our cost of SaaS and support revenues comprises the direct costs to deliver and support our products, including salaries, bonus, benefits, stock-based compensation, as well as allocated overhead for facilities and IT, third-party hosting fees related to cloud services, amortization of capitalized internal-use software development costs and amortization of acquired intangible assets.  

Cost of professional services

  Our cost of professional services revenues comprises the personnel-related expenses for our professional services employees and contractors responsible for delivering implementation, upgrade and migration services to our clients. This includes salaries, benefits, stock-based compensation, and allocated overhead for facilities and IT. We expect the cost of professional services revenues to increase in absolute dollars as we continue to hire personnel to provide implementation, upgrade and migration services to our growing client base.  

Operating expenses

Research and development expense

  Our research and development expenses comprise costs associated with the development of our software products for sale. The major components of research and development costs include salaries and employee benefits, costs of third-party services, and allocations of various overhead and occupancy costs. We expect our research and development expenses to continue to increase in absolute dollars for the foreseeable future as we continue to dedicate substantial internal resources to develop, improve and expand the functionality of our solutions.  Sales and marketing expense  Our sales and marketing expenses consist primarily of costs incurred for personnel-related expenses for our sales and marketing employees as well as commission payments to our sales employees, costs of marketing events and online advertising, allocations of various overhead and occupancy costs and travel and entertainment expenses. We capitalize client acquisition costs (principally commissions paid to sales personnel) and subsequently amortize these costs over the expected period of benefit. We expect in the long-term we will see an increase of our sales and marketing expense as we continue to expand our direct sales force to capitalize on opportunities for growth and resume in-person conferences and attendance at trade shows once the COVID-19 pandemic has abated.  

General and administrative expense

  Our general and administrative expenses consist primarily of personnel-related expenses as well as professional services and facilities costs related to our executive, finance, human resources, information technology and legal functions. Being a new public company, we expect to incur significant additional accounting and legal costs related to compliance with rules and regulations enacted by the SEC, including the additional costs of achieving and maintaining compliance with the Sarbanes-Oxley Act, as well as additional insurance, investor relations and other costs associated with being a public company.  

Loss on debt extinguishment

Loss on debt extinguishment consists of the write-off of unamortized deferred financing costs upon the repayment of our debt obligations.

Interest expense

Interest expense, net primarily consists of the interest on our debt, which was repaid in full in July 2021.

  Other income (expense), net  

Other income (expense), net consists primarily of realized and unrealized foreign exchange gains and losses resulting from fluctuations in foreign exchange rates on monetary assets and liabilities denominated in currencies other than the U.S. dollar.

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  Table of Contents    Income tax benefit (expense)  Our income tax provision consists of an estimate of federal, state, and foreign income taxes based on enacted federal, state, and foreign tax rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in the valuation of our deferred tax assets and liabilities, and changes in tax laws. We maintain a full valuation allowance on our federal and state deferred tax assets as we have concluded that it is not more likely than not that the deferred tax assets will be realized.  

Results of Operations

The following tables set forth our results of operations for the periods presented, expressed in total dollar terms and as a percentage of total revenues (percentages may not add up due to rounding):

                                    Three Months Ended December 31,                       Six Months Ended December 31,                                  2021                       2020                      2021                      2020                                                        (in thousands, except for percentages) Revenues: SaaS and support       $  46,970         73   %   $  34,651         70   %  

$ 90,459 71 % $ 67,756 69 % Subscription license 9,323 14

           9,750         20          19,907        16          19,746        20 Total recurring revenues                  56,293         87          44,401         90         110,366        87          87,502        90 Professional services                   8,404         13           5,184         10          16,521        13          10,226        10 Total revenues            64,697        100          49,585        100         126,887       100          97,728       100 Cost of revenues: SaaS and support          12,175         19           9,876         20          23,517        19          19,155        20 Total cost of recurring revenues        12,175         19           9,876         20          23,517        19          19,155        20 Professional services                  11,378         18           7,551         15          22,412        18          15,255        16 Total cost of revenues                  23,553         36          17,427         35          45,929        36          34,410        35 Gross profit              41,144         64          32,158         65          80,958        64          63,318        65 Operating expenses: Research and development               17,386         27          12,146         24          34,356        27          24,100        25 Sales and marketing       26,840         41          15,472         31          52,485        41          30,810        32 General and administrative            21,217         33           9,437         19          42,047        33          17,581        18 Total operating expenses                  65,443        101          37,055         75         128,888       102          72,491        74 Operating loss           (24,299 )      (38 )        (4,897 )      (10 )       (47,930 )     (38 )        (9,173 )      (9 ) Loss on debt extinguishment                 -          -               -          -          (2,407 )      (2 )             -         - Interest expense             (38 )        -          (6,395 )      (13 )          (197 )       -         (12,674 )     (13 ) Other income (expense), net              (419 )       (1 )         1,107          2             460         -           1,375         1 Net loss before income taxes             (24,756 )      (38 )       (10,185 )      (21 )       (50,074 )     (39 )       (20,472 )     (21 ) Income tax benefit (expense)                    531          1            (145 )        -             719         1            (265 )       - Net loss               $ (24,225 )      (37 ) %   $ (10,330 )      (21 ) %   $ (49,355 )     (39 ) %   $ (20,737 )     (21 ) %                                              24 

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Comparison of the Three and Six Months Ended December 31, 2021 and 2020

  Revenues                                  Three Months Ended                                  December 31,                  Change                Six Months Ended December 31,               Change                              2021            2020         Amount        %              2021                  2020           Amount        %                                                                  (in thousands, except for percentages) Revenues: SaaS and support           $  46,970       $  34,651     $ 12,319         36 %    $        90,459       $       67,756     $ 22,703         34 % Subscription license           9,323           9,750         (427 )       (4 )%            19,907               19,746          161          1 % Total recurring revenues      56,293          44,401       11,892         27 %            110,366               87,502       22,864         26 % Professional services          8,404           5,184        3,220         62 %             16,521               10,226        6,295         62 % Total revenues             $  64,697       $  49,585     $ 15,112         30 %    $       126,887       $       97,728     $ 29,159         30 %     Recurring revenues  Recurring revenues from the sale of our SaaS solutions, from subscriptions to our term software solutions, and from providing support for these solutions increased by $11.9 million, or 27%, and $22.9 million, or 26%, respectively, in the three and six months ended December 31, 2021 compared to the same periods in the prior year.  Our SaaS and support revenues grew $12.3 million, or 36%, and $22.7 million, or 34%, respectively, in the three and six months ended December 31, 2021 compared to the three and six months ended December 31, 2020, due to sales to new clients and expansion of existing clients from both cross-selling and upselling sales motions. An increase in clients starting to migrate from using our on-premise solutions to our cloud solutions also contributed to the growth.  Subscription license revenues decreased by $0.4 million, or 4%, and increased by $0.2 million, or 1%, respectively, in the three and six months ended December 31, 2021 compared to the same periods in the prior year. This reflects our continued emphasis on selling new subscriptions as SaaS and migrating our existing on-premise clients to our SaaS solutions.  

Professional services

  Professional services revenues increased by $3.2 million, or 62%, for the three months ended December 31, 2021 compared to the three months ended December 31, 2020, and increased by $6.3 million, or 62%, for the six months ended December 31, 2021 compared to the six months ended December 31, 2020. The results for both the three and six month periods ended December 31, 2021 reflect a recovery in demand for implementation, upgrade and migration services, which were adversely impacted by COVID-19 during the six months ended December 31, 2020.  

Cost of revenues and gross profit

                            Three Months Ended                             December 31,                  Change                Six Months Ended December 31,              Change                         2021            2020         Amount        %              2021                 2020           Amount        %                            (in thousands, except for percentages)                      (in thousands, except for percentages)
Cost of revenues: SaaS and support      $  12,175       $   9,876     $  2,299         23 %    $       23,517       $       19,155     $  4,362         23 % Total cost of recurring revenues       12,175           9,876        2,299         23 %            23,517               19,155        4,362         23 % Professional services                 11,378           7,551        3,827         51 %            22,412               15,255        7,157         47 % Total cost of revenues                 23,553          17,427        6,126         35 %            45,929               34,410       11,519         33 %  Gross profit: SaaS and support         34,795          24,775       10,020         40 %            66,942               48,601       18,341         38 % Subscription license                   9,323           9,750         (427 )       (4 )%           19,907               19,746          161          1 % Total gross profit - recurring revenues                 44,118          34,525        9,593         28 %            86,849               68,347       18,502         27 % Professional services                 (2,974 )        (2,367 )       (607 )       26 %            (5,891 )             (5,029 )       (862 )       17 % Gross profit          $  41,144       $  32,158     $  8,986         28 %    $       80,958       $       63,318     $ 17,640         28 %                                            25 

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  Table of Contents      Cost of SaaS and support  Cost of SaaS and support revenues increased by $2.3 million, or 23%, for the three months ended December 31, 2021 compared to the three months ended December 31, 2020. The increase can be attributed primarily to increases in royalty expense of $0.8 million relating to third-party products, amortization expense of $0.6 million relating to capitalized software development costs and intangible assets, personnel expense of $0.5 million mainly due to headcount increases, and hosting costs of $0.4 million resulting from the growth of our business.  Cost of SaaS and support revenues increased by $4.4 million, or 23%, for the six months ended December 31, 2021 compared to the six months ended December 31, 2020. The increase can be attributed primarily to increases in royalty expense of $1.5 million relating to third-party products, amortization expense of $1.1 million relating to capitalized software development costs and intangible assets, personnel expense of $0.9 million mainly due to annual pay raises and headcount increases, hosting costs of $0.6 million to support our growth as we scale our business and contractor costs of $0.3 million.  

Cost of professional services

  Cost of professional services revenues increased by $3.8 million, or 51%, for the three months ended December 31, 2021 compared to the three months ended December 31, 2020, primarily due to an increase in personnel costs by $2.4 million due to increased headcount, sub-contractor costs of $0.8 million, and other allocated overhead costs of $0.6 million as we expanded our teams to provide implementation and migration services to our growing client base.  Cost of professional services revenues increased by $7.2 million, or 47%, for the six months ended December 31, 2021 compared to the six months ended December 31, 2020, primarily due to an increase in personnel costs by $4.5 million due to annual raises and increased headcount, sub-contractor costs of $1.5 million, and other allocated overhead costs of $1.0 million as we expanded our teams to provide implementation and migration services to our growing client base.  

Gross profit

  Gross profit increased by $9.0 million, or 28%, for the three months ended December 31, 2021 compared to the three months ended December 31, 2020, and increased by $17.6 million, or 28%, for the six months ended December 31, 2021 compared to the six months ended December 31, 2020, primarily driven by the growth in SaaS and support revenues, which was partially offset by increases in professional services costs as we invested in headcount to support our implementation, upgrade and migration services, and royalty expenses incurred on sales of third-party products.  Operating expenses                             Three Months Ended                             December 31,                  Change               Six Months Ended December 31,               Change                         2021            2020         Amount        %             2021                  2020           Amount        %                                                             (in thousands, except for percentages) Operating expenses: Research and development           $  17,386       $  12,146     $  5,240         43 %   $        34,356       $       24,100     $ 10,256         43 % Sales and marketing      26,840          15,472       11,368         73 %            52,485               30,810       21,675         70 % General and administrative           21,217           9,437       11,780        125 %            42,047               17,581       24,466        139 % Total operating expenses              $  65,443       $  37,055     $ 28,388         77 %   $       128,888       $       72,491     $ 56,397         78 %    

Research and development expense

  Research and development expenses increased by $5.2 million, or 43%, for the three months ended December 31, 2021 compared to the three months ended December 31, 2020. Stock-based compensation expense increased by $3.2 million, primarily due to stock awards granted since January 2021 combined with an increase in the grant date fair value of such awards. Personnel costs increased by $1.4 million due to increased headcount. Cloud hosting costs and contractor costs increased by $0.5 million and $0.4 million, respectively, due to incremental development activities relating to our cloud offerings. These increases in expenses were partially offset by an increase in capitalized software development costs of $0.5 million.  Research and development expenses increased by $10.3 million, or 43%, for the six months ended December 31, 2021 compared to the six months ended December 31, 2020. Stock-based compensation expense increased by $6.6 million, primarily due to stock awards granted since January 2021 combined with an increase in the grant date fair value of such awards. Personnel-related costs increased by $2.8 million due to increased headcount and pay increases. Contractor costs increased by $0.9 million and cloud hosting costs increased by $0.8 million due to incremental development activities relating to our cloud offerings, partially offset by increased capitalized internal-use software costs of $1.0 million.                                           26 

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  Table of Contents    Sales and marketing expense  Sales and marketing expenses increased by $11.4 million, or 73%, for the three months ended December 31, 2021 compared to the three months ended December 31, 2020. Stock-based compensation expense increased by $5.6 million, primarily due to stock awards granted since January 2021 combined with an increase in the grant date fair value of such awards. Personnel-related costs increased by $4.3 million due to increased headcount, salary raises, and higher sales commissions driven by increased sales. Marketing expenses increased by $0.9 million due to company events and a modest return to in-person activities resulting from the easing of Covid-related restrictions on travel. Allocated overhead costs increased by $0.5 million due to increased headcount.  Sales and marketing expenses increased by $21.7 million, or 70%, for the six months ended December 31, 2021 compared to the six months ended December 31, 2020. Stock-based compensation expense increased by $10.5 million, primarily due to stock awards granted since January 2021 combined with an increase in the grant date fair value of such awards. Personnel-related costs increased by $8.2 million due to increased headcount, salary raises, and higher sales commissions driven by increased sales. Marketing expenses increased by $1.8 million due to company events and a modest return to in-person activities resulting from the easing of Covid-related restrictions on travel and our IPO. Allocated overhead costs increased by $1.1 million due to increased headcount and overall costs to support the growth in our business.  

General and administrative expense

  General and administrative expenses increased by $11.8 million, or 125%, for the three months ended December 31, 2021 compared to the three months ended December 31, 2020. The increase was primarily driven by personnel-related expenses and costs associated with being a public company. Stock-based compensation expense increased by $6.5 million mainly due to stock awards granted since January 2021 combined with an increase in the grant date fair value of such awards. Personnel-related costs increased by $2.3 million, primarily due to increased headcount and salary raises. Insurance expense increased by $1.4 million and third-party professional fees increased by $1.3 million, in each case largely due to costs associated with being a public company.  General and administrative expenses increased by $24.5 million, or 139%, for the six months ended December 31, 2021 compared to the six months ended December 31, 2020. The increase was primarily driven by personnel expenses and costs associated with being a public company. Stock-based compensation expense increased by $11.7 million mainly due to stock awards granted since January 2021 combined with an increase in the grant date fair value of such awards. Personnel-related costs increased by $4.6 million, primarily due to increased headcount and salary raises. Third-party professional fees increased by $4.0 million and insurance expense increased by $2.8 million, in each case largely due to costs associated with being a public company. Other costs increased by $1.0 million primarily due to increases recorded in the fair value of contingent consideration and the impact of a one-time rent credit which was received in the prior year.  Loss on debt extinguishment                                                                                             Six Months Ended December                          Three Months Ended December 31,                Change                        31,                        Change                          2021                        2020          Amount         %          2021              2020         Amount        %                                   (in thousands, except for percentages)                        (in thousands, except for percentages) Loss on debt                                     $          - extinguishment       $           -                                $       -         *     $   (2,407 )       $       -     $ (2,407 )       *   *Not meaningful  Loss on debt extinguishment of $2.4 million during the six months ended December 31, 2021 related to the write-off of unamortized deferred financing costs upon the full repayment of our debt under the Prior Credit Facility in July 2021.  Interest expense                                                                                       Six Months Ended December                       Three Months Ended December 31,           Change                        31,                        Change                           2021                2020        Amount        %            2021              2020         Amount        %                                                            (in thousands, except for percentages) Interest expense      $        (38 )       $   (6,395 )   $ 6,357        (99 )%   $      (197 )     $  (12,674 )   $ 12,477        (98 )%     Interest expense decreased by $6.4 million in the three months ended December 31, 2021 compared to the three months ended December 31, 2020, and decreased by $12.5 million in the six months ended December 31, 2021 compared to the six months ended December 31, 2020. The decreases were mainly due to the full repayment of our debt under the Prior Credit Facility in July 2021.                                           27

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   Table of Contents    Other income (expense), net                          Three Months Ended December 31,            Change             Six Months Ended December 31,            Change                            2021                2020         Amount        %             2021               2020        Amount        %                                                             (in thousands, except for percentages) Other income (expense), net        $         (419 )       $   1,107     $ (1,526 )     (138 )%   $        460         $   1,375     $  (915 )      (67 )%     Other income (expense), net decreased by $1.5 million in the three months ended December 31, 2021 compared to the three months ended December 31, 2020 primarily due to the impact of fluctuations in foreign currency rates on our cash and accounts receivable balances denominated in British Pounds. We had foreign exchange losses during the three months ended December 31, 2021 compared to foreign exchange gains during the same period in the prior year.  Other income (expense), net decreased by $0.9 million in the six months ended December 31, 2021 compared to the six months ended December 31, 2020 primarily due to a decrease in foreign exchange gains arising on our cash, accounts receivable balances and contingent consideration relating to the acquisition of Repstor, denominated in British Pounds.  

Income tax benefit (expense)

                          Three Months Ended December 31,           Change             Six Months Ended December 31,            Change                           2021                2020         Amount        %             2021               2020         Amount        %                                                             (in thousands, except for percentages) Income tax benefit (expense)             $         531         $    (145 )   $    676       (466 )%   $        719         $    (265 )   $    984       (371 )%     Income tax benefit was $0.5 million and $0.7 million for the three and six months ended December 31, 2021, respectively, compared to an income tax expense of $0.1 million and $0.3 million recorded during the three and six months ended December 31, 2020, respectively. Our income tax benefit during the three and six months ended December 31, 2021 was primarily attributable to an income tax benefit in a number of foreign jurisdictions.  

Liquidity and Capital Resources

Sources of liquidity

  As of December 31, 2021, we had cash, cash equivalents, and restricted cash of $59.8 million. Prior to our IPO in July 2021, we financed our operations primarily through collections from clients, borrowings under our credit facility and the issuance of convertible preferred stock and common stock. We generally bill and collect from our clients annually in advance. Our billings are subject to seasonality, with billings in the second and fourth quarters substantially higher than in the first and third quarters.  We expect that operating losses could continue in the future as we continue to invest in the growth of our business. We believe our existing cash and cash equivalents and restricted cash as of December 31, 2021, along with our JPMorgan Credit Facility described below, will be sufficient to meet our working capital and capital expenditure needs for at least the next twelve months.  In July 2021, we received net proceeds of $283.0 million upon the completion of our IPO. We used $278.0 million of the net proceeds from the offering to fully repay amounts outstanding under our Prior Credit Facility, consisting of $273.0 million outstanding under the term loan and $5.0 million outstanding under the revolving credit facility.  On October 5, 2021, we entered into a Credit Agreement with a group of lenders led by JPMorgan. The Credit Agreement provides for a five-year, senior secured revolving credit facility of $100.0 million with a sub-facility for letters of credit in the aggregate amount of up to $10.0 million. The Credit Agreement also provides that we may seek additional revolving credit commitments in an aggregate amount not to exceed $50.0 million, subject to certain administrative procedures, including approval by the Administrative Agent. Future borrowings under the JPMorgan Credit Facility will bear interest, at our election, at an annual rate of either (a) LIBOR plus a percentage spread (ranging from 1.75% to 2.50%) or (b) an alternate base rate (as described in the Credit Agreement) plus a percentage spread (ranging from 0.75% to 1.50%), in each case based on our total net leverage ratio. In addition, a commitment fee accrues with respect to the unused amount of the JPMorgan Credit Facility at an annual rate ranging from 0.25% to 0.40%, based on our total net leverage ratio. As of December 31, 2021, no amounts have been borrowed under the JPMorgan Credit Facility.                                           28

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Table of Contents

    Our future capital requirements will depend on many factors, including, but not limited to, our ability to grow our revenues and the timing and extent of investment across our organization necessary to support growth in our business. In addition, we may in the future enter into arrangements to acquire or invest in complementary businesses or technologies. We may need to seek additional equity or debt financing in order to meet these future capital requirements. If we are unable to raise additional capital when desired, or on terms that are acceptable to us, our business, financial condition and results of operations could be adversely affected.  Cash flows 

The following table summarizes our cash flows from operating, investing, and financing activities for the periods indicated:

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