10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2020

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number: 001-35840

Model N, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		77-0528806
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
777 Mariners Island Boulevard,	Suite 300	94404
San Mateo,	California
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code: (650) 610-4600

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.00015 per share	MODN	New York Stock Exchange

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  ý    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý    No  ☐

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,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	ý	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐  No  ý

As of January 29, 2021, the registrant had 35,049,340 shares of common stock outstanding.

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		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	2
	Condensed Consolidated Balance Sheets as of December 31, 2020 and September 30, 2020	2
	Condensed Consolidated Statements of Operations for the Three Months Ended December 31, 2020 and 2019	3
	Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended December 31, 2020 and 2019	4
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended December 31, 2020 and 2019	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	27
Item 4.	Controls and Procedures	27
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	56
Item 3.	Defaults Upon Senior Securities	56
Item 4.	Mine Safety Disclosures	56
Item 5.	Other Information	56
Item 6.	Exhibits	57
	Signatures	58

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

MODEL N, INC.

Condensed Consolidated Balance Sheets

(in thousands, except per share data)

(Unaudited)

	As of December 31, 2020		As of September 30, 2020
Assets
Current assets
Cash and cash equivalents	$	143,517	$	200,491
Accounts receivable, net of allowance for doubtful accounts of $110 as of December 31, 2020 and $47 as of September 30, 2020	39,807		35,796
Prepaid expenses	3,678		2,797
Other current assets	6,777		7,314
Total current assets	193,779		246,398
Property and equipment, net	1,568		1,034
Operating lease right-of-use assets	15,837		3,332
Goodwill	66,860		39,283
Intangible assets, net	51,418		24,380
Other assets	7,055		5,863
Total assets	$	336,517	$	320,290
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	5,833	$	3,009
Accrued employee compensation	11,513		17,056
Accrued liabilities	5,036		5,237
Operating lease liabilities, current portion	1,889		1,460
Deferred revenue, current portion	55,638		50,904
Total current liabilities	79,909		77,666
Long term debt	116,795		114,438
Operating lease liabilities, less current portion	13,604		2,067
Other long-term liabilities	1,355		1,448
Total liabilities	211,663		195,619
Commitments and contingencies
Stockholders’ equity
Common Stock, $0.00015 par value; 200,000 shares authorized; 35,049 and 34,821 shares issued and outstanding at December 31, 2020 and September 30, 2020, respectively	5		5
Preferred Stock, $0.00015 par value; 5,000 shares authorized; no shares issued and outstanding	—		—
Additional paid-in capital	357,106		351,952
Accumulated other comprehensive loss	(1,031)		(1,213)
Accumulated deficit	(231,226)		(226,073)
Total stockholders’ equity	124,854		124,671
Total liabilities and stockholders’ equity	$	336,517	$	320,290

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

MODEL N, INC.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(Unaudited)

	Three Months Ended December 31,
	2020		2019
Revenues
Subscription	$	31,435	$	28,182
Professional services	11,299		10,206
Total revenues	42,734		38,388
Cost of revenues
Subscription	8,992		8,710
Professional services	8,124		7,642
Total cost of revenues	17,116		16,352
Gross profit	25,618		22,036
Operating expenses
Research and development	8,697		8,516
Sales and marketing	9,456		9,013
General and administrative	8,787		6,965
Total operating expenses	26,940		24,494
Loss from operations	(1,322)		(2,458)
Interest expense, net	3,462		563
Other expenses (income), net	130		(12)
Loss before income taxes	(4,914)		(3,009)
Provision for (benefit from) income taxes	239		(11)
Net loss	$	(5,153)	$	(2,998)
Net loss per share attributable to common stockholders:
Basic and diluted	$	(0.15)	$	(0.09)
Weighted average number of shares used in computing net loss per share attributable to common stockholders:
Basic and diluted	34,936		33,145

The accompanying notes are an integral part of these condensed consolidated financial statements.

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MODEL N, INC.

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

(Unaudited)

	Three Months Ended December 31,
	2020		2019
Net loss	$	(5,153)	$	(2,998)
Other comprehensive income, net of tax
Unrealized gain on cash flow hedges	65		18
Foreign currency translation gain	117		25
Total comprehensive loss	$	(4,971)	$	(2,955)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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MODEL N, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

	Three Months Ended December 31,
	2020		2019
Cash flows from operating activities
Net loss	$	(5,153)	$	(2,998)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization	1,320		1,452
Stock-based compensation	5,128		5,823
Amortization of debt discount and issuance costs	2,357		109
Deferred income taxes	60		(190)
Amortization of capitalized contract acquisition costs	651		624
Changes in assets and liabilities, net of acquisition
Accounts receivable	(233)		(4,141)
Prepaid expenses and other assets	(602)		(398)
Accounts payable	(422)		136
Accrued employee compensation	(5,563)		(6,384)
Other current and long-term liabilities	(878)		(573)
Deferred revenue	3,114		1,549
Net cash used in operating activities	(221)		(4,991)
Cash flows from investing activities
Purchases of property and equipment	(336)		(29)
Acquisition of business	(56,444)		—
Net cash used in investing activities	(56,780)		(29)
Cash flows from financing activities
Proceeds from exercise of stock options	26		18
Net cash provided by financing activities	26		18
Effect of exchange rate changes on cash and cash equivalents	1		11
Net decrease in cash and cash equivalents	(56,974)		(4,991)
Cash and cash equivalents
Beginning of period	200,491		60,780
End of period	$	143,517	$	55,789

The accompanying notes are an integral part of these condensed consolidated financial statements.

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MODEL N, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1.The Company and Significant Accounting Policies and Estimates

Model N, Inc. (“Model N,” “we,” “us,” “our,” and “the Company”) was incorporated in Delaware on December 14, 1999. The Company is a provider of cloud revenue management solutions for the life sciences and high tech industries. The Company’s solutions enable its customers to maximize revenues and reduce revenue compliance risk by transforming their revenue life cycle from a series of tactical, disjointed operations into a strategic end-to-end process, which enables them to manage the strategy and execution of pricing, contracting, incentives and rebates. The Company’s corporate headquarters are located in San Mateo, California, with additional offices in the United States, India and Switzerland.

Fiscal Year

The Company’s fiscal year ends on September 30. References to fiscal year 2021, for example, refer to the fiscal year ending September 30, 2021.

Basis for Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. The unaudited condensed consolidated balance sheet as of September 30, 2020 has been derived from the audited financial statements which are included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2020 (“the Annual Report”) on file with the SEC. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Annual Report.

In the opinion of management, the unaudited interim consolidated financial statements include all the normal recurring adjustments necessary to present fairly our condensed consolidated financial statements. The results of operations for the three months ended December 31, 2020 are not necessarily indicative of the operating results for the full fiscal year 2021 or any future periods.

The condensed consolidated financial statements include the accounts of Model N and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities and reported amounts of revenues and expenses during the reporting periods. Significant items subject to such estimates include revenue recognition, liability and equity allocation of convertible senior notes, legal contingencies, income taxes, stock-based compensation and valuation of goodwill and intangibles. These estimates and assumptions are based on management’s best estimates and judgment. Management regularly evaluates its estimates and assumptions using historical experience and other factors. However, actual results could differ significantly from these estimates.

COVID-19

The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. At this point, the extent to which COVID-19 may impact the Company’s financial condition or results of operations is uncertain. As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require us to update our estimates, judgments or revise the carrying value of our assets or liabilities. The estimates discussed above may change, as new events occur and additional information is obtained, and are recognized in the condensed consolidated financial statements as soon as they become known.

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New Accounting Pronouncements

Recently Adopted Accounting Guidance

In August 2018, the FASB issued ASU 2018-15, Intangibles (Topic 350), Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This standard also requires customers to amortize the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. ASU 2018-15 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019, with early adoption permitted. The Company adopted this guidance beginning in the first quarter of fiscal year 2021 and it did not have a material impact on the condensed consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model which requires the use of forward-looking information to calculate credit loss estimates. ASU 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019, with early adoption permitted. ASU 2016-13 requires a cumulative effect adjustment to the balance sheet as of the beginning of the first reporting period in which the guidance is effective. The Company adopted this guidance beginning in the first quarter of fiscal year 2021 and it did not have a material impact on the condensed consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes, which simplifies the accounting for incomes taxes by removing certain exceptions to the general principles in Topic 740 and amending existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact this standard will have on its condensed consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40), Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, the new guidance modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation. ASU 2020-06 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2021, with early adoption permitted. The Company is currently evaluating the impact this standard will have on its condensed consolidated financial statements.

Significant Accounting Policies

There have been no changes in the significant accounting policies from those that were disclosed in the audited consolidated financial statements for the fiscal year ended September 30, 2020 included in the Annual Report on Form 10-K.

2.     Revenues from Contracts with Customers

Revenue Recognition

The Company derives revenues primarily from subscription revenues and professional services revenues.

Disaggregation of Revenues

See Note 13, Geographic Information, for information on revenue by geography.

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Customer Contract Balances

The following table reflects contract balances related to contracts with customers (in thousands):

	As of December 31, 2020		As of September 30, 2020
Accounts receivable, net	$	39,807	$	35,796
Contract asset	3,432		4,482
Deferred revenue	56,369		51,786
Capitalized contract acquisition costs	8,580		7,506

Accounts Receivable

Accounts receivable represents the Company’s right to consideration that is unconditional, net of allowances for doubtful accounts. The allowance for doubtful accounts is based on management’s assessment of the collectability of accounts receivable amounts.

Contract Asset

Contract asset represents revenue that has been recognized for satisfied performance obligations for which the Company does not have an unconditional right to consideration.

Deferred Revenue

Deferred revenue, which is a contract liability, consists of amounts that have been invoiced and for which the Company has the right to bill, but that have not been recognized as revenue because the related goods or services have not been transferred.

The non-current portion of deferred revenue is included in other long-term liabilities in the condensed consolidated balance sheets. During the three months ended December 31, 2020, and 2019, the Company recognized revenue of $22.8 million and $19.8 million, respectively, that was included in the deferred revenue balances at the beginning of the periods.

Capitalized Contract Acquisition Costs

The Company capitalizes incremental costs incurred to acquire contracts with customers, primarily sales commissions, for which the associated revenue is expected to be recognized in future periods. The Company incurs these costs in connection with both initial contracts and renewals. Such costs for renewals are not considered commensurate with those for initial contracts given the substantive difference in commission rates in proportion to their respective contract values. The costs in connection with initial contracts and renewals are deferred and amortized over an expected customer life of five years and over the renewal term, respectively, which corresponds to the period of benefit to the customer. The Company determined the period of benefit by considering the Company’s history of customer relationships, length of customer contracts, technological development and obsolescence, and other factors. The current and non-current portion of capitalized contract acquisition costs are included in other current assets and other assets on the condensed consolidated balance sheets. Amortization expense is included in sales and marketing expenses on the condensed consolidated statements of operations.

As of December 31, 2020, the current and non-current portions of capitalized contract acquisition costs were $2.7 million and $5.9 million, respectively. As of September 30, 2020, the current and non-current portions of capitalized contract acquisition costs were $2.3 million and $5.2 million, respectively.The Company amortized $0.7 million of contract acquisition costs during the three months ended December 31, 2020.

For the three months ended December 31, 2020, there was no impairment related to capitalized contract acquisition costs.

Customer Deposits

Customer deposits primarily relate to payments received from customers which could be refundable pursuant to the terms of the arrangement. These amounts are included in accrued liabilities on the condensed consolidated balance sheets. Customer deposits were immaterial as of December 31, 2020 and September 30, 2020.

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Standard payment terms to customers generally range from thirty to ninety days; however, payment terms and conditions in our customer contracts may vary. In some cases, customers prepay for subscription and services in advance of the delivery; in other cases, payment is due as services are performed or in arrears following the delivery.

Performance Obligations

Remaining performance obligations represent non-cancelable contracted revenue that has not yet been recognized, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. As of December 31, 2020, the aggregate amount of the transaction price allocated to performance obligations either unsatisfied or partially unsatisfied was $187.0 million, 53% of which we expect to recognize as revenue over the next 12 months and the remainder thereafter.

3.     Leases

The Company leases facilities under noncancelable operating leases with lease terms between three years and 10 years. Certain leases include options to extend or terminate the lease. The Company factored into the determination of lease payments the options that it is reasonably certain to exercise.

Operating lease costs were $0.8 million for both the three months ended December 31, 2020 and 2019. Short-term lease costs, variable lease costs, and sublease income were immaterial for the three months ended December 31, 2020 and 2019.

Cash flow information related to operating leases is as follows (in thousands):

	Three months ended December 31, 2020		Three months ended December 31, 2019
Cash paid for amounts included in the measurement of operating lease liabilities	$	692	$	899
Operating lease ROU assets obtained in exchange for new operating lease liabilities	12,592		—

The Company’s headquarter’s lease commenced on December 1, 2020 which resulted in an increase of ROU assets of $10.3 million.

The weighted-average remaining lease term is 4.8 years and the weighted-average discount rate is 3.1% as of December 31, 2020.

Maturities of operating lease liabilities as of December 31, 2020 are as follows (in thousands):

Fiscal Year
Remaining fiscal 2021	$	1,425
2022	3,756
2023	3,607
2024	3,321
2025	2,833
2026 and thereafter	1,867
Total operating lease payments	16,809
Less imputed interest	1,316
Total operating lease liabilities	$	15,493

In January 2021, the Company entered into a new noncancelable operating lease for office space in India with a five year lease term that will commence upon the Company taking control of the space, which is anticipated to be in the second quarter of fiscal year 2021. The new lease has an early termination option and a five year renewal option which the Company is not reasonably certain to exercise. The future payments over the five year lease term are approximately $7.5 million.

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4.     Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, debt and certain accrued liabilities. The Company regularly reviews its financial instruments portfolio to identify and evaluate such instruments that have indications of possible impairment. The Company estimates the fair value of its financial instruments when there is no readily available market data, which involves some level of management estimation and judgment and may not necessarily represent the amounts that could be realized in a current or future sale of these assets.

The table below sets forth the Company’s marketable securities which are measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

									Reported as:
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value		Cash and Cash Equivalents
As of December 31, 2020
Level 1:
Money market funds	$	64,804	$	—	$	—	$	64,804	$	64,804
US Treasury securities	49,998		—		—		49,998		49,998
Total	$	114,802	$	—	$	—	$	114,802	$	114,802
As of September 30, 2020
Level 1:
Money market funds	$	31,915	$	—	$	—	$	31,915	$	31,915
US Treasury securities	149,982		—		—		149,982		149,982
Total	$	181,897	$	—	$	—	$	181,897	$	181,897

The Company’s financial instruments not measured at fair value on a recurring basis include cash, accounts receivable, accounts payable and certain accrued liabilities. These financial instruments are reflected in the financial statements at cost and approximate their fair value due to their short-term nature.

See Note 6 for the fair value measurement of the Company’s derivative contracts and Note 7 for the fair value measurement of the Company’s convertible senior notes.

5.     Acquisition, Goodwill, and Intangible Assets

Acquisition

On December 31, 2020, the Company acquired certain assets, properties and rights and certain liabilities and obligations from Deloitte & Touche LLP’s pricing and contracting solutions business for a contractual purchase price of $60.0 million subject to net working capital adjustments (the “Acquisition”). The acquired business operates primarily in the same markets as the Company’s existing operations. The reason for the Acquisition was to increase the Company’s addressable market and expand the opportunity to sell existing Model N products. This Acquisition has been accounted for as a business combination. The Company has included the results of the acquired business in its condensed consolidated financial statements since the date of Acquisition. The Company incurred $2.4 million acquisition-related expense during the three months ended December 31, 2020, which was recorded as general and administrative expenses.

The total purchase consideration was $59.9 million reflecting a $0.1 million of estimated net working capital adjustment from the contractual purchase price. The Company paid $56.4 million purchase consideration in cash during the three months ended December 31, 2020. The total purchase consideration of $59.9 million is subject to working capital settlement in the

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post-combination period and the excess over $56.4 million will be paid in cash during the remainder of fiscal year 2021. The Company does not expect the working capital settlement to be material.

The purchase price was allocated to assets acquired and liabilities assumed based upon their estimated fair values as of the date of the acquisition. The excess of the purchase price over the estimated fair value of the net assets acquired was recorded as goodwill. The following table sets forth the preliminary allocation of the purchase price in connection with the Acquisition (in thousands):

	Acquisition Date Fair Value
Accounts receivable	$	3,760
Prepaid expenses	794
Property and equipment, net	511
Operating lease right-of-use assets	2,764
Goodwill	27,577
Intangible assets	28,210
Total assets acquired	63,616
Operating lease liabilities, current portion	656
Deferred revenue, current portion	1,449
Operating lease liabilities, less current portion	1,657
Total liabilities assumed	3,762
Total purchase price	$	59,854

The fair value of the assets acquired and liabilities assumed is subject to change within the measurement period (up to one year from the Acquisition date), as the valuation is finalized and if new information becomes available. The Company does not expect the change to be material.

Intangible assets included customer relationships of $15.5 million, developed technology of $10.2 million, non-compete of $1.6 million, and trade name of $0.9 million, which are amortized on a straight-line basis over 15 years, 6 years, 5 years, and 3 years, respectively, and over a weighted average period of 10.8 years. The Company applied significant judgment in determining the fair value of the intangible assets acquired, which involved the use of significant estimates and assumptions including customer attrition rate, royalty rate and technology migration curve. Goodwill is comprised of expected synergies for the combined operations and the assembled workforce acquired in the Acquisition. This goodwill is deductible for income tax purposes.

The Company has not presented the supplemental pro forma information for revenue and earnings related to the Acquisition, as it is deemed impracticable to determine and disclose this information, due to the unavailability of the information provided to the Company by Deloitte & Touche LLP, management’s inability to reasonably estimate the amounts from the carve out business and due to the difference in fiscal year-ends of the Company and Deloitte & Touche LLP.

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Goodwill

The following table summarizes the changes in the carrying amount of goodwill (in thousands):

Balance at September 30, 2020	$	39,283
Addition from Acquisition	27,577
Balance at December 31, 2020	$	66,860

Intangible Assets

Intangible assets consisted of the following (in thousands):

	Estimated	As of December 31, 2020
	Useful Life (in Years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Intangible Assets:
Customer relationships	3-15	$	52,109	$	(15,648)	$	36,461
Developed technology	5-6	22,333		(9,826)		12,507
Non-compete	5	1,600		—		1,600
Trade name	3	850		—		850
Total		$	76,892	$	(25,474)	$	51,418

	Estimated	As of September 30, 2020
	Useful Life (in Years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Intangible Assets:
Customer relationships	3-10	$	36,599	$	(14,758)	$	21,841
Developed technology	5-6	12,083		(9,544)		2,539
Total		$	48,682	$	(24,302)	$	24,380

The Company recorded amortization expense related to the acquired intangible assets of $1.2 million for both the three months ended December 31, 2020 and 2019.

Estimated future amortization expense for the intangible assets as of December 31, 2020 is as follows (in thousands):

Fiscal Year
Remaining fiscal 2021	$	6,024
2022	8,032
2023	7,186
2024	6,691
2025	6,620
2026 and thereafter	16,865
Total future amortization	$	51,418

6.     Derivative Instruments and Hedging

The Company uses foreign currency forward contracts to hedge a portion of the forecasted foreign currency-denominated expenses incurred in the normal course of business. These contracts are designated as cash flows hedges. These hedging contracts reduce, but do not entirely eliminate, the impact of adverse foreign exchange rate movements. The Company does not use any of the derivative instruments for trading or speculative purposes. These contracts have maturities of 12 months or less. The Company records changes in the fair value of cash flow hedges in accumulated other comprehensive loss in the condensed consolidated balance sheets, until the forecasted transaction occurs, at which point, the related gain or loss on the cash flow hedge is reclassified to the financial statement line item to which the derivative relates. The amounts reclassified to expenses

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related to the hedged transactions were immaterial for the periods presented. The fair value of the outstanding non-deliverable foreign currency forward contracts was measured using Level 2 fair value inputs and was immaterial as of December 31, 2020 and September 30, 2020.

Notional Amounts of Derivative Contracts

Derivative transactions are measured in terms of the notional amount but this amount is not recorded on the balance sheet and is not, when viewed in isolation, a meaningful measure of the risk profile of the instruments. The notional amount is generally not exchanged but is used only as the basis on which the value of foreign exchange payments under these contracts are determined. The notional amounts of the outstanding foreign currency forward contracts designated as cash flow hedges were $5.6 million and $5.5 million as of December 31, 2020 and September 30, 2020, respectively.

7.     Convertible Senior Notes

In May 2020, the Company issued $172.5 million aggregate principal amount of 2.625% convertible senior notes in a private placement, including $22.5 million which represents the exercise in full of the initial purchasers’ option to purchase additional notes. The net proceeds from the issuance of the Notes was $166.4 million, net of initial purchasers’ discounts and debt issuance costs of $6.1 million. The Company used $40.0 million of the net proceeds to repay in full the debt outstanding under, and terminated the Credit Agreement dated May 4, 2018, as amended, by and among the Company, Wells Fargo, as administrative agent, and the lenders party thereto.

The Notes are senior, unsecured obligations of the Company and bear an interest rate of 2.625% per year payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2020. The Notes mature on June 1, 2025 unless repurchased, redeemed or converted in accordance with their terms prior to such date.

The Notes are convertible into cash, shares of the Company’s common stock or a combination thereof, at the Company’s election, at an initial conversion rate of 30.0044 shares of common stock per $1,000 principal amount of the Notes, which is equal to an initial conversion price of approximately $33.33 per share of common stock subject to adjustment, with a maximum conversion rate of 38.2555. The Company intends to settle the principal amount of the Notes with cash. Prior to the close of business on the scheduled trading day immediately preceding March 1, 2025, holders of the Notes may convert all or a portion of their Notes in multiples of $1,000 principal amount, only under the following circumstances:

•during any calendar quarter commencing after the calendar quarter ending on September 30, 2020 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

•during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day;

•if the Company calls any or all of the notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or

•upon the occurrence of specified corporate events.

On or after March 1, 2025 and prior to the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the Notes may convert all or a portion of their Notes in multiples of $1,000 principal amount regardless of the foregoing conditions.

Holders of the Notes who convert their Notes in connection with a make-whole fundamental change (as defined in the Indenture) or in connection with any optional redemption are, under certain circumstances, entitled to an increase in the conversion rate. Additionally, in the event of a fundamental change (as defined in the Indenture), holders of the Notes may require the Company to repurchase all or a portion of their Notes at a price equal to 100% of the principal amount of Notes, plus any accrued and unpaid interest to, but excluding, the repurchase date.

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The Company may not redeem the Notes prior to June 6, 2023. The Company may redeem for cash all or part of the Notes, at its option, on or after June 6, 2023 and on or before the 41st scheduled trading day immediately before the maturity date, at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption. No sinking fund is provided for the Notes.

During the three months ended December 31, 2020, the conditions allowing holders of the Notes to convert were not met. The Notes were classified as long-term debt on the condensed consolidated balance sheets as of December 31, 2020.

In accounting for the issuance of the Notes, the Company separated the Notes into liability and equity components. The carrying amount of the liability component of $115.3 million was calculated by measuring the fair value of a similar debt instrument that does not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was $57.2 million and was determined by deducting the fair value of the liability component from the principal amount of the Notes. The excess of the principal amount of the Notes over the carrying amount of the liability component is amortized to interest expense at an effective interest rate over the contractual terms of the Notes. The equity component was recorded in additional paid-in capital and is not remeasured as long as it continues to meet the conditions for equity classification.

In accounting for the issuance costs related to the Notes, the Company allocated the total amount incurred to the liability and equity components of the Notes based on the proportion of the proceeds allocated to the debt and equity components. Issuance costs attributable to the liability component were $4.1 million and are amortized to interest expense using the effective interest method over the contractual terms of the Notes. Issuance costs attributable to the equity component of $2.0 million were netted with the equity component in stockholders’ equity.

The net carrying amounts of the liability and equity components for the Notes were as follows (in thousands):

	As of December 31, 2020		As of September 30, 2020
Liability component:
Principal amount	$	172,500	$	172,500
Unamortized discount	(51,908)		(54,147)
Unamortized issuance costs	(3,797)		(3,915)
Net carrying amount	$	116,795	$	114,438
Equity component, net of issuance costs	$	55,227	$	55,227

The following table sets forth the interest expense recognized related to the Notes (in thousands):

	Three months ended December 31, 2020
Coupon interest expense	$	1,132
Amortization of debt discount	2,239
Amortization of debt issuance costs	118
Total interest expense related to the Notes	$	3,489
Effective interest rate of the liability component	12.32		%

The unamortized debt discount and debt issuance costs will be amortized over 53 months as of December 31, 2020.

As of December 31, 2020, the total estimated fair value of the Notes was approximately $224.9 million which includes the equity component. The fair value was determined based on the closing trading price per $100 of the Notes as of the last day of trading for the period. The fair value of the Notes is primarily affected by the trading price of the Company’s common stock and market interest rates. The fair value of the Notes is considered a Level 2 measurement as they are not actively traded.

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8.     Stockholders’ Equity

The following tables present the changes of the components of stockholders’ equity (in thousands):

	Three Months Ended December 31, 2020
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at September 30, 2020	34,821	$	5	$	351,952	$	(1,213)	$	(226,073)	$	124,671
Issuance of common stock upon exercise of stock options	4	—		26		—		—		26
Issuance of common stock upon release of restricted stock units	224	—		—		—		—		—
Stock-based compensation	—	—		5,128		—		—		5,128
Equity component of convertible senior notes, net of issuance costs	—	—		—		—		—		—
Other comprehensive income	—	—		—		182		—		182
Net loss	—	—		—		—		(5,153)		(5,153)
Balance at December 31, 2020	35,049	$	5	$	357,106	$	(1,031)	$	(231,226)	$	124,854

	Three Months Ended December 31, 2019
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at September 30, 2019	32,995	$	5	$	266,295	$	(1,169)	$	(212,409)	$	52,722
Issuance of common stock upon exercise of stock options	3	—		18		—		—		18
Issuance of common stock upon release of restricted stock units	336	—		—		—		—		—
Stock-based compensation	—	—		9,553		—		—		9,553
Other comprehensive income	—	—		—		43		—		43
Net loss	—	—		—		—		(2,998)		(2,998)
Balance at December 31, 2019	33,334	$	5	$	275,866	$	(1,126)	$	(215,407)	$	59,338

For the three months ended December 31, 2019, the additional paid-in capital included $3.7 million related to restricted stock unit grants for the portion of the bonus recorded as stock-based compensation for the year ended September 30, 2019.

9.     Stock-based Compensation

As of December 31, 2020, the Company had approximately 2.2 million shares available for future stock awards under its equity plans and any additional releases resulting from an over-achievement relating to performance-based restricted stock units.

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The following table summarizes our restricted stock unit (“RSU”) activity which includes performance-based RSUs under all equity plans for the three months ended December 31, 2020:

	Restricted  Stock Units Outstanding (in thousands)	Weighted Average Grant Date Fair Value
Balance at September 30, 2020	1,957	$	22.43
Granted	677	35.09
Released	(224)	22.15
Forfeited	(145)	23.12
Balance at December 31, 2020	2,265	$	26.20

Stock-based compensation recorded in the condensed consolidated statements of operations is as follows (in thousands):

	Three Months Ended December 31,
	2020		2019
Cost of revenues
Subscription	$	523	$	522
Professional services	654		597
Total stock-based compensation in cost of revenues	1,177		1,119
Operating expenses
Research and development	1,131		1,426
Sales and marketing	1,553		1,406
General and administrative	1,267		1,872
Total stock-based compensation in operating expenses	3,951		4,704
Total stock-based compensation	$	5,128	$	5,823

10.     Income Taxes

The Company recorded an income tax provision of $0.2 million, representing effective income tax rates of (4.9)% for the three months ended December 31, 2020. The income tax benefit was immaterial for the three months ended December 31, 2019. The income tax provision for the three months ended December 31, 2020 was primarily related to foreign taxes on the Company’s profitable foreign operations and foreign withholding taxes on dividends. The income tax benefit for the three months ended December 31, 2019 was primarily related to a discrete tax benefit for a true-up in federal income tax payable partially offset by foreign taxes on the Company’s profitable foreign operations, state minimum taxes, and foreign withholding taxes on dividend distributions.

The Company elected to partially reinvest foreign earnings in certain foreign jurisdictions and expects to repatriate future foreign earnings in certain foreign jurisdictions over time. As a result, the Company will record a deferred tax liability for the additional non-U.S. taxes that are expected to be incurred related to the repatriation of these earnings.

The Company elected to record GILTI as a period cost. The Company realized no benefit for current period losses due to maintaining a full valuation allowance against the U.S. net deferred tax assets.

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11.     Net Loss per Share

The following table sets forth the computation of the basic and diluted net loss per share attributable to common stockholders during the periods presented (in thousands, except per share data):

	Three Months Ended December 31,
	2020		2019
Numerator
Basic and diluted
Net loss attributable to common stockholders	$	(5,153)	$	(2,998)
Denominator
Basic and diluted
Weighted average shares used in computing net loss per share attributable to common stockholders	34,936		33,145
Net loss per share attributable to common stockholders:
Basic and diluted	$	(0.15)	$	(0.09)

Potentially dilutive securities that were not included in the calculation of diluted net loss per share because their effect would have been anti-dilutive are as follows (in thousands):

	As of December 31,
	2020	2019
Stock options	30	97
Performance-based RSUs and RSUs	2,265	2,773
Shares issuable pursuant to the employee stock purchase plan	66	86
Convertible senior notes	5,176	—

Since the Company expects to settle the principal amount of its Notes in cash and any excess in cash or shares of the Company’s common stock, the Company uses the treasury stock method for calculating any potential dilutive effect of the conversion spread on diluted net income per share, if applicable. The conversion spread will have a dilutive impact on diluted net income per share of common stock when the average market price of the Company’s common stock for a given period exceeds the conversion price of $33.33 per share for the Notes.

12.     Litigation and Contingencies

Legal Proceedings

The Company is not currently a party to any pending material legal proceedings. From time to time, the Company may become involved in legal proceedings arising in the ordinary course of business. Regardless of outcome, litigation can have an adverse impact on the Company due to defense and settlement costs, diversion of management resources, negative publicity and reputational harm and other factors.

13.     Geographic Information

The Company has one operating segment with one business activity — developing and monetizing revenue management solutions.

Revenues

The Company disaggregates the revenues by geographic regions based on the bill to location of its customers. Revenues from customers outside of the United States were 9% of total revenues for both the three months ended December 31, 2020 and 2019.

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Long-Lived Assets

The following table sets forth the Company’s property and equipment, net, by geographic region (in thousands):

	As of December 31, 2020		As of September 30, 2020
United States	$	1,144	$	562
India	424		472
Total property and equipment, net	$	1,568	$	1,034

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This report contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933, as amended (“Securities Act”) and the Securities Exchange Act of 1934, as amended (“Exchange Act”). All statements other than statements of historical facts are statements that could be deemed forward-looking statements. These statements are based on current expectations, estimates, forecasts and projections about the industries in which we operate and the beliefs and assumptions of our management. Words such as “anticipates,” “goals,” “plans,” “believes,” “seeks,” “estimates,” “continues,” “may,” “will,” variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, the expected impact of the COVID-19 pandemic on our operations, and other characterizations of future events or circumstances are forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Forward-looking statements are based only on our current expectations and projections and are subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified below under “Part II, Item 1A. Risk Factors,” and elsewhere in this report. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason.

As used in this report, the terms “we,” “us,” “our,” and “the Company” mean Model N, Inc. and its subsidiaries unless the context indicates otherwise.

Overview

We are a leading provider of cloud revenue management solutions for life sciences and high tech companies. Our software helps companies drive mission critical business processes such as pricing, quoting, contracting, regulatory compliance, rebates and incentives. With deep industry expertise, Model N supports the complex business needs of the world’s leading brands in life sciences and high tech including Johnson & Johnson, AstraZeneca, Stryker, Seagate Technology, Broadcom and Microchip Technology.

Model N Revenue Cloud transforms the revenue life cycle into a strategic, end-to-end process aligned across the enterprise. Deployments may vary from specific divisions or territories to enterprise-wide implementations. Customers may purchase and deploy a single cloud product or a full suite.

We derive revenues primarily from the sale of subscriptions to our cloud-based solutions, as well as subscriptions for maintenance and support and managed support services related to on-premise solutions. We price our solutions based on a number of factors, including revenues under management and number of users. Subscription revenues are recognized ratably over the coverage period. We also derive revenues from selling professional services related to past sales of perpetual licenses and implementation and professional services associated with our cloud-based solutions. The actual timing of revenue recognition may vary based on our customers’ implementation requirements and the availability of our services personnel.

We market and sell our solutions to customers in the life sciences and high tech industries. Historically, our growth was driven by the sale of on-premise solutions. Over the past few years, we have primarily been entering into cloud-based subscription arrangements with our new and existing customers and we anticipate that subscription arrangements will be the majority of new contractual arrangements going forward.

For the three months ended December 31, 2020 and 2019, our total revenues were $42.7 million and $38.4 million, respectively, representing a year-over-year increase of 11% primarily due to the increase in subscription revenues resulting from a large transaction with one customer and more customer contracts in general as well as the increase in professional services revenues resulting from an increase in services provided to our new and existing customers.

Recent Acquisition

On December 31, 2020, we acquired certain assets, properties and rights and certain liabilities and obligations from Deloitte & Touche LLP’s pricing and contracting solutions business for a contractual purchase price of $60.0 million subject to

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net working capital adjustments (the “Acquisition”). The acquired business’ operational results will be reflected in the consolidated financial results beginning January 1, 2021.

COVID-19

The World Health Organization declared the outbreak of COVID-19 a pandemic and the U.S. federal government declared it a national emergency in March 2020. Many federal, state and local governments and private entities have mandated various restrictions, including travel restrictions, restrictions on public gatherings, stay at home orders and advisories and quarantining of people who may have been exposed to the virus. Our financial results for the quarter ended December 31, 2020 has not been materially impacted by COVID-19. The extent of the impact of COVID-19 on our future operational and financial performance, revenues, and liquidity will depend on certain developments, including the duration and spread of the outbreak as well as the impact on our customers, employees, and partners, all of which are uncertain and cannot be predicted. We are conducting business with substantial modifications to employee travel, employee work locations, and virtualization or cancellation of certain sales and marketing events, among other modifications. Many of our customers have implemented similar measures, which may limit our ability to sell or provide professional services to them. Customers may also delay or cancel purchasing decisions or projects in light of uncertainties to their businesses arising from the COVID-19 pandemic. As the majority of our revenue is subscription-based, the effect of the COVID-19 pandemic may not be fully reflected in our results of operations until future periods.

Key Business Metric

In addition to the measures of financial performance presented in our condensed consolidated financial statements, we use adjusted EBITDA to establish budgets and operational goals and to evaluate and manage our business internally. We believe adjusted EBITDA provides investors with consistency and comparability with our past financial performance and facilitates period-to-period comparisons of our operating results and our competitors’ operating results. See “Adjusted EBITDA” below.

Key Components of Results of Operations

Revenues

Subscription

Subscription revenues primarily include contractual arrangements with customers accessing our cloud-based solutions. These arrangements, on average, are for committed three-year terms. Included in subscription revenues are revenues associated with maintenance and support which generally renew on a one year or three year basis and managed support services. Maintenance and support revenues include post-contract customer support and the right to unspecified software updates and enhancements on a when and if available basis from customers using on-premise solutions. Managed support services revenue includes supporting, managing and administering our software solutions and providing additional end user support. Term-based licenses for current products with the right to use unspecified future versions of the software and maintenance and support during the coverage period are also included in subscription revenues. Subscription revenue is generally recognized ratably over the contractual term of the arrangement beginning on the date our service is made available to the customer. The software-as-a-service (“SaaS”) model is the primary way we sell to our customers in our vertical markets.

Professional Services

Professional services revenues primarily include fees generated from implementation, cloud configuration, on-site support and other consulting services. Also included in professional services revenues are revenues related to training and customer-reimbursed expenses, as well as services related to software licenses for our on-premise solutions. Professional services revenues are generally recognized as the services are rendered for time and materials contracts or recognized using a proportional performance method as hours are incurred relative to total estimated hours for the engagement for fixed price contracts. The majority of our professional services contracts are on a time and materials basis. The revenue from training and customer-reimbursed expenses is recognized as we deliver these services.

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Cost of Revenues

Subscription

Cost of subscription revenues includes costs related to our cloud-based solutions, maintenance and support for our on-premise solutions and managed support services. Cost of subscription revenues primarily consists of personnel-related costs including salary, bonus, and stock-based compensation as well as costs for royalties, facilities expense, amortization, depreciation, third-party contractors and cloud infrastructure costs.

Professional Services

Cost of professional services revenues includes costs related to the set-up of our cloud-based solutions, services for on-premise solutions, training and customer-reimbursed expenses. Cost of professional services revenues primarily consists of personnel-related costs including salary, bonus, and stock-based compensation as well as costs for third-party contractors and other expenses. Cost of professional services revenues may vary from period to period depending on a number of factors, including the amount of implementation services required to deploy our solutions and the level of involvement of third-party contractors providing implementation services.

Operating Expenses

Research and Development

Our research and development expenses consist primarily of personnel-related costs including salary, bonus, stock-based compensation and costs related to third-party contractors. Our software development costs are generally expensed as incurred. We capitalize certain development costs incurred in connection with the cloud-based software platform for internal use.

Sales and Marketing

Our sales and marketing expenses consist primarily of personnel-related costs including salary, bonus, commissions, stock-based compensation, as well as amortization of intangibles, travel-related expenses and marketing programs.

General and Administrative

Our general and administrative expenses consist primarily of personnel-related costs including salary, bonus, and stock-based compensation, as well as audit and legal fees, costs related to third-party contractors, facilities expenses, costs associated with corporate transactions and travel-related expenses.

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Results of Operations

The following tables set forth our consolidated results of operations for the periods presented. The period-to-period comparison of financial results is not necessarily indicative of financial results to be achieved in future periods.

	Three Months Ended December 31,
	2020		2019
	(in thousands)
Revenues
Subscription	$	31,435	$	28,182
Professional services	11,299		10,206
Total revenues	42,734		38,388
Cost of Revenues
Subscription	8,992		8,710
Professional services	8,124		7,642
Total cost of revenues	17,116		16,352
Gross profit	25,618		22,036
Operating Expenses
Research and development	8,697		8,516
Sales and marketing	9,456		9,013
General and administrative	8,787		6,965
Total operating expenses	26,940		24,494
Loss from operations	(1,322)		(2,458)
Interest expense, net	3,462		563
Other expenses (income), net	130		(12)
Loss before income taxes	(4,914)		(3,009)
Provision for (benefit from) income taxes	239		(11)
Net loss	$	(5,153)	$	(2,998)

Comparison of the Three Months Ended December 31, 2020 and 2019

Revenues

	Three Months Ended December 31,
	2020				2019
	Amount		% of Total Revenues		Amount		% of Total Revenues		Change ($)		Change (%)
	(in thousands, except percentages)
Revenues
Subscription	$	31,435	74	%	$	28,182	73	%	$	3,253	12	%
Professional services	11,299		26	%	10,206		27	%	1,093		11	%
Total revenues	$	42,734	100	%	$	38,388	100	%	$	4,346	11	%

Subscription

Subscription revenues increased by $3.3 million, or 12%, to $31.4 million for the three months ended December 31, 2020 from $28.2 million for the same period last year. As a percentage of total revenues, subscription revenues increased from 73% to 74%. The increase in our subscription revenues was due primarily to a large transaction with one customer as well as more customer contracts in general. We intend to continue to focus on growing our recurring revenue from SaaS subscriptions in future periods.

Professional services

Professional services revenues increased by $1.1 million, or 11%, to $11.3 million for the three months ended December 31, 2020 from $10.2 million for the same period last year. The increase in our professional services revenue in absolute dollars

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was primarily driven by the increase in delivery activities experienced in the professional services business in the first quarter of fiscal year 2021. As a percentage of total revenues, professional services revenues decreased from 27% to 26%. The decrease in our professional services revenue as a percentage of total revenue is primarily driven by the change in business model as we continue to move towards cloud-based solutions.

Cost of Revenues

	Three Months Ended December 31,
	2020				2019
	Amount		% of Revenues		Amount		% of Revenues		Change ($)		Change (%)
	(in thousands, except percentages)
Cost of revenues
Subscription	$	8,992	29	%	$	8,710	31	%	$	282	3	%
Professional services	8,124		72	%	7,642		75	%	482		6	%
Total cost of revenues	$	17,116	40	%	$	16,352	43	%	$	764	5	%

Subscription

Cost of subscription revenues increased by $0.3 million, or 3%, to $9.0 million during the three months ended December 31, 2020 from $8.7 million for the same period last year. As a percentage of subscription revenues, cost of subscription revenues decreased from 31% to 29% during the three months ended December 31, 2020, as we continue to improve gross margins by more efficiently delivering our cloud platform.

Professional services

Cost of professional services revenues increased by $0.5 million, or 6%, to $8.1 million during the three months ended December 31, 2020 from $7.6 million for the same period last year. As a percentage of professional services revenue, cost of professional services revenues decreased from 75% to 72% primarily due to improved utilization.

Operating Expenses

	Three Months Ended December 31,
	2020		2019		Change ($)		Change (%)
	(in thousands, except percentages)
Operating expenses
Research and development	$	8,697	$	8,516	$	181	2	%
Sales and marketing	9,456		9,013		443		5	%
General and administrative	8,787		6,965		1,822		26	%
Total operating expenses	$	26,940	$	24,494	$	2,446	10	%

Research and Development

Research and development expenses increased by $0.2 million, or 2%, to $8.7 million during the three months ended December 31, 2020 from $8.5 million for the same period last year. The increase was primarily due to a $0.4 million increase in employee-related costs partially offset by a $0.1 million decrease in outside services and a $0.1 million decrease in travel and entertainment.

Sales and Marketing

Sales and marketing expenses increased by $0.4 million, or 5%, to $9.5 million during the three months ended December 31, 2020 from $9.0 million for the same period last year. This increase was primarily due to a $1.0 million increase in employee-related costs partially offset by a $0.5 million decrease in travel and entertainment and a $0.1 million decrease in office expenses.

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General and Administrative

General and administrative expenses increased by $1.8 million, or 26%, to $8.8 million during the three months ended December 31, 2020 from $7.0 million for the same period last year. The increase was primarily driven by a $2.4 million increase in acquisition-related expense partially offset by a $0.2 million decrease in outside services, a $0.2 million decrease in travel and entertainment, a $0.1 million decrease in employee-related costs and a $0.1 million decrease in facilities expense.

Interest and Other Expenses (Income), Net

	Three Months Ended December 31,
	2020		2019		Change ($)		Change (%)
	(in thousands, except percentages)
Interest expense, net	$	3,462	$	563	$	2,899	515	%
Other expenses (income), net	$	130	$	(12)	$	142	(1,183)	%

Interest expense, net, increased during the three months ended December 31, 2020 compared to the same period last year and was primarily driven by the interest expense related to the convertible senior notes we issued in May 2020. See Note 7 to the Notes to Condensed Consolidated Financial Statements.

The change in other expenses (income), net, was primarily driven by currency fluctuations.

Provision for (benefit from) Income Taxes

	Three Months Ended December 31,
	2020		2019		Change ($)		Change (%)
	(in thousands, except percentages)
Provision for (benefit from) income taxes	$	239	$	(11)	$	250	(2,273)	%

The income tax provision for the three months ended December 31, 2020 was primarily related to foreign taxes on the Company’s profitable foreign operations and foreign withholding taxes on dividends. For the three months ended December 31, 2019, foreign income taxes on our profitable foreign operations, state minimum taxes, and foreign withholding taxes on dividend distributions were completely offset by a discrete tax benefit for a true-up in federal income tax payable.

Liquidity and Capital Resources

As of December 31, 2020, we had cash and cash equivalents of $143.5 million. Based on our future expectations, including the potential ability to raise cash through additional financing, and historical usage, we believe our current cash and cash equivalents are sufficient to meet our operating needs including principal payments related to our debt for at least the next twelve months. Our future capital requirements will depend on many factors, including our rate of revenue growth, the expansion of our sales and marketing activities, the timing and extent of spending to support research and development efforts, expansion of our business and capital expenditures. To the extent that existing cash and cash equivalents and cash from operations are insufficient to fund our future activities, we may elect to raise additional capital through the sale of additional equity or debt securities, obtain a credit facility or sell certain assets. If additional funds are raised through the issuance of debt securities, these securities could have rights, preferences and privileges senior to holders of common stock and terms of any debt could impose restrictions on our operations. The sale of additional equity or additional convertible debt securities could result in more dilution to our stockholders and additional financing may not be available in amounts or on terms acceptable to us. We may also seek to invest in, or acquire complementary businesses or technologies, any of which could also require us to seek additional equity or debt financing. Additional funds may not be available on terms favorable to us or at all.

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Cash Flows

	Three Months Ended December 31,
	2020		2019
	(in thousands)
Cash flows used in operating activities	$	(221)	$	(4,991)
Cash flows used in investing activities	(56,780)		(29)
Cash flows provided by financing activities	26		18

Operating Activities

Cash provided by or used in operating activities is primarily influenced by the sales of our products, our personnel-related expenditures, our facility related costs and the amount and timing of customer payments. Our largest source of operating cash inflows is cash collections from our customers from the sale of subscriptions and professional services.

Net cash used in operating activities during the three months ended December 31, 2020 was primarily the result of our net loss of $5.2 million and net cash outflows of $4.6 million from changes in operating assets and liabilities, partially offset by non-cash adjustments of $9.5 million. Non-cash expenses consisted primarily of stock-based compensation of $5.1 million, amortization of debt discount and issuance costs of $2.4 million, depreciation and amortization of $1.3 million, and amortization of capitalized contract acquisition costs of $0.7 million. The net change in operating assets and liabilities primarily reflects an outflow from the changes in accrued employee compensation of $5.6 million due to payments of bonuses and other employee benefits, other current and long-term liabilities of $0.9 million, prepaid expenses and other assets of $0.6 million, accounts payable of $0.4 million, accounts receivable of $0.2 million due to timing of billing and cash collections, offset mainly by an inflow from the changes in deferred revenue of $3.1 million caused by the timing of invoicing.

Net cash used in operating activities during the three months ended December 31, 2019 was primarily the result of our net loss of $3.0 million and net cash outflows of $9.8 million from change in operating assets and liabilities, offset in part by $7.8 million of non-cash expenses consisting primarily of stock-based compensation and depreciation and amortization. The net change in operating assets and liabilities primarily reflects an outflow from the changes in accrued employee compensation of $6.4 million due to payments of bonuses and other employee benefits and accounts receivable of $4.1 million due to the timing of billing and cash collections, offset mainly by an inflow from the changes in deferred revenue of $1.5 million caused by the timing of invoicing.

Investing Activities

Net cash used in investing activities for the three months ended December 31, 2020 was related to the acquisition of Deloitte & Touche LLP’s pricing and contracting solutions business and purchases of property and equipment. See Note 5 to the Notes to Condensed Consolidated Financial Statements for more information of the acquisition.

Net cash used in investing activities for the three months ended December 31, 2019 was related to purchases of property and equipment.

Financing Activities

Net cash provided by financing activities for the three months ended December 31, 2020 and 2019 resulted from the stock option exercises.

Off-Balance Sheet Arrangements

As of December 31, 2020, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

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Critical Accounting Policies and Estimates

We prepare our condensed consolidated financial statements in accordance with generally accepted accounting principles in the United States. The preparation of condensed consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by our management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. We believe that the accounting policies referred to below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in our most recent Annual Report filed on Form 10-K for the fiscal year ended September 30, 2020.

Adjusted EBITDA

Adjusted EBITDA is a financial measure that is not calculated in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). We define adjusted EBITDA as net loss before items discussed below, including stock-based compensation expense, depreciation and amortization, acquisition-related expense, interest expense, net, other expenses (income), net, and provision for (benefit from) income taxes. We believe adjusted EBITDA provides investors with consistency and comparability with our past financial performance and facilitates period-to-period comparisons of our operating results and our competitors’ operating results. We also use this measure internally to establish budgets and operational goals to manage our business and evaluate our performance.

We understand that, although adjusted EBITDA is frequently used by investors and securities analysts in their evaluations of companies, adjusted EBITDA has limitations as an analytical tool and it should not be considered in isolation or as a substitute for analysis of our results of operations as reported under U.S. GAAP. These limitations include:

•adjusted EBITDA does not reflect stock-based compensation expense;

•depreciation and amortization are non-cash charges, and the assets being depreciated or amortized will often have to be replaced in the future and adjusted EBITDA does not reflect any cash requirements for these replacements;

•adjusted EBITDA does not include acquisition-related expense;

•adjusted EBITDA does not reflect cash requirements for income taxes and the cash impact of interest expense and other income and expense; and

•other companies in our industry may calculate adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

The following tables provide a reconciliation of adjusted EBITDA to net loss (in thousands):

	Three Months Ended December 31,
	2020		2019
Reconciliation of Adjusted EBITDA
Net loss	$	(5,153)	$	(2,998)
Adjustments
Stock-based compensation expense	5,128		5,823
Depreciation and amortization	1,320		1,452
Acquisition-related expense	2,362		—
Interest expense, net	3,462		563
Other expenses (income), net	130		(12)
Provision for (benefit from) income taxes	239		(11)
Adjusted EBITDA	$	7,488	$	4,817

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

There has been no material change in our exposure to market risks from that discussed in Item 7A of our Annual Report on Form 10-K for the year ended September 30, 2020.

Item 4 Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2020. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures as of December 31, 2020, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by a management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are involved in various legal proceedings arising from the normal course of our business activities. We accrue a liability when management believes that it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. As of December 31, 2020, it was not reasonably possible that any material loss had been incurred. We review these matters at least quarterly and adjust our accruals to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events.

ITEM 1A. Risk Factors

Our operating and financial results are subject to various risks and uncertainties. You should carefully consider the risks and uncertainties described below, together with all of the other information in this report, including the condensed consolidated financial statements and the related notes included elsewhere in this report, before deciding whether to invest in shares of our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business. If any of the following risks or others not specified below actually occurs, our business, financial condition, results of operations, and future prospects could be materially and adversely affected. In that event, the market price of our common stock could decline, and you could lose part or all of your investment.

Risk Factors Summary

Our business is subject to a number of risks and uncertainties, including those risks discussed at-length below. These risks include, among others, the following:

•We have incurred losses in the past, and we may not be profitable in the future.

•Our operating results are likely to vary significantly from period to period and be unpredictable, which could cause the trading price of our common stock to decline.

•We must improve our sales execution and increase our sales channels and opportunities in order to grow our revenues, and if we are unsuccessful, our operating results may be adversely affected.

•Our sales cycles are time-consuming, and it is difficult for us to predict when or if sales will occur.

•Our revenues are dependent on our ability to maintain and expand existing customer relationships and our ability to attract new customers.

•The loss of one or more of our key customers could slow our revenue growth or cause our revenues to decline.

•Because we recognize a majority of our subscription revenues from our customers over the term of their agreements, downturns or upturns in sales of our cloud-based solutions may not be immediately reflected in our operating results.

•Our implementation cycle is lengthy and variable, depends upon factors outside our control and could cause us to expend significant time and resources prior to earning associated revenues.

•The COVID-19 outbreak has had a material impact on the U.S. and global economies and could have a material adverse impact on our employees, suppliers and customers, which could adversely and materially impact our business, financial condition and results of operations.

•We depend on our management team and our key sales and development and services personnel, and the loss of one or more key employees or groups could harm our business and prevent us from implementing our business plan in a timely manner.

•Our transition from an on-premise to a cloud-based business model is subject to numerous risks and uncertainties.

•Our future growth is, in large part, dependent upon the increasing adoption of revenue management solutions.

•We are highly dependent upon the life sciences industry, and factors that adversely affect this industry could also adversely affect us.

•Our acquisition of other companies could require significant management attention, disrupt our business, dilute stockholder value and adversely affect our operating results.

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•We rely on third parties and their systems as we introduce a variety of new services, including the processing of transaction data and settlement of funds to us and our counterparties, and these third parties’ failure to perform these services adequately could materially and adversely affect our business.

•Failure to comply with applicable laws, regulations, or industry standards may harm our business and financial condition.

•If our solutions do not interoperate with our customers’ IT infrastructure, sales of our solutions could be negatively affected, which would harm our business.

•If our solutions experience data security breaches, and there is unauthorized access to our customers’ data, we may lose current or future customers, our reputation and business may be harmed, and we may incur significant liabilities.

•Any failure to protect our intellectual property rights could impair our ability to protect our proprietary technology and our brand, which would substantially harm our business and operating results.

•Our stock price may be volatile, and you may be unable to sell your shares at or above your purchase price.

•Our indebtedness could adversely affect our business and limit our ability to expand our business or respond to changes, and we may be unable to generate sufficient cash flow to satisfy our debt service obligations.

Risk Related to Our Financial Condition

We have incurred losses in the past, and we may not be profitable in the future.

We have incurred net losses of $5.2 million and $3.0 million for the three months ended December 31, 2020 and 2019, respectively. As of December 31, 2020, we had an accumulated deficit of $231.2 million. Our expenses may increase in future periods as we implement additional initiatives designed to grow our business, including, among other things, increasing sales to existing customers, expanding our customer base, introducing new applications, enhancing existing solutions, extending into the mid-market, and continuing to penetrate the technology industry and integrating the personnel, products, technologies and customers from our acquisition of Deloitte & Touche LLP’s pricing and contracting solutions business. Increased operating expenses related to personnel costs such as salary, bonus, commissions and stock-based compensation as well as third-party contractors, travel-related expenses and marketing programs may also increase our expenses in future periods. In the near-term, our revenues may not be sufficient to offset increases in operating expenses, and we expect that we will incur losses. Additionally, we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may result in losses in future periods. We cannot assure you that we will again obtain and maintain profitability in the future. Any failure to return to profitability may materially and adversely affect our business, results of operations and financial condition.

Our operating results are likely to vary significantly from period to period and be unpredictable, which could cause the trading price of our common stock to decline.

Our operating results have historically varied from period to period, and we expect that this trend will continue as a result of a number of factors, many of which are outside of our control and may be difficult to predict, including:

•our ability to increase sales to and renew agreements with our existing customers;

•our ability to expand and improve the productivity of our direct sales force;

•our ability to attract and retain new customers and to improve sales execution;

•our ability to continue to transition our customers from an on-premise to a cloud-based business model;

•the timing and volume of incremental customer purchases of our cloud-based solutions, which may vary from period to period based on a customer’s needs at a particular time;

•our ability to successfully expand our business domestically and internationally;

•disruptions in our relationships with partners;

•the timing of new orders and revenue recognition for new and prior period orders;

•changes in the competitive landscape of our industry, including mergers or consolidation among our customers or competitors;

•the complexity of implementations and the scheduling and staffing of the related personnel, each of which can affect the timing and duration of revenue recognition;

•issues related to changes in customers’ business requirements, project scope, implementations or market needs;

•the mix of revenues in any particular period between subscription and professional services;

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•the timing of upfront recognition of sales commission expense relative to the deferred recognition of our revenues;

•the timing of recognition of payment of royalties;

•the timing of our annual payment and recognition of employee non-equity incentive and bonus payments;

•the budgeting cycles and purchasing practices of customers;

•changes in customer requirements or market needs;

•delays or reductions in information technology spending and resulting variability in customer orders from quarter to quarter;

•delays or difficulties encountered during customer implementations, including customer requests for changes to the implementation schedule;

•the timing and success of new product or service introductions by us or our competitors;

•the amount and timing of any customer refunds or credits;

•our ability to accurately estimate the costs associated with any fixed bid projects;

•deferral of orders from customers in anticipation of new solutions or solution enhancements announced by us or our competitors;

•the length of time for the sale and implementation of our solutions to be complete, and our level of upfront investments prior to the period we begin generating revenues associated with such investments;

•the amount and timing of our operating expenses and capital expenditures, and our ability to timely repay our debt;

•price competition;

•the rate of expansion and productivity of our direct sales force;

•regulatory compliance costs;

•required modifications to our solutions or services in response to changes in law or regulations;

•sales commissions expenses related to large transactions;

•technical difficulties or interruptions in the delivery of our cloud-based solutions;

•seasonality or cyclical fluctuations in our industries;

•future accounting pronouncements or changes in our accounting policies, including the impact of the adoption and implementation of the Financial Accounting Standards Board’s new standard regarding revenue recognition;

•increases or decreases in our expenses caused by fluctuations in foreign currency exchange rates, as a significant portion of our expenses are incurred and paid in currencies other than the U.S. dollar;

•general economic conditions, both domestically and in our foreign markets;

•global epidemics, pandemics, or contagious diseases, such as COVID-19; and

•entry of new competitors into our market.

Any one of the factors above or discussed elsewhere in this report or the cumulative effect of some of the factors referred to above may result in significant fluctuations in our financial and other operating results. This variability and unpredictability could result in our failure to meet expectations of investors for our revenues or other operating results for a particular period. If we fail to meet or exceed such expectations for these or any other reasons, the market price of our common stock could decrease.

We must improve our sales execution and increase our sales channels and opportunities in order to grow our revenues, and if we are unsuccessful, our operating results may be adversely affected.

We must improve our sales execution in order to, among other things, increase the number of our sales opportunities and grow our revenue. We must improve the market awareness of our solutions and expand our relationships with our channel partners in order to increase our revenues. Further, we believe that we must continue to develop our relationships with new and existing customers and partners and create additional sales opportunities to effectively and efficiently extend our geographic reach and market penetration. Our efforts to improve our sales execution could result in a material increase in our sales and marketing expense and general and administrative expense, and there can be no assurance that such efforts will be successful. We have experienced challenges in sales execution in the past, and if we are unable to significantly improve our sales

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execution, increase the awareness of our solutions, create additional sales opportunities, expand our relationships with channel partners, leverage our relationship with strategic partners, or effectively manage the costs associated with these efforts, our operating results and financial condition could be materially and adversely affected.

Our sales cycles are time-consuming, and it is difficult for us to predict when or if sales will occur.

Our sales efforts are often targeted at larger enterprise customers, and as a result, we face greater costs, must devote greater sales support to individual customers, have longer sales cycles and have less predictability in completing some of our sales. Also, sales to large enterprises often require us to provide greater levels of education regarding the use and benefits of our solutions. We believe that our customers view the purchase of our solutions as a significant and strategic decision. As a result, customers carefully evaluate our solutions, often over long periods with a variety of internal constituencies. In addition, the sales of our solutions may be subject to delays if the customer has lengthy internal budgeting, approval and evaluation processes, which are quite common in the context of introducing large enterprise-wide technology solutions. As a result, it is difficult to predict the timing of our future sales.

Our revenues are dependent on our ability to maintain and expand existing customer relationships and our ability to attract new customers.

The continued growth of our revenues is dependent in part on our ability to expand the use of our solutions by existing customers and attract new customers. Likewise, it is also important that customers using our on-premise solutions renew their maintenance agreements and that customers using our cloud-based solutions renew their subscription agreements with us. Our customers have no obligation to renew their agreements after the expiration of the initial term, and there can be no assurance that they will do so. We have had in the past and may in the future have disputes with customers regarding our solutions, which may impact such customers’ decisions to continue to use our solutions and pay for maintenance and support in the future.

If we are unable to expand our customers’ use of our solutions, sell additional solutions to our customers, maintain our renewal rates for maintenance and subscription agreements and expand our customer base, our revenues may decline or fail to increase at historical growth rates, which could adversely affect our business and operating results. In addition, if we experience customer dissatisfaction with customers in the future, we may find it more difficult to increase use of our solutions within our existing customer base and it may be more difficult to attract new customers, or we may be required to grant credits or refunds, any of which could negatively impact our operating results and materially harm our business.

The loss of one or more of our key customers could slow our revenue growth or cause our revenues to decline.

A substantial portion of our total revenues in any given period may come from a relatively small number of customers. As of September 30, 2020, we had approximately 160 customers. Although our largest customers typically change from period to period, for the fiscal year ended September 30, 2020, our 15 largest customers accounted for 48% of our total revenues. During the fiscal year ended September 30, 2020, no customer represented more than 10% of our total revenues or more than 10% of our subscription revenues. We expect that we will continue to depend upon a relatively small number of customers for a significant portion of our total revenues for the foreseeable future. The loss of any of our significant customers or groups of customers for any reason, or a change of relationship with any of our key customers may cause a significant decrease in our total revenues.

Additionally, mergers or consolidations among our customers in the life sciences and high tech industries, both of which are currently undergoing significant consolidation, could reduce the number of our customers and could adversely affect our revenues and sales. In particular, if our customers are acquired by entities that are not also our customers, that do not use our solutions or that have more favorable contract terms and choose to discontinue, reduce or change the terms of their use of our solutions, our business and operating results could be materially and adversely affected.

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Because we recognize a majority of our subscription revenues from our customers over the term of their agreements, downturns or upturns in sales of our cloud-based solutions may not be immediately reflected in our operating results.

Subscription revenues primarily include contractual arrangements with customers accessing our cloud-based solutions and revenues associated with maintenance and support agreements from license customers. We recognize a majority of our subscription revenues over the term of our customer agreements, which, on average are typically one to three years. As a result, most of our quarterly subscription revenues result from agreements entered into during previous quarters. Consequently, a shortfall in sales of our cloud-based solutions or renewal of maintenance and support agreements in any quarter may not significantly reduce our subscription revenues for that quarter but may negatively affect subscription revenues in future quarters. Accordingly, the effect of significant downturns in sales of our cloud-based solutions or renewals of our maintenance and support agreements may not be fully reflected in our results of operations until future periods. We may be unable to adjust our cost structure to compensate for this potential shortfall in subscription revenues. Our revenue recognition model for our cloud-based solutions and maintenance and support agreements also makes it difficult for us to rapidly increase our revenues through additional sales in any period, as a significant amount of our revenues are recognized over the applicable agreement term. As a result, changes in the volume of sales of our cloud-based solutions or the renewals of our maintenance and support agreements in a particular period would not be fully reflected in our revenues until future periods.

Our implementation cycle is lengthy and variable, depends upon factors outside our control and could cause us to expend significant time and resources prior to earning associated revenues.

The implementation and testing of our solutions typically range from a few months to up to twelve months, and unexpected implementation delays and difficulties can occur including, but not limited to, those related to global epidemics, pandemics, or contagious diseases, such as COVID-19. Implementing our solutions typically involves integration with our customers’ systems, as well as adding their data to our system. This can be complex, time-consuming and expensive for our customers and can result in delays in the implementation and deployment of our solutions. The lengthy and variable implementation cycle may also have a negative impact on the timing of our revenues, causing our revenues and results of operations to vary significantly from period to period.

A substantial majority of our total revenues have come from sales and renewals of our enterprise cloud products, and decreases in demand for our enterprise cloud products could adversely affect our results of operations and financial condition.

Historically, a substantial majority of our total revenues has been associated with our enterprise cloud products, whether deployed as individual solutions or as a complete suite. We expect our enterprise cloud products to continue to generate a substantial majority of our total revenues for the foreseeable future. Declines and variability in demand for our enterprise cloud products could occur for a number of reasons, including improved products or product versions being offered by competitors, competitive pricing pressures, failure to release new or enhanced versions on a timely basis, technological changes that we are unable to address or that change the way our customers utilize our solutions, reductions in technology spending, export restrictions or other regulatory or legislative actions that could limit our ability to sell those products to key customer or market segments. Our business, results of operations, financial condition and cash flows would be adversely affected by a decline in demand for our enterprise cloud products.

Most of our implementation contracts are on a time and materials basis and may be terminated by the customer.

The contracts under which we perform most of our implementation services may have a term typically ranging between a few months to up to twelve months and are on a time and materials basis and may be terminated by the customer at any time. If an implementation project is terminated sooner than we anticipated or a portion of the implementation is delayed, we would lose the anticipated revenues that we might not be able to replace or it may take significant time to replace the lost revenues with other work or we may be unable to eliminate the associated costs. Consequently, we may recognize fewer revenues than we anticipated or incur unnecessary costs, and our results of operations in subsequent periods could be materially lower than expected.

We are exposed to fluctuations in currency exchange rates, which could negatively affect our financial condition and operating results.

Our sales contracts are primarily denominated in U.S. dollars, and therefore, substantially all of our revenues are not subject to foreign currency risk. However, a strengthening of the U.S. dollar could increase the real cost of our solutions to our customers outside of the United States, which could adversely affect our financial condition and operating results. In addition, an increasing portion of our operating expenses are incurred in India, are denominated in Indian Rupees and are subject to fluctuations due to changes in foreign currency exchange rates. While we recently began using foreign exchange forward contracts to hedge certain cash flow exposures resulting from changes in foreign currency exchange rates, this hedging strategy may not ultimately be effective and may adversely affect our financial condition and operating results.

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If we are required to collect sales and use taxes on the solutions we sell, we may be subject to liability for past sales and our future sales may decrease.

State and local taxing jurisdictions have differing rules and regulations governing sales and use taxes, and these rules and regulations are subject to varying interpretations that may change over time. In particular, the applicability of sales taxes to our subscription services in various jurisdictions is unclear. Although we have historically collected and remitted sales tax in certain circumstances, it is possible that we could face sales tax audits and that our liability for these taxes could exceed our estimates as state tax authorities could still assert that we are obligated to collect additional amounts as taxes from our customers and remit those taxes to those authorities. We could also be subject to audits with respect to state and international jurisdictions for which we have not accrued tax liabilities. A successful assertion that we should be collecting additional sales or other taxes on our services in jurisdictions where we have not historically done so and do not accrue for sales taxes could result in substantial tax liabilities for past sales, discourage customers from purchasing our solutions or otherwise harm our business and operating results.

If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our operating results could fall below expectations of securities analysts and investors, resulting in a decline in our stock price.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. For example, our revenue recognition policy is complex and we often must make estimates and assumptions that could prove to be inaccurate. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about revenue recognition, capitalized software, the carrying values of assets, taxes, liabilities, equity, revenues and expenses that are not readily apparent from other sources. Our operating results may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our operating results to fall below the expectations of securities analysts and investors, resulting in a decline in our stock price. Significant assumptions and estimates used in preparing our condensed consolidated financial statements include those related to revenue recognition, share-based compensation and income taxes.

We may need additional capital, and we cannot be certain that additional financing will be available.

We may require additional financing in the future to operate or expand our business, acquire assets or repay or refinance our existing debt. Our ability to obtain financing will depend, among other things, on our development efforts, business plans, operating performance and condition of the capital markets at the time we seek financing. We cannot assure you that additional financing will be available to us on favorable terms when required, or at all. If we raise additional funds through the issuance of equity, equity-linked or debt securities, those securities may have rights, preferences or privileges senior to the rights of our common stock, notes, or preferred stock, and our stockholders may experience dilution.

If we need additional capital and cannot raise it on acceptable terms, we may not be able to, among other things:

•develop or enhance our solutions;

•continue to expand our sales and marketing and research and development organizations;

•repay or refinance our existing debt;

•acquire complementary technologies, solutions or businesses;

•expand operations, in the United States or internationally;

•hire, train and retain employees; or

•respond to competitive pressures or unanticipated working capital requirements.

Our failure to do any of these things could seriously harm our business, financial condition, and operating results.

Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.

In general, under Section 382 of the U.S. Internal Revenue Code of 1986, as amended (Code), and similar state law provisions, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating losses (“NOLs”) to offset future taxable income. If our existing NOLs are subject to limitations arising from ownership changes, our ability to utilize NOLs could be limited by Section 382 of the Code. Future changes in our stock ownership, some of which are outside of our control, also could result in an ownership change under Section 382 of the Code. There is also a risk that our NOLs could expire, or otherwise be unavailable to offset future income tax liabilities due to changes in the law, including regulatory changes, such as suspensions on the use of NOLs or other unforeseen reasons. Additionally, the CARES Act, among other things, permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. The CARES Act also temporarily repealed the 80% taxable income limitation for tax years beginning

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before January 1, 2021; net operating loss carried forward generated from 2018 or later and carryforwards to taxable years beginning after December 31, 2020 will be subject to the 80% limitation. Under the CARES Act, net operating losses arising in 2018, 2019 and 2020 can be carried back 5 years.

Risks Related to Our Business and Industry

The COVID-19 outbreak has had a material impact on the U.S. and global economies and could have a material adverse impact on our employees, suppliers and customers, which could adversely and materially impact our business, financial condition and results of operations.

The outbreak of the novel coronavirus, COVID-19, has evolved into a global pandemic and public health emergency. Many federal, state and local governments and private entities have mandated various restrictions, including travel restrictions, restrictions on public gatherings, stay at home orders and advisories and quarantining of people who may have been exposed to the virus. As the COVID-19 pandemic is complex and rapidly evolving, our business may be negatively affected for a sustained time frame. While our financial results for the quarter ended December 31, 2020 have not been materially impacted by COVID-19, at this point, we cannot reasonably estimate the duration and severity of this pandemic, which could have a material adverse impact on our business, results of operations, financial position, and cash flows.

The pandemic may adversely affect our customers’ operations, our employees, and our employee productivity. It may impact the ability of our subcontractors and partners to operate and fulfill their contractual obligations, and result in an increase in costs, delays, or disruptions in performance. In particular, our customers in the life sciences industry may experience disruptions in their business due to the prioritization of COVID-19 treatment in the healthcare community, manufacturing, and supply interruptions or safety concerns. A negative impact on our customers may cause them to request extended payment terms, delayed invoicing, higher discounts, lower renewal amounts, or cancelations. We might also experience delays or changes in customer demand, particularly if customer funding priorities change. Additionally, our employees, in many cases, are working remotely and using various technologies to perform their functions, which may create inefficiencies and reduced productivity, and reduce the effectiveness of our sales team. These effects on our customers, and the direct effect of the virus and the disruption on our employees and operations, may negatively impact our revenue, profit margins and liquidity in 2020 and beyond. Additionally, the disruption and volatility in the global and domestic capital markets may increase the cost of capital and limit our ability to access capital.

The COVID-19 pandemic has caused us to modify our business practices including employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences, and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, and business partners. A prolonged disruption or any further unforeseen delay in our operations or within any of our business activities could continue to result in increased costs and reduced revenue. We could also be adversely affected if government authorities impose additional restrictions or extend the length of restrictions on public gatherings, human interactions, mandatory closures, seek voluntary closures, restrict hours of operations, or impose curfews. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus or otherwise be satisfactory to government authorities.

Both the health and economic aspects of the COVID-19 virus are highly fluid and the future course of each is uncertain. For these reasons and other reasons that may come to light if the coronavirus pandemic and associated protective or preventative measures expand, we may experience a material adverse effect on our business operations, revenues and financial condition; however, its ultimate impact is highly uncertain and subject to change.

We depend on our management team and our key sales and development and services personnel, and the loss of one or more key employees or groups could harm our business and prevent us from implementing our business plan in a timely manner.

Our success depends on the expertise, efficacy and continued services of our executive officers, who are geographically dispersed. We have in the past and may in the future continue to experience changes in our executive management team resulting from the departure of executives or subsequent hiring of new executives, which may be disruptive to our business. Any changes in business strategies or leadership can create uncertainty, may negatively impact our ability to execute our business strategy quickly and effectively and may ultimately be unsuccessful. The impact of hiring new executives may not be immediately realized. We are also substantially dependent on the continued service of our existing development and services personnel because of their familiarity with the inherent complexities of our solutions.

Our personnel do not have employment arrangements that require them to continue to work for us for any specified period and, therefore, they could terminate their employment with us at any time. We do not maintain key personnel life insurance policies on any of our employees. The loss of one or more of our key employees or groups could seriously harm our business.

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Our transition from an on-premise to a cloud-based business model is subject to numerous risks and uncertainties.

Our business model has shifted away from sales of on-premise software licenses to focus on sales of subscriptions for our cloud-based solutions, which provide our customers the right to access certain of our software in a hosted environment for a specified subscription period. This cloud-based strategy may give rise to a number of risks, including the following:

•if customers are uncomfortable with cloud-based solutions and desire only perpetual licenses, we may experience longer than anticipated sales cycles and sales of our cloud-based solutions may lag behind our expectations;

•our cloud-based strategy may raise concerns among our customer base, including concerns regarding changes to pricing over time, service availability, information security of a cloud-based solution and access to files while offline or once a subscription has expired;

•we may be unsuccessful in maintaining our target pricing, adoption and projected renewal rates;

•we may select a target price that is not optimal and could negatively affect our sales or earnings; and

•we may incur costs at a higher than forecasted rate as we expand our cloud-based solutions.

Our cloud-based strategy also requires a considerable investment of technical, financial, legal and sales resources, and a scalable organization. Market acceptance of such offerings is affected by a variety of factors, including but not limited to: security, reliability, scalability, customization, performance, current license terms, customer preference, customer concerns with entrusting a third party to store and manage their data, public concerns regarding privacy and the enactment of restrictive laws or regulations. Whether our business model transition will prove successful and will accomplish our business and financial objectives is subject to numerous uncertainties, including but not limited to: customer demand, renewal rates, channel acceptance, our ability to further develop and scale infrastructure, our ability to include functionality and usability in such solutions that address customer requirements, tax and accounting implications, pricing and our costs. In addition, the metrics we use to gauge the status of our business may evolve over the course of the transition as significant trends emerge.

If we are unable to successfully execute our cloud-based strategy and navigate our business model transition in light of the foregoing risks and uncertainties, our results of operations could be negatively impacted.

Our future growth is, in large part, dependent upon the increasing adoption of revenue management solutions.

Revenue management is at an early stage of market development and adoption, and the extent to which revenue management solutions will become widely adopted remains uncertain. It is difficult to predict customer adoption rates, customer demand for revenue management solutions, including our solutions in particular, the future growth rate and size of this market and the timing of the introduction of additional competitive solutions. Any expansion of the revenue management market depends on a number of factors, including the cost, performance and perceived value associated with revenue management solutions. For example, many companies have invested substantial personnel, infrastructure and financial resources in other revenue management infrastructure and therefore may be reluctant to implement solutions such as ours. Additionally, organizations that use legacy revenue management products may believe that these products sufficiently address their revenue management needs. Because this market is relatively undeveloped, we must spend considerable time educating customers as to the benefits of our solutions. If revenue management solutions do not achieve widespread adoption, or if there is a reduction in demand for revenue management solutions caused by a lack of customer acceptance, technological challenges, competing technologies and products, decreases in corporate spending or otherwise, it could result in lower sales, reduced renewal and upsell rates and decreased revenues and our business could be adversely affected.

We are highly dependent upon the Life Sciences industry, and factors that adversely affect this industry could also adversely affect us.

Our future growth depends, in large part, upon continued sales to companies in the Life Sciences industry, and our recent acquisition of Deloitte & Touche LLP’s pricing and contracting solutions business may increase our dependency. Demand for our solutions could be affected by factors that adversely affect demand for the underlying life sciences products and services that are purchased and sold pursuant to contracts managed through our solutions. The Life Sciences industry is affected by certain factors, including the emergence of large group purchasing and managed care organizations and integrated healthcare delivery networks, increased customer and channel incentives and rebates, the shift of purchasing influence from physicians to economic buyers, increased spending on healthcare by governments instead of commercial entities and increased scope of government mandates, frequency of regulatory reporting and audits, fines, and global epidemics, pandemics, or contagious diseases, such as COVID-19. Accordingly, our future operating results could be materially and adversely affected as a result of factors that affect the Life Sciences industry generally.

Failure to adequately expand and train our direct sales force will impede our growth.

We rely almost exclusively on our direct sales force to sell our solutions. We believe that our future growth will depend, to a significant extent, on the continued development of our direct sales force and its ability to manage and retain our existing

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customer base, expand the sales of our solutions to existing customers and obtain new customers. Because our software is complex and often must interoperate with complex computing requirements, it can take longer for our sales personnel to become fully productive compared to other software companies. Our ability to achieve significant growth in revenues in the future will depend, in large part, on our success in recruiting, training and retaining a sufficient number of direct sales personnel. New hires require significant training and may, in some cases, take more than a year before becoming fully productive, if at all. If we are unable to hire and develop sufficient numbers of productive direct sales personnel, and if these sales personnel are unable to achieve full productivity, sales of our solutions will suffer and our growth will be impeded.

Our acquisition of other companies could require significant management attention, disrupt our business, dilute stockholder value and adversely affect our operating results.

As part of our business strategy, we have in the past and may in the future make investments in other companies, solutions or technologies to, among other reasons, expand or enhance our product offerings. In the future, any significant acquisition would require the consent of our lenders. Any failure to receive such consent could delay or prohibit us from acquiring companies that we believe could enhance our business.

We may not ultimately strengthen our competitive position or achieve our goals from any recent or any future acquisition, and any acquisitions we complete could be viewed negatively by users, customers, partners or investors. In addition, if we fail to integrate successfully such acquisitions, or the technologies associated with such acquisitions, into our company, the revenues and operating results of the combined company could be adversely affected. For example, we recently acquired Deloitte & Touche LLP’s pricing and contracting solutions business, and we must effectively integrate the personnel, products, technologies and customers and develop and motivate new employees. In addition, we may not be able to successfully retain the customers and key personnel of such acquisitions over the longer term, which could also adversely affect our business. The integration of any recently-acquired business or future-acquired business will require significant time and resources, and we may not be able to manage the process successfully. We may not successfully evaluate or utilize the acquired technology and accurately forecast the financial impact of the acquisition, including accounting charges.

It is also possible that a governmental entity could initiate an antitrust investigation at any time. Among other things, an investigation that is resolved unfavorably to us could delay or prevent the completion of a transaction, require us to divest or sell the assets or businesses we acquired, limit the ability to realize the expected financial or strategic benefits of a transaction or have other adverse effects on our current business and operations.

We may have to pay cash, incur debt or issue equity securities to pay for any acquisition, each of which could affect our financial condition or the value of our capital stock. For example, in connection with our acquisition of Deloitte & Touche LLP’s pricing and contracting solutions business, we paid approximately $60.0 million in cash. To fund any future acquisition, we may issue equity, which would result in dilution to our stockholders, or incur more debt, which would result in increased fixed obligations and could subject us to additional covenants or other restrictions that would impede our ability to manage our operations.

We rely on third parties and their systems as we introduce a variety of new services, including the processing of transaction data and settlement of funds to us and our counterparties, and these third parties’ failure to perform these services adequately could materially and adversely affect our business.

To provide our managed operations and payments solution and other products and services, we rely on third parties that we do not control, such as financial institution partners, and systems like the Federal Reserve Automated Clearing House, and other partners. We rely on these third parties for a variety of services, including the transmission of transaction data, settlement of funds, and the provision of information and other elements of our services. For example, we may directly or indirectly rely on banking institutions to facilitate payment settlement. If such banking institution should stop providing the underlying services, we must find other financial institutions to provide those services. If we are unable to find a replacement financial institution, we may no longer be able to provide processing services to certain customers, which could negatively affect our operations or cash flows.

Our customers often require significant configuration efforts to match their complex business processes. The failure to meet their requirements could result in customer disputes, loss of anticipated revenues and additional costs, which could harm our business.

Our customers often require significant configuration services to address their unique business processes. Supporting such a diversity of configured settings and implementations could become difficult as the number of customers we serve grows. In addition, supporting our customers could require us to devote significant development services and support personnel and strain our personnel resources and infrastructure. We have had in the past and may in the future have disputes with customers regarding the performance and implementation of our solutions. If we are unable to address the needs of our customers in a timely fashion, our customers may decide to seek to terminate their relationship, renew on less favorable terms, not renew their maintenance agreements or subscriptions, fail to purchase additional solutions or services, assert legal claims against us or cease

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to be a reference. If any of these were to occur, our revenues may decline or we may be required to refund amounts to customers and our operating results may be harmed.

If we are unable to enhance existing solutions and develop new solutions that achieve market acceptance or that keep pace with technological developments, our business could be harmed.

Our ability to increase revenues from existing customers and attract new customers depends in large part on our ability to enhance and improve our existing solutions and to develop and introduce new solutions. The success of any enhancement or new solutions depends on several factors, including timely completion, adequate quality testing, introduction and market acceptance. Any enhancement or new solutions that we develop or acquire may not be introduced in a timely or cost-effective manner, may contain defects or may not achieve the broad market acceptance necessary to generate significant revenues. If we are unable to successfully enhance our existing solutions and develop new solutions to meet customer requirements, our business and operating results will be adversely affected.

Because we designed our solutions to operate on a variety of network, hardware and software platforms, we will need to continuously modify and enhance our solutions to keep pace with changes in networking, internet-related hardware, and software, communication, browser and database technologies. If we are unable to respond in a timely manner to these rapid technological developments in a cost-effective manner, our solutions may become less marketable and less competitive or obsolete and our operating results may be negatively impacted.

Our efforts to expand the adoption of our solutions in the technology industry will be affected by our ability to provide solutions that adequately address trends in that industry.

We are attempting to expand the use of our solutions by companies in the technology industry, and our future growth depends in part on our ability to increase sales of solutions to customers in this industry and potentially other industries. The technology industry is affected by many factors, including shortening of product lifecycles, core technology products being sold into different end markets with distinct pricing, increasing complexity of multi-tiered global distribution channels, changing financial reporting requirements due to channel complexity and increasing use of off-invoice discounting. If our solutions are not perceived by existing or potential customers in the technology industry as capable of providing revenue management tools that will assist them in adequately addressing these trends, then our efforts to expand the adoption of our solutions in this industry may not be successful, which would adversely impact our business and operating results.

The market for cloud-based solutions is at an earlier stage of acceptance relative to on-premise solutions, and if it develops more slowly than we expect, our business could be harmed.

Although gaining wider acceptance, the market for cloud-based solutions is at an early stage relative to on-premise solutions, and these types of deployments may not achieve and sustain high levels of demand and market acceptance. We plan to accelerate the shift in our business model to recurring revenues, including revenues derived from our cloud-based solutions, by continuing to expand the implementation of our cloud-based solutions both within our current installed base of customers as well as new customers and additional markets in the future. Many companies have invested substantial personnel and financial resources to integrate traditional enterprise software into their businesses, and therefore may be reluctant or unwilling to migrate to a cloud-based solution. Other factors that may affect the market acceptance of cloud-based solutions include:

•perceived security capabilities and reliability;

•perceived concerns about ability to scale operations for large enterprise customers;

•concerns with entrusting a third party to store and manage critical data;

•the level of configurability or customizability of the solutions; and

•ability to perform at or near the capabilities of our on-premise solutions.

If organizations do not perceive the benefits of our cloud-based solutions, or if our competitors or new market entrants are able to develop cloud-based solutions that are or are perceived to be more effective than ours, our plan to accelerate the shift in our business model to recurring revenues may not succeed or may develop more slowly than we expect, if at all, or may result in short-term declines in recognized revenue, any of which would adversely affect our business.

If we or our solutions fail to perform properly, our reputation and customer relationships could be harmed, our market share could decline, and we could be subject to liability claims.

Our solutions are inherently complex and may contain material vulnerabilities, defects or errors. Any defects in solution functionality or that cause interruptions in availability could result in:

•lost or delayed market acceptance and sales;

•reductions in current-period total revenues;

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•breach of warranty or other contract breach or misrepresentation claims;

•sales credits or refunds to our customers;

•loss of customers;

•diversion of development and customer service resources; and

•injury to our reputation.

The costs incurred in correcting any material vulnerabilities, defects or errors might be substantial and could adversely affect our operating results. Because our customers often use our solutions as a system of record and many of our customers are subject to regulation of pricing of their products or otherwise have complex pricing commitments and revenue recognition policies, errors could result in an inability to process sales or lead to a violation of pricing requirements or misreporting of revenues by our customers that could potentially expose them to fines or other substantial claims or penalties. Accordingly, we could face increased exposure to product liability and warranty claims, litigation and other disputes and claims, resulting in potentially material losses and costs. Our limitation of liability provisions in our customer agreements may not be sufficient to protect us against any such claims.

Given the large amount of data that our solutions process and manage, it is possible that failures, vulnerabilities or errors in our software could result in unauthorized access, data loss or corruption, or cause the information that we process to be incomplete or contain inaccuracies that our customers regard as significant. We may be required to issue credits or refunds or indemnify or otherwise be liable to our customers or third parties for damages they may incur resulting from certain of these events.

Our insurance may be inadequate or may not be available in the future on acceptable terms, or at all. In addition, our policy may not cover any claim against us for claims related to any product defects or errors or other indirect or consequential damages and defending a suit, regardless of its merit, could be costly and divert management’s attention.

The market in which we participate is highly competitive, and if we do not compete effectively, our operating results could be harmed.

The market for revenue management solutions is highly competitive, fragmented and subject to rapid changes in technology. We face competition from spreadsheet-assisted manual processes, internally developed solutions, large integrated systems vendors, providers of business process outsourcing services and smaller companies that offer point solutions.

Companies lacking IT resources often resort to spreadsheet-assisted manual processes or personal database applications. In addition, some potential customers, particularly large enterprises, may elect to develop their own internal solutions, including custom-built solutions that are designed to support the needs of a single organization. Companies with large investments in packaged ERP or CRM applications, which do not typically provide revenue management capabilities, may extend these horizontal applications with configurations or point solution applications in order to address one or a small set of revenue management sub processes or drivers. Common horizontal applications that customers attempt to configure for this purpose in the life sciences and high tech industries include large integrated systems vendors like SAP AG and Oracle Corporation. We also encounter competition from small independent companies which compete based on price, unique product features or functions and custom developments.

Many of our competitors have greater name recognition, larger sales and marketing budgets and greater resources than we do and may have pre-existing relationships with our potential customers, including relationships with, and access to, key decision makers within these organizations, and major distribution agreements with consultants and system integrators. Moreover, many software vendors could bundle solutions or offer them at a low price as part of a larger product sale.

With the introduction of new technologies and market entrants, we expect competition to intensify in the future. We also expect enterprise software vendors that focus on enterprise resource planning or back-office applications to enter our market with competing products. In addition, we expect sales force automation vendors to acquire or develop additional solutions that may compete with our solutions. If we fail to compete effectively, our business will be harmed. In addition, pricing pressures and increased competition generally could result in reduced sales, reduced margins, losses or the failure of our solutions to achieve or maintain more widespread market acceptance, any of which could harm our business.

If we are not able to maintain and enhance our brand, our business and operating results may be adversely affected.

We believe that maintaining and enhancing the “Model N” brand identity is critical to our relationships with our customers and partners and to our ability to attract new customers and partners. The successful promotion of our brand will depend largely upon our marketing efforts, our ability to continue to offer high-quality solutions and our ability to successfully differentiate our solutions from those of our competitors. Our brand promotion activities may not be successful or yield increased revenues. In addition, independent industry analysts often provide reviews of our solution, as well as those of our competitors, and perception of our solution in the marketplace may be significantly influenced by these reviews. If these

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reviews are negative, or less positive as compared to those of our competitors’ products and services, our brand may be adversely affected. Further, stockholder activism has been increasing in recent years. Any such activism or public criticism of our company or management team may harm our brand and reputation.

The promotion of our brand requires us to make substantial expenditures, and we anticipate that the expenditures will increase as our market becomes more competitive and as we expand into new verticals within the life sciences and high tech industries. To the extent that these activities yield increased revenues, these revenues may not offset the increased expenses we incur. If we do not successfully maintain and enhance our brand, our business may not grow, we may have reduced pricing power relative to competitors with stronger brands and we could lose customers, partners, current employees and prospective employees, all of which would adversely affect our business operations and financial results.

If we are unable to maintain successful relationships with system integrators, our business operations, financial results and growth prospects could be adversely affected.

Our relationships with system integrators are generally non-exclusive, which means they may recommend to their customers the solutions of several different companies, including solutions that compete with ours, and they may also assist in the implementation of software or systems that compete with ours. If our system integrators do not choose to continue to refer our solutions, assist in implementing our solutions, choose to use greater efforts to market and sell their own solutions or those of our competitors, or fail to meet the needs of our customers, our ability to grow our business and sell our solutions may be adversely affected. The loss of a substantial number of our system integrators, our possible inability to replace them or the failure to recruit additional system integrators could harm our business.

Our ability to achieve revenue growth in the future will depend in part on our success in maintaining successful relationships with our system integrators and in helping our system integrators enhance their ability to independently market and implement our solutions. Our growth in revenues, particularly in international markets, will be influenced by the development and maintenance of relationships with these companies. Although we have established relationships with some of the leading system integrators, our solutions compete directly against the solutions of other leading system integrators. We are unable to control the resources that our system integrators commit to implementing our solutions or the quality of such implementation. If they do not commit sufficient resources to these activities, or if we are unable to maintain our relationships with these system integrators or otherwise develop and expand our indirect distribution channel, our business, results of operations, financial condition or cash flows could be adversely affected.

Any failure to offer high-quality customer support for our cloud platform may adversely affect our relationships with our customers and harm our financial results.

Once our solutions are implemented, our customers use our support organization to resolve technical issues relating to our solutions. In addition, we also believe that our success in selling our solutions is highly dependent on our business reputation and on favorable recommendations from our existing customers. Any failure to maintain high-quality customer support, or a market perception that we do not maintain high-quality support, could harm our reputation, adversely affect our ability to maintain existing customers or sell our solutions to existing and prospective customers, and harm our business, operating results and financial condition.

We may be unable to respond quickly enough to accommodate short-term increases in customer demand for support services. Increased customer demand for these services, without corresponding revenues, could also increase costs and adversely affect our operating results.

Incorrect or improper implementation or use of our solutions could result in customer dissatisfaction and negatively affect our business, operations, financial results and growth prospects.

Our customers and third-party partners may need training in the proper use of and the variety of benefits that can be derived from our solutions to maximize their potential. We have implemented the Model N Align Program, which gives our customers full access to expert knowledge through a portal for easy and fast access to information, experienced customer success managers and defined customer success plans, in order to help our customers maximize the value of our solutions. However, our customers may choose not to use such programs or may not use such programs efficiently or effectively and as a result may become dissatisfied with our solutions. If our solutions are not implemented or used correctly or as intended, inadequate performance may result. Since our customers rely on our solutions and customer support to manage key areas of their businesses, the incorrect or improper implementation or use of our solutions, our failure to train customers on how to efficiently and effectively use our solutions or our failure to provide services to our customers, may result in negative publicity, failure of customers to renew their SaaS maintenance agreements or subscriptions or potentially make legal claims against us. Also, as we continue to expand our customer base, any failure by us to properly provide these services will likely result in lost opportunities for follow-on sales of our solutions.

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Competition for our target employees is intense, and we may not be able to attract and retain the quality employees we need to support our planned growth.

Our future success depends, in part, upon our ability to recruit and retain key management, technical, sales, marketing, finance, and other critical personnel. Competition for qualified management, technical and other personnel is intense, and we may not be successful in attracting and retaining such personnel. If we fail to attract and retain qualified employees, including internationally, our ability to grow our business could be harmed. Competition for people with the specific skills that we require is significant. In order to attract and retain personnel in a competitive marketplace, we believe that we must provide a competitive compensation package, including cash and equity-based compensation. Volatility in our stock price may from time to time adversely affect our ability to recruit or retain employees. If we are unable to hire and retain qualified employees, or conversely, if we fail to manage employee performance or reduce staffing levels when required by market conditions, our business and operating results could be adversely affected.

Our significant international operations subject us to additional risks that can adversely affect our business, results of operations and financial condition.

We have significant international operations, including in emerging markets such as India, and we are continuing to expand our international operations as part of our growth strategy. As of September 30, 2020, approximately 47% of our total employees were located in India, where we conduct a portion of our development activities, implementation services and support services. Our current international operations and our plans to expand our international operations have placed, and will continue to place, a strain on our employees, management systems and other resources.

Operating in international markets requires significant resources and management attention and will subject us to regulatory, economic and political risks and competition that are different from those in the United States. Because of our limited experience with international operations, we cannot assure you that our international expansion efforts will be successful or that returns on such investments will be achieved in the future. In addition, our international operations may fail to succeed due to other risks inherent in operating businesses internationally, including:

•our lack of familiarity with commercial and social norms and customs in countries which may adversely affect our ability to recruit, retain and manage employees in these countries;

•difficulties and costs associated with staffing and managing foreign operations;

•the potential diversion of management’s attention to oversee and direct operations that are geographically distant from our U.S. headquarters;

•compliance with multiple, conflicting and changing governmental laws and regulations, including employment, tax, privacy and data protection laws and regulations;

•legal systems in which our ability to enforce and protect our rights may be different or less effective than in the United States and in which the ultimate result of dispute resolution is more difficult to predict;

•greater difficulty collecting accounts receivable and longer payment cycles;

•higher employee costs and difficulty in terminating non-performing employees;

•differences in workplace cultures;

•unexpected changes in regulatory requirements;

•the need to adapt our solutions for specific countries;

•our ability to comply with differing technical and certification requirements outside the United States;

•tariffs, export controls and other non-tariff barriers such as quotas and local content rules;

•more limited protection for intellectual property rights in some countries;

•adverse tax consequences, including as a result of transfer pricing adjustments involving our foreign operations;

•fluctuations in currency exchange rates;

•anti-bribery compliance by us or our partners;

•restrictions on the transfer of funds;

•global epidemics, pandemics, or contagious diseases; and

•new and different sources of competition.

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Our failure to manage any of these risks successfully could harm our existing and future international operations and seriously impair our overall business.

Risks Related to Regulatory Compliance

Changes in privacy laws, regulations and standards may cause our business to suffer.

Personal privacy and data security have become significant issues in the United States, Europe and in many other jurisdictions where we offer our solutions. The regulatory framework for privacy and security issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. For example, the Court of Justice of the European Union (the “ECJ”) ruled in October 2015 that the US-EU Safe Harbor framework was invalid, and on July 16, 2020, invalidated its successor program the US-EU Privacy Shield as a mechanism for managing personal data transfers between the European Union and the United States (and other countries). While the ECJ upheld the adequacy of EU-specified standard contractual clauses (a form of contract approved by the EU commission as an adequate data transfer mechanism), it made clear that reliance on them alone may not necessarily be sufficient in all circumstances and that their use must be assessed on a case-by-case basis taking into account the surveillance laws and right of individuals in the destination country. The ECJ went on to state that, if the competent supervisory authority believes that the standard contractual clauses cannot be complied with in the recipient country and the required level of protection cannot be secured by other means, such supervisory authority is under an obligation to suspend or prohibit that transfer unless the data exporter has already done so itself. We rely on a mixture of mechanisms to transfer personal data from our EU business to the U.S. (including having previously relied on US-EU Privacy Shield) and are evaluating what additional mechanisms may be required to establish adequate safeguards for personal data transfer. Furthermore, federal, state or foreign government bodies or agencies have in the past adopted, and may in the future adopt, laws and regulations affecting data privacy. For example, the state of California enacted the California Consumer Privacy Act of 2018 (“CCPA”) and California voters recently approved the California Privacy Rights Act (“CPRA”). The CCPA creates new individual privacy rights for consumers and places increased privacy and security obligations on entities handling personal data of consumers or households. The CCPA went into effect on January 1, 2020, and it requires covered companies to provide new disclosures to California consumers, provides such consumers, business-to-business contacts, and employees new ways to opt-out of certain sales of personal information, and allows for a new private right of action for data breaches. The CPRA significantly modifies the CCPA and will impose additional data protection obligations on companies doing business in California, including additional consumer rights processes and opt outs for certain uses of sensitive data. While the CPRA will not take effect until January 2023, it will establish a California privacy regulator before that date. The CCPA and the CPRA may significantly impact our business activities and require substantial compliance costs that adversely affect business, operating results, prospects and financial condition. To date, we have not experienced substantial compliance costs in connection with fulfilling the requirements under the CCPA or CPRA. However, we cannot be certain that compliance costs will not increase in the future with respect to the CCPA and CPRA.

Industry organizations also regularly adopt and advocate for new standards in this area. In the United States, these include rules and regulations promulgated under the authority of federal agencies and state attorneys general and legislatures and consumer protection agencies. Internationally, many jurisdictions in which we operate have established their own data security and privacy legal framework with which we or our customers must comply, including but not limited to, the European General Data Protection Regulation, which imposes additional obligations and risks upon our business. In many jurisdictions, enforcement actions and consequences for noncompliance are also rising. In addition to government regulation, privacy advocates and industry groups may propose new and different self-regulatory standards that either legally or contractually applies to us.

Any inability to adequately address privacy and security concerns, even if unfounded, or comply with applicable privacy and data security laws, regulations and policies, could result in additional cost and liability to us, damage our reputation, inhibit sales and adversely affect our business. Furthermore, the costs of compliance with, and other burdens imposed by, the laws, regulations, and policies that are applicable to the businesses of our customers may limit the use and adoption of, and reduce the overall demand for, our solutions. Privacy and data security concerns, whether valid or not valid, may inhibit market adoption of our solutions, particularly in foreign countries. If we are not able to adjust to changing laws, regulations and standards related to privacy or security, our business may be harmed.

Failure to comply with certain certifications and standards pertaining to our solutions, as may be required by governmental authorities or other standards-setting bodies could harm our business. Additionally, failure to comply with governmental laws and regulations could harm our business.

Customers may require our solutions to comply with certain security or other certifications and standards, which are promulgated by governmental authorities or other standards-setting bodies. The requirements necessary to comply with these certifications and standards are complex and often change significantly. If our solutions are late in achieving or fail to achieve compliance with these certifications and standards, including when they are revised or otherwise change, or our competitors

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achieve compliance with these certifications and standards, we may be disqualified from selling our solutions to such customers, or at a competitive disadvantage, which would harm our business, operating results and financial condition.

We are subject to governmental export and import controls that could subject us to liability or impair our ability to compete in international markets.

Certain of our solutions are subject to U.S. export controls and may be exported outside the United States only with the required export license or through an export license exception. Additionally, we incorporate encryption technology into our solutions, which may require additional filings prior to export. If we were to fail to comply with U.S. export licensing requirements, U.S. customs regulations, U.S. economic sanctions or other laws, we could be subject to substantial civil and criminal penalties, including fines, incarceration for responsible employees and managers, and the possible loss of export or import privileges. Obtaining the necessary export license for a particular sale may be time-consuming and may result in the delay or loss of sales opportunities. Furthermore, U.S. export control laws and economic sanctions prohibit the shipment of certain products to U.S. embargoed or sanctioned countries, governments and persons. Even though we take precautions to ensure that our channel partners comply with all relevant regulations, any failure by our channel partners to comply with such regulations could have negative consequences, including reputational harm, government investigations and penalties.

In addition, various countries regulate the import of certain encryption technology, including through import permit and license requirements, and have enacted laws that could limit our ability to distribute our solutions or could limit our customers’ ability to implement our solutions in those countries. Changes in our solutions or changes in export and import regulations may create delays in the introduction of our solutions into international markets, prevent our customers with international operations from deploying our solutions globally or, in some cases, prevent the export or import of our solutions to certain countries, governments or person’s altogether. Any change in export or import regulations, economic sanctions or related legislation, shift in the enforcement or scope of existing regulations, or change in the countries, governments, persons or technologies targeted by such regulations, could result in decreased use of our solutions by, or in our decreased ability to export or sell our solutions to, existing or potential customers with international operations. Any decreased use of our solutions or limitation on our ability to export or sell our solutions would likely adversely affect our business, financial condition, and operating results.

Changes to government regulations may reduce the size of the market for our solutions, harm demand for our solutions, force us to update our solutions or implement changes in our services and increase our costs of doing business.

Any changes in government regulations that impact our customers or their end customers could have a harmful effect on our business by reducing the size of our addressable market, forcing us to update the solutions we offer or otherwise increasing our costs. For example, with respect to our life sciences customers, regulatory developments related to government-sponsored entitlement programs or U.S. Food and Drug Administration or foreign equivalent regulation of, or denial, withholding or withdrawal of approval of, our customers’ products could lead to a lack of demand for our solutions. Other changes in government regulations, in areas such as privacy, export compliance or anti-bribery statutes, such as the U.S. Foreign Corrupt Practices Act, could require us to implement changes in our solutions, services or operations that increase our cost of doing business and thereby adversely affecting our financial performance.

Any new implementation of or changes made to laws, regulations or other industry standards affecting our business in any of the geographic regions in which we operate may require significant development efforts or have an unfavorable effect on our business operations.

Various U.S. laws and regulations, such as the Bank Secrecy Act of 1970 (the “Bank Secrecy Act”) and many states jurisdictions impose license and registration obligations on those companies engaged in the business of money transmission, with varying definitions of what constitutes money transmission. Evaluation of our compliance efforts, as well as the questions of whether and to what extent our products and services require licensure is subject to regulatory interpretation and could change over time. Such changes could subject us to investigations and resulting liability, including governmental fines, restrictions on our business, or other sanctions, and we could be forced to cease conducting certain aspects of our business with customers of certain jurisdictions, or be required to obtain additional licenses or regulatory approvals. There can be no assurance that we will be able to obtain any such licenses, and, even if we were able to do so, there could be substantial costs and potential product changes involved in maintaining such licenses, which could have a material and adverse effect on our business. In addition, as our business and products continue to develop and expand, we may become subject to additional rules, regulations, and industry standards. We may not always be able to accurately predict the scope or applicability of certain regulations to our business, particularly as we expand into new areas of operations, which could have a significant negative effect on our existing business and our ability to pursue future plans.

We may be the target of illegitimate or other improper transaction settlement despite compliance systems

We are legally or contractually required to comply with the anti-money laundering laws and regulations, such as, the Bank Secrecy Act, and other compliance standards related to providing managed payments and processing services for our customers. In some contexts, we are directly subject to these requirements; in other contexts, we have contractually agreed to

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assist our financial institutions with their obligation to comply with compliances requirements that apply to them. We have developed procedures and controls that are designed to monitor and address legal and regulatory requirements and developments and that are applicable to our payments sector. However, when our products and services are used to process illegitimate transactions, or if our products and services are subject to internal data and transaction reporting errors, and invoice or other payments settlements are improperly processed, we may suffer losses and liability. These types of illegitimate transactions or improper settlements can also expose us to governmental and regulatory sanctions and potentially prevent us from satisfying our contractual obligations to our customers or other third parties, which may cause us to be in breach of our obligations.

Risks Related to Our Technology and Security

If our solutions do not interoperate with our customers’ IT infrastructure, sales of our solutions could be negatively affected, which would harm our business.

Our solutions must interoperate with our customers’ existing IT infrastructure, which often have different specifications, complex configuration, utilize multiple protocol standards, deploy products from multiple vendors and contain multiple generations of products that have been added over time. As a result, when problems occur in a network, it may be difficult to identify the sources of these problems. If we find errors in the existing products or defects in the hardware used in our customers’ IT infrastructure or problematic network configurations or settings, we may have to modify our solutions or platform so that our solutions will interoperate with our customers’ IT infrastructure. Any delays in identifying the sources of problems or in providing necessary modifications to our solutions could have a negative impact on our reputation and our customers’ satisfaction with our solutions, and our ability to sell solutions could be adversely affected.

If our solutions experience data security breaches, and there is unauthorized access to our customers’ data, we may lose current or future customers, our reputation and business may be harmed, and we may incur significant liabilities.

Our solutions are used by our customers to manage and store personally identifiable information, proprietary information and sensitive or confidential data relating to their business. Although we maintain security features in our solutions, our security measures may not detect or prevent hacker interceptions, break-ins, security breaches, the introduction of viruses or malicious code, such as “ransomware,” and other disruptions that may jeopardize the security of information stored in and transmitted by our solutions. Cyber-attacks and other malicious Internet-based activity continue to increase generally and may be directed at either the solution used by our customers or our corporate information technology software and infrastructure.

Because techniques used to obtain unauthorized access, exploit vulnerabilities or sabotage systems change frequently and generally are not identified until they are launched against a target, we may be unable to anticipate these techniques, patch vulnerabilities, or implement adequate preventative measures. Certain of our customers may have a greater sensitivity to security defects or breaches in our software than to defects in other, less critical, software solutions. Any actual or perceived security breach or theft of the business-critical data of one or more of our customers, regardless of whether the breach is attributable to the failure of our software or solutions, may adversely affect the market’s perception of our solutions. There can be no assurance that limitation of liability, indemnification or other protective provisions in our contracts would be applicable, enforceable or adequate in connection with a security breach, or would otherwise protect us from any such liabilities or damages with respect to any particular claim. We also cannot be sure that our existing general liability insurance coverage and coverage for errors or omissions will continue to be available on acceptable terms or will be available in sufficient amounts to cover one or more large claims, or that the insurer will not deny coverage as to any future claim. One or more large claims may be asserted against us that exceed our available insurance coverage, or changes in our insurance policies may occur, including premium increases or the imposition of large deductible or co-insurance requirements.

Furthermore, a party that is able to circumvent our security measures or exploit any vulnerabilities in our solutions could misappropriate our or our customers’ proprietary or confidential information, cause interruption in their operations, damage or misuse their computer systems, misuse any information that they misappropriate, cause early termination of our contracts, subject us to notification and indemnity obligations, litigation, and regulatory investigation or governmental sanctions, cause us to lose existing customers, and harm our ability to attract future customers. Any such breach could cause harm to our reputation, business, financial condition and results of operations, and we may incur significant liability, and as a result our business and financial position may be harmed.

We rely on a small number of third-party service providers to host and deliver our cloud-based solutions, and any interruptions or delays in services from these third parties could impair the delivery of our cloud-based solutions and harm our business.

We currently operate our cloud-based solutions primarily through third-party data centers. We do not control the operation of these facilities. These facilities and third-parties are vulnerable to damage or interruption from natural disasters, fires, power loss, telecommunications failures, global epidemics, pandemics, or contagious diseases, such as COVID-19, and similar events. They are also subject to break-ins, computer viruses, sabotage, intentional acts of vandalism and other

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misconduct. The occurrence of a natural disaster or an act of terrorism, a decision to close the facilities without adequate notice or other unanticipated problems could result in lengthy interruptions, which would have a serious adverse impact on our business. Additionally, our data center agreements are of limited duration, subject to early termination rights in certain circumstances, may include inadequate indemnification and liability provisions, and the providers of our data centers have no obligation to renew their agreements with us on commercially reasonable terms, or at all.

If we continue to add data centers and add capacity in our existing data centers, we may transfer data to other locations. Despite precautions taken during this process, any unsuccessful data transfers may impair the delivery of our service. Interruptions in our service, data loss or corruption may subject us to liability to our customers, cause customers to terminate their agreements and adversely affect our renewal rates and our ability to attract new customers. Data transfers may also subject us to regional privacy and data protection laws that apply to the transmission of customer data across international borders.

We also depend on access to the Internet through third-party bandwidth providers to operate our cloud-based solution. If we lose the services of one or more of our bandwidth providers, or if these providers experience outages, for any reason, we could experience disruption in delivering our cloud-based solutions or we could be required to retain the services of a replacement bandwidth provider. Any Internet outages or delays could adversely affect our ability to provide our solutions to our customers. Our data center operations also rely heavily on the availability of electricity, which also comes from third-party providers. If we or the third-party data center facilities that we use to deliver our services were to experience a major power outage or if the cost of electricity were to increase significantly, our operations and financial results could be harmed. If we or our third-party data centers were to experience a major power outage, we or they would have to rely on back-up generators, which might not work properly or might not provide an adequate supply during a major power outage. Such a power outage could result in a significant disruption of our business.

Additionally, defects in our systems or those of third parties, errors or delays in the processing of payment transactions, telecommunications failures, or other difficulties (including those related to system relocation) could result in loss of revenues, loss of customers, loss of data, harm to our business or reputation, exposure to fraud losses or other liabilities, negative publicity, additional operating and development costs, fines and other sanctions imposed by counterparties, and/or diversion of technical and other resources.

Our use of open source and third-party technology could impose limitations on our ability to commercialize our solutions.

We use open source software in our solutions and in our services engagements on behalf of customers. As we increasingly handle configured implementation of our solutions on behalf of customers, we use additional open source software that we obtain from all over the world. Although we try to monitor our use of open source software, the terms of many open source licenses have not been interpreted by U.S. courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to market our solutions. In such event, we could be required to seek licenses from third parties in order to continue offering our solutions, to re-engineer our technology or to discontinue offering our solutions in the event re-engineering cannot be accomplished on a timely basis, any of which could cause us to breach contracts, harm our reputation, result in customer losses or claims, increase our costs or otherwise adversely affect our business, operating results and financial condition.

Some open source licenses contain requirements that we make available source code for modifications or derivative works we create based upon the type of open source software we use. If we combine our proprietary software with open source software in a certain manner, we could, under certain open source licenses, be required to release the source code of our proprietary software to the public. This would allow our competitors to create similar solutions with lower development effort and time and ultimately could result in a loss of product sales for us.

Risks Related to Our Intellectual Property

Any failure to protect our intellectual property rights could impair our ability to protect our proprietary technology and our brand, which would substantially harm our business and operating results.

The success of our business and the ability to compete depend in part upon our ability to protect and enforce our patents, trade secrets, trademarks, copyrights and other intellectual property rights. We primarily rely on patent, copyright, trade secret and trademark laws, trade secret protection and confidentiality or license agreements with our employees, customers, partners and others to protect our intellectual property rights. However, the steps we take to protect our intellectual property rights may be inadequate or we may be unable to secure intellectual property protection for all of our solutions. Any of our copyrights, trademarks or other intellectual property rights may be challenged by others or invalidated through administrative process or litigation. Competitors may independently develop technologies or solutions that are substantially equivalent or superior to our solutions or that inappropriately incorporate our proprietary technology into their solutions. Competitors may hire our former employees who may misappropriate our proprietary technology or misuse our confidential information. Although we rely in part upon confidentiality agreements with our employees, consultants and other third parties to protect our trade secrets and other confidential information, those agreements may not effectively prevent disclosure of trade secrets and other confidential

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information and may not provide an adequate remedy in the event of misappropriation of trade secrets or unauthorized disclosure of confidential information. In addition, others may independently discover our trade secrets and confidential information, and in such cases we could not assert any trade secret rights against such parties.

In order to protect our intellectual property rights, we may be required to spend significant resources to monitor and protect these rights. Litigation to protect and enforce our intellectual property rights could be costly, time-consuming and distracting to management and could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights. Any litigation, whether or not it is resolved in our favor, could result in significant expense to us and divert the efforts of our technical and management personnel, which may adversely affect our business, operating results and financial condition. Certain jurisdictions may not provide adequate legal infrastructure for effective protection of our intellectual property rights. Changing legal interpretations of liability for unauthorized use of our solutions or lessened sensitivity by corporate, government or institutional users to refraining from intellectual property piracy or other infringements of intellectual property could also harm our business.

It is possible that innovations for which we seek patent protection may not be protectable. Additionally, the process of obtaining patent protection is expensive and time consuming, and we may not be able to prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. Given the cost, effort, risks and downside of obtaining patent protection, including the requirement to ultimately disclose the invention to the public, we may not choose to seek patent protection for certain innovations. However, such patent protection could later prove to be important to our business. Even if issued, there can be no assurance that any patents will have the coverage originally sought or adequately protect our intellectual property, as the legal standards relating to the validity, enforceability and scope of protection of patent and other intellectual property rights are uncertain. Any patents that are issued may be invalidated or otherwise limited, or may lapse or may be abandoned, enabling other companies to better develop products that compete with our solutions, which could adversely affect our competitive business position, business prospects and financial condition.

We cannot assure you that the measures we have taken to protect our intellectual property will adequately protect us, and any failure to protect our intellectual property could harm our business.

We may not be able to enforce our intellectual property rights throughout the world, which could adversely impact our international operations and business.

The laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Many companies have encountered significant problems in protecting and enforcing intellectual property rights in certain foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection. This could make it difficult for us to stop the infringement or misappropriation of our intellectual property rights. Proceedings to enforce our proprietary rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business. Accordingly, our efforts to enforce our intellectual property rights in such countries may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop, which could have a material adverse effect on our business, financial condition and results of operations.

We license technology from third parties, and our inability to maintain those licenses could harm our business. Certain third-party technology that we use may be difficult to replace or could cause errors or failures of our service.

We incorporate technology that we purchase or license from third parties, including hardware and software, into our solutions. We cannot be certain that this technology will continue to be available on commercially reasonable terms, or at all. We cannot be certain that our licensors are not infringing the intellectual property rights of third parties or that our licensors have sufficient rights to the licensed intellectual property in all jurisdictions in which we may sell our solutions. Some of our agreements with our licensors may be terminated for convenience by them. If we are unable to continue to license any of this technology because of intellectual property infringement claims brought by third parties against our licensors or against us, or if we are unable to continue our license agreements or enter into new licenses on commercially reasonable terms, our ability to develop and sell solutions containing that technology would be severely limited and our business could be harmed. Additionally, if we are unable to license or obtain the necessary technology from third parties, we may be forced to acquire or develop alternative technology of lower quality or performance standards. This would limit and delay our ability to offer new or competitive solutions and increase our costs of production. In addition, errors or defects in third-party hardware or software used in our cloud-based solutions could result in errors or a failure of our cloud-based solutions, which could harm our business.

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We may be sued by third parties for alleged infringement of their proprietary rights which could result in significant costs and harm our business.

There is considerable patent and other intellectual property development activity in our industry. Our success depends upon us not infringing upon the intellectual property rights of others. Companies in the software and technology industries, including some of our current and potential competitors, own large numbers of patents, copyrights, trademarks and trade secrets and frequently enter into litigation based on allegations of infringement, misappropriation or other violations of intellectual property rights. In addition, many of these companies have the capability to dedicate substantially greater resources to enforce their intellectual property rights and to defend claims that may be brought against them. The litigation may involve patent holding companies or other adverse patent owners who have no relevant product revenue and against whom our potential patents may provide little or no deterrence. We have received, and may in the future receive, notices that claim we have infringed, misappropriated or otherwise violated other parties’ intellectual property rights. To the extent we gain greater visibility, we face a higher risk of being the subject of intellectual property infringement claims, which is not uncommon with respect to software technologies in general and information security technology in particular. There may be third-party intellectual property rights, including issued or pending patents that cover significant aspects of our technologies or business methods. Any intellectual property claims, with or without merit, could be very time consuming, could be expensive to settle or litigate and could divert our management’s attention and other resources. These claims could also subject us to significant liability for damages, potentially including treble damages if we are found to have willfully infringed patents or copyrights. These claims could also result in our having to stop using technology found to be in violation of a third party’s rights. We might be required to seek a license for the intellectual property, which may not be available on reasonable terms or at all. Even if a license were available, we could be required to pay significant royalties, which would increase our operating expenses. As a result, we may be required to develop alternative non-infringing technology, which could require significant effort and expense. If we cannot license or develop technology for any infringing aspect of our business, we would be forced to limit or stop sales of one or more of our solutions or features of our solutions and may be unable to compete effectively. Any of these results would harm our business, operating results and financial condition.

In addition, our agreements with customers and partners include indemnification provisions under which we agree to indemnify them for losses suffered or incurred as a result of claims of intellectual property infringement and, in some cases, for damages caused by us to property or persons. Large indemnity payments could harm our business, operating results and financial condition.

Risks Related to the Ownership of Our Common Stock

Our stock price may be volatile, and you may be unable to sell your shares at or above your purchase price.

The market price of our common stock could be subject to wide fluctuations in response to, among other things, the factors described in this “Risk Factors” section or otherwise and other factors beyond our control, such as fluctuations in the volume of shares traded and the valuations of companies perceived by investors to be comparable to us; and stockholder activism.

Furthermore, the stock markets have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies, particularly during this time of uncertainty as the world responds to the COVID-19 pandemic which could continue for an uncertain period. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market fluctuations, as well as general economic, systemic, political and market conditions, such as recessions, or impacts related to global epidemics, pandemics, or contagious diseases, such as COVID-19, interest rate changes or international currency fluctuations, may negatively affect the market price of our common stock.

Many companies that have experienced volatility in the market price of their stock have become subject to securities class action litigation. We have been in the past, and may be in the future, the target of this type of litigation. Securities litigation against us could result in substantial costs and divert our management’s attention, which could harm our business.

The exclusive forum provision in our restated certificate of incorporation may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, or other employees, which may discourage lawsuits with respect to such claims.

Our restated certificate of incorporation, to the fullest extent permitted by law, provides that the Court of Chancery of the State of Delaware is the exclusive forum for: any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, or the DGCL, our restated certificate of incorporation, or our restated bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine. This exclusive forum provision does not apply to suits brought to enforce a duty or liability created by the Exchange Act. It could apply, however, to a suit that falls within one or more of the categories enumerated in the exclusive forum provision and asserts claims under the Securities Act, inasmuch as Section 22 of the

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Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rule and regulations thereunder. There is uncertainty as to whether a court would enforce such provision with respect to claims under the Securities Act, and our stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.

This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, or other employees, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provisions contained in our restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations and financial condition.

In addition, Section 203 of the DGCL may discourage, delay or prevent a change in control of our company. Section 203 imposes certain restrictions on mergers, business combinations and other transactions between us and holders of 15% or more of our common stock.

Section 22 of the Securities Act of 1933, as amended (the Securities Act), creates concurrent jurisdiction for federal and state courts over all claims brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. In May 2020, we amended and restated our restated bylaws to provide that the federal district courts of the United States of America will, to the fullest extent permitted by law, be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, or a Federal Forum Provision. Our decision to adopt a Federal Forum Provision followed a decision by the Supreme Court of the State of Delaware holding that such provisions are facially valid under Delaware law. While there can be no assurance that federal or state courts will follow the holding of the Delaware Supreme Court or determine that the Federal Forum Provision should be enforced in a particular case, application of the Federal Forum Provision means that suits brought by our stockholders to enforce any duty or liability created by the Securities Act must be brought in federal court and cannot be brought in state court.

Section 27 of the Exchange Act creates exclusive federal jurisdiction over all claims brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. In addition, neither the exclusive forum provision nor the Federal Forum Provision applies to suits brought to enforce any duty or liability created by the Exchange Act. Accordingly, actions by our stockholders to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder must be brought in federal court.

Our stockholders will not be deemed to have waived our compliance with the federal securities laws and the regulations promulgated thereunder.

Any person or entity purchasing or otherwise acquiring or holding any interest in any of our securities shall be deemed to have notice of and consented to our exclusive forum provisions, including the Federal Forum Provision. These provisions may limit a stockholders’ ability to bring a claim in a judicial forum of their choosing for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees.

We do not anticipate paying any dividends on our common stock.

We do not anticipate paying any cash dividends on our common stock in the foreseeable future. If we do not pay cash dividends, you would receive a return on your investment in our common stock only if the market price of our common stock is greater at the time you sell your shares than the market price at the time you bought your shares.

Risk Related to Ownership of Our Convertible Senior Notes

Our outstanding notes are effectively subordinated to our secured debt and any liabilities of our subsidiaries.

Our outstanding notes will rank senior in right of payment to all of our indebtedness that is expressly subordinated in right of payment to the notes; equal in right of payment with all of our liabilities that are not so subordinated; effectively junior to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including trade payables) of our subsidiaries. In the event of our bankruptcy, liquidation, reorganization or other winding up, our assets that secure debt ranking senior or equal in right of payment to the notes will be available to pay obligations on the notes only after the secured debt has been repaid in full from these assets. There may not be sufficient assets remaining to pay amounts due on any or all of the notes then outstanding. The indenture governing the notes will not prohibit us from incurring additional senior debt or secured debt, nor will it prohibit any of our subsidiaries from incurring additional liabilities.

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Our notes are our obligations only, and to the extent our operations will be conducted through, and a substantial portion of our consolidated assets will be held by, our subsidiaries, we may rely on distributions from such subsidiaries to service our debt.

Our notes are our obligations exclusively. To the extent our operations will be conducted through, and a substantial portion of our consolidated assets will be held by, our subsidiaries, our ability to service the notes will depend on the results of operations of our subsidiaries and upon the ability of such subsidiaries to provide us with cash, whether in the form of dividends, loans or otherwise, to pay amounts due on our obligations, including the notes. Our present and future subsidiaries are separate and distinct legal entities and have no obligation, contingent or otherwise, to make payments on the notes or to make any funds available for that purpose. In addition, dividends, loans or other distributions to us from such subsidiaries may be subject to statutory, contractual and other restrictions and are subject to other business considerations.

Our indebtedness could adversely affect our business and limit our ability to expand our business or respond to changes, and we may be unable to generate sufficient cash flow to satisfy our debt service obligations.

As of December 31, 2020, we had an aggregate principal amount of $172.5 million of notes outstanding. We may also incur additional indebtedness in the future to meet future financing needs. Our current indebtedness and any future incurrence of additional significant indebtedness could have adverse consequences, including the following:

•reducing the availability of our cash flow for our operations, capital expenditures, future business opportunities and other purposes;

•limiting our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate;

•increasing our vulnerability to general adverse economic and industry conditions; and

•lengthening our sales process as customers evaluate our financial viability.

Our ability to generate cash to repay our indebtedness is subject to the performance of our business, as well as general economic, financial, competitive and other factors that are beyond our control. If our business does not generate sufficient cash flow from operating activities or if future borrowings are not available to us in amounts sufficient to enable us to fund our liquidity needs, our operating results, financial condition and ability to expand our business may be adversely affected. In addition, if we are unable to generate such cash flow or obtain sufficient borrowings, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.

Recent and future regulatory actions and other events may adversely affect the trading price and liquidity of our notes.

We expect that many investors in our notes will employ, or seek to employ, a convertible arbitrage strategy with respect to the notes. Investors would typically implement such a strategy by selling short the common stock underlying the notes and dynamically adjusting their short position while continuing to hold the notes. Investors may also implement this type of strategy by entering into swaps on our common stock in lieu of or in addition to short selling the common stock. The SEC and other regulatory and self-regulatory authorities have implemented various rules and taken certain actions, and may in the future adopt additional rules and take other actions, that may impact those engaging in short selling activity involving equity securities (including our common stock). Such rules and actions include Rule 201 of SEC Regulation SHO, the adoption by the Financial Industry Regulatory Authority, Inc. and the national securities exchanges of a ‘‘Limit Up-Limit Down’’ program, the imposition of market-wide circuit breakers that halt trading of securities for certain periods following specific market declines, and the implementation of certain regulatory reforms required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Any governmental or regulatory action that restricts the ability of investors in, or potential purchasers of, the notes to effect short sales of our common stock, borrow our common stock or enter into swaps on our common stock could adversely affect the trading price and the liquidity of our notes.

In addition, the liquidity of the market for our common stock may decline, which could reduce the number of shares available for lending in connection with short sale transactions and the number of counterparties willing to enter into an equity swap on our shares of common stock with a note investor. If investors in our notes seeking to employ a convertible note arbitrage strategy are unable to borrow or enter into equity swaps on our shares of common stock on commercially reasonable terms, then the trading of, and the liquidity of the market for, our notes may significantly decline.

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Volatility in the market price and trading volume of our common stock could adversely impact the trading price of our notes.

We expect that the trading price of the notes will be significantly affected by the market price of our common stock. The stock market in recent years has experienced significant price and volume fluctuations that have often been unrelated to the operating performance of companies. The market price of our common stock could fluctuate significantly for many reasons, including in response to the risks described in this section and this report, many of which are beyond our control, such as reports by industry analysts, investor perceptions or negative announcements by our customers, competitors or suppliers regarding their own performance, as well as industry conditions and general financial, economic and political instability. A decrease in the market price of our common stock would likely adversely impact the trading price of our notes. The market price of our common stock could also be affected by possible sales of our common stock by investors who view the notes as a more attractive means of equity participation in us and by hedging or arbitrage trading activity that we expect to develop involving our common stock. This trading activity could, in turn, affect the trading price of the notes.

In addition, the condition of the financial markets and changes in prevailing interest rates can have an adverse effect on the trading price of our notes. For example, prevailing interest rates have fluctuated in the past and are likely to fluctuate in the future, and any increase in prevailing interest rates could adversely affect the trading price of our notes.

We and our subsidiaries may incur substantially more debt or take other actions which would intensify the risks discussed above.

We and our subsidiaries may be able to incur substantial additional debt in the future, subject to the restrictions contained in our debt instruments, some of which may be secured debt. We are not restricted under the terms of the indenture governing our notes from incurring additional debt, securing existing or future debt, recapitalizing our debt or taking a number of other actions that are not limited by the terms of the indenture governing the notes that could have the effect of diminishing our ability to make payments on our notes when due.

We may not have the ability to raise the funds necessary to settle conversions of our notes in cash, to repurchase our notes for cash upon a fundamental change or to pay the redemption price for any notes we redeem, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of the notes.

Holders of our notes have the right to require us to repurchase all or a portion of their notes upon the occurrence of a fundamental change (as defined in the indenture) at a fundamental change repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus accrued and unpaid interest, if any. In addition, upon conversion of the notes, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional shares), we will be required to make cash payments in respect of the notes being converted. However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of notes surrendered therefor or notes that are being redeemed or converted.

In addition, our ability to repurchase the notes or to pay cash upon redemptions or conversions of the notes may be limited by law, by regulatory authority, or by other agreements governing our future indebtedness. Our failure to repurchase notes at a time when the repurchase is required by the indenture or to pay any cash payable on future conversions of the notes as required by the indenture would constitute a default under the indenture. A default under the indenture or the occurrence of a fundamental change itself could also lead to a default under agreements governing our existing and future indebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the notes or make cash payments upon conversions thereof.

The conditional conversion feature of our notes, if triggered, may adversely affect our financial condition and operating results.

In the event the conditional conversion feature of our notes is triggered, holders of notes will be entitled to convert the notes at any time during specified periods at their option. If one or more holders elect to convert their notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional shares), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

The accounting method for convertible debt securities that may be settled in cash, such as our outstanding notes, could have a material effect on our reported financial results.

Under Accounting Standards Codification 470-20, Debt with Conversion and Other Options (‘‘ASC 470-20’’), an entity must separately account for the liability and equity components of the convertible debt instruments (such as our notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest cost. The effect of ASC 470-20 on the accounting for the notes is that the equity component is required to be included in the

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additional paid-in capital section of stockholders’ equity on our consolidated balance sheet at the issuance date, and the value of the equity component is treated as debt discount for purposes of accounting for the debt component of the notes. As a result, we are required to record a greater amount of non-cash interest expense in current periods presented as a result of the accretion of the discounted carrying value of the notes to their face amount over the respective terms of the notes. We report larger net losses (or lower net income) in our financial results because ASC 470-20 requires interest to include both the current period’s accretion of the debt discount and the instrument’s coupon interest rate, which could adversely affect our future financial results, the trading price of our common stock or the trading price of the notes.

In addition, under certain circumstances, the treasury stock method for calculating diluted earnings per share is permitted for convertible debt instruments (such as the notes) that may be settled entirely or partly in cash. As a result, for purposes of calculating diluted earnings per share, we will include, under certain circumstances, the shares underlying the notes only to the extent that the conversion value of the notes exceeds the principal amount; provided that we will not use the treasury stock method if the effect on diluted earnings per share would be anti-dilutive.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40), Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. This would reduce non-cash interest expense, and thereby decreasing net loss (or increasing net income). Additionally, the treasury stock method for calculating earnings per share will no longer be allowed for convertible debt instruments whose principal amount may be settled using shares. Rather, the if-converted method will be required. Application of the ‘‘if-converted’’ method may reduce our reported diluted earnings per share. We cannot be sure whether other changes may be made to the current accounting standards related to the notes, or otherwise, that could have an adverse impact on our financial statements.

Future sales of our common stock or equity-linked securities in the public market could lower the market price for our common stock and adversely impact the trading price of the notes.

In the future, we may sell additional shares of our common stock or equity-linked securities to raise capital. In addition, a substantial number of shares of our common stock are reserved for issuance upon the exercise of stock options, settlement of other equity incentive awards, and upon conversion of the notes. The indenture for our notes does not restrict our ability to issue additional common stock or equity- linked securities in the future. We cannot predict the size of future issuances or the effect, if any, that they may have on the market price for our common stock. The issuance and sale of substantial amounts of common stock or equity-linked securities, or the perception that such issuances and sales may occur, could adversely affect the trading price of our notes and the market price of our common stock and impair our ability to raise capital through the sale of additional common stock or equity-linked securities.

Holders of our notes are not entitled to any rights with respect to our common stock, but they are subject to all changes made with respect to them to the extent our conversion obligation includes shares of our common stock.

Holders of our notes are not entitled to any rights with respect to our common stock (including, without limitation, voting rights and rights to receive any dividends or other distributions on our common stock) prior to the conversion date relating to such notes (if we have elected to settle the relevant conversion by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional shares)) or the last trading day of the relevant observation period (if we elect to pay and deliver, as the case may be, a combination of cash and shares of our common stock in respect of the relevant conversion), but holders of notes will be subject to all changes affecting our common stock. For example, if an amendment is proposed to our certificate of incorporation or bylaws requiring stockholder approval and the record date for determining the stockholders of record entitled to vote on the amendment occurs prior to the conversion date related to a holder’s conversion of its notes (if we have elected to settle the relevant conversion by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional shares)) or the last trading day of the relevant observation period (if we elect to pay and deliver, as the case may be, a combination of cash and shares of our common stock in respect of the relevant conversion), such holder will not be entitled to vote on the amendment, although such holder will nevertheless be subject to any changes affecting our common stock.

The conditional conversion feature of the notes could result in holders of our notes receiving less than the value of our common stock into which the notes would otherwise be convertible.

Prior to the close of business on the business day immediately preceding March 1, 2025, the holders of our notes may convert their notes only if specified conditions are met. If the specific conditions for conversion are not met, our note holders will not be able to convert their notes, and they may not be able to receive the value of the cash, common stock or a combination of cash and common stock, as applicable, into which the notes would otherwise be convertible.

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Upon conversion of our notes, our note holders may receive less valuable consideration than expected because the value of our common stock may decline after such exercise of conversion rights but before we settle our conversion obligation.

Under the notes, a converting holder will be exposed to fluctuations in the value of our common stock during the period from the date such holder surrenders notes for conversion until the date we settle our conversion obligation.

Upon conversion of the notes, we have the option to pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock. If we elect to satisfy our conversion obligation in cash or a combination of cash and shares of our common stock, the amount of consideration that our note holders will receive upon conversion of their notes will be determined by reference to the volume-weighted average price of our common stock for each trading day in a 40 consecutive trading day observation period. This period would be (i) subject to clause (ii), if the relevant conversion date occurs prior to March 1, 2025, the 40 consecutive trading day period beginning on, and including, the second trading day immediately succeeding such conversion date; (ii) if the relevant conversion date occurs on or after the date of our issuance of a notice of redemption calling such note for redemption and on or prior to the business day immediately preceding the relevant redemption date, the 40 consecutive trading days beginning on, and including, the 41st scheduled trading day immediately preceding such redemption date; and (iii) subject to clause (ii), if the relevant conversion date occurs on or after March 1, 2025, the 40 consecutive trading days beginning on, and including, the 41st scheduled trading day immediately preceding the maturity date. Accordingly, if the price of our common stock decreases during this period, the amount and/or value of consideration a note holder will receive will be adversely affected. In addition, if the market price of our common stock at the end of such period is below the average volume-weighted average price of our common stock during such period, the value of any shares of our common stock that our note holders will receive in satisfaction of our conversion obligation will be less than the value used to determine the number of shares that they will receive.

If we elect to satisfy our conversion obligation solely in shares of our common stock upon conversion of the notes, we will be required to deliver the shares of our common stock, together with cash for any fractional shares, on the second business day following the relevant conversion date. Accordingly, if the price of our common stock decreases during this period, the value of the shares that note holders receive will be adversely affected and would be less than the conversion value of the notes on the conversion date.

Our notes are not protected by restrictive covenants.

The indenture governing the notes does not contain any financial or operating covenants or restrictions on the payments of dividends, the incurrence of indebtedness or the issuance or repurchase of securities by us or any of our subsidiaries. The indenture does not contain any covenants or other provisions to afford protection to holders of the notes in the event of a fundamental change or other corporate transaction involving us except to the extent described in the indenture governing the notes.

The increase in the conversion rate for notes converted in connection with a make-whole fundamental change or a notice of redemption may not adequately compensate note holders for any lost value of their notes as a result of such transaction or redemption.

If a make-whole fundamental change (as defined in the indenture) occurs prior to the maturity date or if we deliver a notice of redemption, we will, under certain circumstances, increase the conversion rate by a number of additional shares of our common stock for notes converted in connection with such make-whole fundamental change or notice of redemption, as the case may be. The number of additional shares, if any, by which the conversion rate will be increased will be determined based on the date on which the make-whole fundamental change occurs or becomes effective or the date of the notice of redemption, as the case may be, and the price paid (or deemed to be paid) per share of our common stock in the make-whole fundamental change or determined with respect to the notice of redemption, as the case may be. Although the increase in the conversion rate is designed to compensate note holders for the option value that their notes lose as result of a make-whole fundamental change or a redemption, as the case may be, the value provided by the increase in the conversion rate is only an approximation of the lost option value and may not adequately compensate note holders for any lost value of their notes as a result of such transaction or redemption, as the case may be. In addition, if the ‘‘stock price’’ (as defined in the indenture governing the notes) is greater than $325.00 per share or less than $26.14 per share (in each case, subject to adjustment), no additional shares will be added to the conversion rate. Moreover, in no event will the conversion rate per $1,000 principal amount of notes as a result of this adjustment exceed 38.2555 shares of common stock, subject to adjustment.

Our obligation to increase the conversion rate for notes converted in connection with a make-whole fundamental change or notice of redemption could be considered a penalty, in which case the enforceability thereof would be subject to general principles of reasonableness and equitable remedies.

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Upon any redemption of the notes on or after June 6, 2023 or any conversion of the notes in connection with a notice of redemption, the cash comprising the redemption price, in the case of a redemption, or the applicable conversion rate, in the case of a conversion in connection with a notice of redemption, as applicable, may not fully compensate note holders for future interest payments or lost time value of their notes and may adversely affect their return on the notes.

On a redemption date occurring on or after June 6, 2023 and on or before the 41st scheduled trading day immediately before the maturity date, we may redeem for cash all or any portion of the notes, at our option, if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which we provide notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. If we call any or all of the notes for redemption, our note holders may convert their notes at any time prior to the close of business on the business day immediately preceding the redemption date. Upon such redemption or conversion, the cash comprising the redemption price, in the case of a redemption, or the applicable conversion rate, in the case of a conversion in connection with a notice of redemption, in either case, may not fully compensate our note holders for any future interest payments that they would have otherwise received or any other lost time value of their notes. In addition, we may choose to redeem some or all of the notes, including at times when prevailing interest rates are relatively low and our note holders may not be able to reinvest the proceeds or conversion consideration they receive from the redemption or conversion prior to the redemption, respectively, of such notes in a comparable security at an effective interest rate as high as the interest rate on the notes being redeemed.

The conversion rate of our notes may not be adjusted for all dilutive events.

The conversion rate of our notes is subject to adjustment for certain events, including, but not limited to, the issuance of certain stock dividends on our common stock, the issuance of certain rights or warrants, subdivisions, combinations, distributions of capital stock, indebtedness, or assets, cash dividends and certain issuer tender or exchange offers. However, the conversion rate will not be adjusted for other events, such as a third-party tender or exchange offer or an issuance of our common stock for cash, that may adversely affect the trading price of the notes or our common stock. An event that adversely affects the value of the notes may occur, and that event may not result in an adjustment to the conversion rate.

Provisions in the indenture for the notes may deter or prevent a business combination that may be favorable to our security holders.

If a fundamental change occurs prior to the maturity date, holders of our notes will have the right, at their option, to require us to repurchase all or a portion of their notes. In addition, if a make-whole fundamental change occurs prior the maturity date, we will in some cases be required to increase the conversion rate for a holder that elects to convert its notes in connection with such make-whole fundamental change. Furthermore, the indenture for the notes prohibits us from engaging in certain mergers or acquisitions unless, among other things, the surviving entity assumes our obligations under the notes. These and other provisions in the indenture could deter or prevent a third party from acquiring us even when the acquisition may be favorable to our security holders.

Some significant restructuring transactions may not constitute a fundamental change, in which case we would not be obligated to offer to repurchase the notes.

Upon the occurrence of a fundamental change, our note holders have the right to require us to repurchase their notes. However, the fundamental change provisions will not afford protection to holders of notes in the event of other transactions that could adversely affect the notes. For example, transactions such as leveraged recapitalizations, refinancings, restructurings, or acquisitions initiated by us may not constitute a fundamental change requiring us to repurchase the notes. In the event of any such transaction, the note holders would not have the right to require us to repurchase the notes, even though each of these transactions could increase the amount of our indebtedness, or otherwise adversely affect our capital structure or any credit ratings, thereby adversely affecting the holders of notes.

We have not registered the notes or the common stock issuable upon conversion of the notes, if any, which will limit our note holders’ ability to resell them.

The offer and sale of the notes and the shares of common stock issuable upon conversion of the notes, if any, have not been registered under the Securities Act or any state securities laws. Unless the notes and the shares of common stock issuable upon conversion of the notes, if any, have been registered, the notes and such shares may not be transferred or resold except in a transaction exempt from or not subject to the registration requirements of the Securities Act and applicable state securities laws. We do not intend to file a registration statement for the resale of the notes and the common stock, if any, into which the notes are convertible.

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There may not be an active trading market for our notes.

We do not intend to apply to list the notes on any securities exchange or to arrange for quotation on any automated dealer quotation system. The liquidity of the trading market in the notes, and the market price quoted for the notes, may be adversely affected by changes in the overall market for this type of security and by changes in our financial performance or prospects or in the prospects for companies in our industry generally. As a result, an active trading market may not be maintained for the notes, and the market price and liquidity of the notes may be adversely affected. In that case note holders may not be able to sell their notes at a particular time or they may not be able to sell their notes at a favorable price.

Any adverse rating of the notes may cause their trading price to fall.

We do not intend to seek a rating on the notes. However, if a rating service were to rate the notes and if such rating service were to lower its rating on the notes below the rating initially assigned to the notes or otherwise announces its intention to put the notes on credit watch, the trading price of the notes could decline.

Note holders may be subject to tax if we make or fail to make certain adjustments to the conversion rate of the notes even though they do not receive a corresponding cash distribution.

The conversion rate of the notes is subject to adjustment in certain circumstances, including the payment of cash dividends. If the conversion rate is adjusted as a result of a dividend that is taxable to our common stockholders, such as a cash dividend, note holders will be deemed to have received a distribution subject to U.S. federal income tax, without the receipt of any cash. In addition, a failure to adjust (or to adjust adequately) the conversion rate after an event that increases a note holder’s proportionate interest in us could be treated as a deemed taxable dividend to the holder. If a make-whole fundamental change occurs prior to the maturity date or if we deliver a notice of redemption, we will, under certain circumstances, increase the conversion rate for notes converted in connection with the make-whole fundamental change or notice of redemption, as the case may be. Such increase also may be treated as a distribution subject to U.S. federal income tax as a dividend. It is unclear whether any such deemed dividend would be eligible for the preferential tax treatment generally available for dividends paid by U.S. corporations to certain non-corporate U.S. holders. If a note holder is a non-U.S. holder, any deemed dividend would generally be subject to U.S. federal withholding tax, which may be set off against subsequent payments on the notes or any shares of our common stock owned by the holder or from any proceeds of any subsequent sale, exchange or other disposition of the notes (including the retirement of a note) or such common stock or other funds or assets of the holder. The Internal Revenue Service has proposed regulations addressing the amount and timing of deemed distributions, obligations of withholding agents and filing and notice obligations of issuers, which if adopted could affect the U.S. federal income tax treatment of beneficial owners of notes deemed to receive such a distribution.

We may invest or spend the proceeds of from the sale of our notes in ways with which our security holders may not agree or in ways which may not yield a return.

Our management will have considerable discretion in the application of the net proceeds from the sale of our notes, and our security holders will not have the opportunity to assess whether the proceeds are being used appropriately. The net proceeds may be invested with a view towards long-term benefits for our stockholders and this may not increase our operating results or market value. The failure by our management to apply these funds effectively may adversely affect the return on investment.

Because the notes will initially be held in book-entry form, holders must rely on DTC’s procedures to receive communications relating to the notes and exercise their rights and remedies.

We will initially issue the notes in the form of one or more global notes registered in the name of Cede & Co., as nominee of DTC. Beneficial interests in global notes will be shown on, and transfers of global notes will be effected only through, the records maintained by DTC. Except in limited circumstances, we will not issue certificated notes. Accordingly, if a note holder owns a beneficial interest in a global note, then it will not be considered an owner or holder of the notes. Instead, DTC or its nominee will be the sole holder of the notes. Unlike persons who have certificated notes registered in their names, owners of beneficial interests in global notes will not have the direct right to act on our solicitations for consents or requests for waivers or other actions from holders. Instead, those beneficial owners will be permitted to act only to the extent that they have received appropriate proxies to do so from DTC or, if applicable, a DTC participant. The applicable procedures for the granting of these proxies may not be sufficient to enable owners of beneficial interests in global notes to vote on any requested actions on a timely basis. In addition, notices and other communications relating to the notes will be sent to DTC. We expect DTC to forward any such communications to DTC participants, which in turn would forward such communications to indirect DTC participants. However, we can make no assurances that note holders will timely receive any such communications.

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General Risk Factors

Our financial results may be adversely affected by changes in accounting principles generally accepted in the United States.

Generally accepted accounting principles in the United States (“U.S. GAAP”) is subject to interpretation by the Financial Accounting Standards Board (“FASB”), the American Institute of Certified Public Accountants, the SEC and various bodies formed to promulgate and interpret appropriate accounting principles. See Note 1 to the condensed consolidated financial statements included in this report regarding the effect of new accounting pronouncements on our financial statements. Any difficulties in implementing these pronouncements could cause us to fail to meet our financial reporting obligations, which could result in regulatory discipline and harm investors’ confidence in us. Further, the implementation of this new guidance or a change in other principles or interpretations could have a significant effect on our financial results and could affect the reporting of transactions completed before the announcement of a change.

If we fail to maintain an effective system of internal controls, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.

As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934 (Exchange Act), the Sarbanes-Oxley Act and the rules and regulations of the applicable listing exchange. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting and financial compliance costs, make some activities more difficult, time consuming and costly, and place significant strain on our personnel, systems and resources.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers.

Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. For example, our recent acquisition of Deloitte & Touche LLP’s pricing and contracting solutions business may present additional challenges as we integrate their business. Further, weaknesses in our internal controls may be discovered in the future. Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal controls also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we are required to include in our periodic reports we file with the SEC under Section 404 of the Sarbanes-Oxley Act. For example, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our common stock.

In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs, and provide significant management oversight. Any failure to maintain the adequacy of our internal controls, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and could materially impair our ability to operate our business. In the event that our internal controls are perceived as inadequate or that we are unable to produce timely or accurate financial statements, investors may lose confidence in our operating results and our stock price could decline. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the New York Stock Exchange.

We incur significant costs and devote substantial management time as a result of operating as a public company.

As a public company, we incur significant legal, accounting and other expenses. For example, we are required to comply with the requirements of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”) and the Dodd Frank Wall Street Reform and Consumer Protection Act, as well as rules and regulations subsequently implemented by the Securities and Exchange Commission (“SEC”) and the New York Stock Exchange, including the establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Compliance with these rules and regulations increases our legal and financial compliance costs, makes some activities more difficult, time‑consuming or costly and increases demand on our systems and resources, particularly since we are no longer an “emerging growth company.” In order to maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting, significant resources and management oversight may be required. As a result, management’s attention may be diverted from other business concerns, which could adversely affect our business and operating results.

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If securities analysts do not publish research or reports or if they publish unfavorable or inaccurate research about our business and our stock, the price of our stock and the trading volume could decline.

We expect that the trading market for our common stock will be affected by research or reports that industry or financial analysts publish about us or our business. There are many large, well-established companies active in our industry and portions of the markets in which we compete, which may mean that we receive less widespread analyst coverage than our competitors. If one or more of the analysts who covers us downgrades their evaluations of our company or our stock, the price of our stock could decline. If one or more of these analysts cease coverage of our company, our stock may lose visibility in the market, which in turn could cause our stock price to decline.

Uncertainty in global economic conditions may adversely affect our business, operating results or financial condition.

Our operations and performance depend on global economic conditions. Challenging or uncertain economic conditions including those related to global epidemics, pandemics, or contagious diseases, such as COVID-19, make it difficult for our customers and potential customers to accurately forecast and plan future business activities and may cause our customers and potential customers to slow or reduce spending, or vary order frequency, on our solutions. Furthermore, during challenging or uncertain economic times, our customers may face difficulties gaining timely access to sufficient credit and experience decreasing cash flow, which could impact their willingness to make purchases and their ability to make timely payments to us. Global economic conditions have in the past and could continue to have an adverse effect on demand for our solutions, including new bookings and renewal and upsell rates, on our ability to predict future operating results and on our financial condition and operating results. If global economic conditions remain uncertain or deteriorate, it may materially impact our business, operating results and financial condition.

Our business is subject to the risks of earthquakes, fire, power outages, floods and other catastrophic events, and to interruption by manmade problems such as terrorism.

Our corporate headquarters and facilities are located near known earthquake fault zones and are vulnerable to significant damage from earthquakes. The corporate headquarters and facilities are also vulnerable to damage or interruption from human error, intentional bad acts, earthquakes, hurricanes, floods, fires, global epidemics, pandemics, or contagious diseases, war, terrorist attacks, power losses, hardware failures, systems failures, telecommunications failures and similar events. The occurrence of a natural disaster or an act of terrorism or vandalism or other misconduct or other unanticipated problems with our facilities could result in lengthy interruptions to our services. If any disaster were to occur, our ability to operate our business at our facilities could be seriously or completely impaired or destroyed. The insurance we maintain may not be adequate to cover our losses resulting from disasters or other business interruptions.

We may face risks related to securities litigation that could result in significant legal expenses and settlement or damage awards.

We have been in the past and may in the future become subject to claims and litigation alleging violations of the securities laws or other related claims, which could harm our business and require us to incur significant costs. We are generally obliged, to the extent permitted by law, to indemnify our current and former directors and officers who are named as defendants in these types of lawsuits. Regardless of the outcome, litigation may require significant attention from management and could result in significant legal expenses, settlement costs or damage awards that could have a material impact on our financial position, results of operations and cash flows.

Our restated certificate of incorporation and restated bylaws and Delaware law could prevent a takeover that stockholders consider favorable and could also reduce the market price of our stock.

Our restated certificate of incorporation and restated bylaws contain provisions that could delay or prevent a change in control of us. These provisions could also make it more difficult for stockholders to elect directors and take other corporate actions. These provisions include:

•providing for a classified board of directors with staggered, three-year terms;

•authorizing the board of directors to issue, without stockholder approval, preferred stock with rights senior to those of our common stock;

•providing that vacancies on our board of directors be filled by appointment by the board of directors;

•prohibiting stockholder action by written consent;

•requiring that certain litigation must be brought in Delaware;

•limiting the persons who may call special meetings of stockholders; and

•requiring advance notification of stockholder nominations and proposals.

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In addition, we are subject to Section 203 of the Delaware General Corporation Law which may prohibit large stockholders, in particular those owning fifteen percent or more of our outstanding voting stock, from merging or combining with us for a certain period of time without the consent of our board of directors.

These and other provisions in our restated certificate of incorporation and our restated bylaws and under the Delaware General Corporation Law could discourage potential takeover attempts, reduce the price that investors might be willing to pay in the future for shares of our common stock and result in the market price of our common stock being lower than it would be without these provisions.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

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Item 6.    Exhibits

    The following documents are filed as Exhibits to this report:

Exhibit Number	Exhibit Description	Filed Herewith
10.1+	Asset Purchase Agreement by and between Deloitte & Touche LLP and the Registrant, dated December 17, 2020	X
31.1	Certification of Principal Executive Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.	X
31.2	Certification of Principal Financial Officer Required Under Rule 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended.	X
32.1*	Certification of Chief Executive Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350	X
32.2*	Certification of Chief Financial Officer Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. §1350	X
101.INS	Inline XBRL Instance Document	X
101.SCH	Inline XBRL Taxonomy Extension Schema Document	X
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document	X
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document	X
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document	X
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document	X
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)	X

+	Registrant has omitted schedules and exhibits pursuant to Item 601(a)(5) of Regulation S-K. The Registrant agrees to furnish supplementally a copy of the omitted schedules and exhibits to the SEC upon request.
*	This certification is deemed not filed for purpose of section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: February 9, 2021

MODEL N INC.
By:	/s/ John Ederer
	John Ederer
	Chief Financial Officer
	(Principal Financial Officer and Accounting Officer)

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EX-10.1

Exhibit 10.1

Asset Purchase Agreement

by and between

Deloitte & Touche LLP

and

Model N, Inc.

December 17, 2020

Table of Contents

Page

Article 1 CERTAIN MATTERS OF CONSTRUCTION AND DEFINITIONS	1
1.1Construction and Definitions	1
Article 2 PURCHASE AND SALE OF ACQUIRED ASSETS	1
2.1Purchase and Sale of Acquired Assets	1
2.2Excluded Assets	3
2.3Liabilities	4
2.4Approvals and Consents; Shared Contracts	5
Article 3 CLOSING; THE PURCHASE PRICE; ALLOCATION	6
3.1Closing	6
3.2Purchase Price	6
3.3Adjustments to Purchase Price	7
3.4Allocation	9
Article 4 REPRESENTATIONS AND WARRANTIES OF SELLER	10
4.1Organization and Power	10
4.2Authorization of Agreement	10
4.3Conflicts; Consents of Third Parties	10
4.4Financial Information	11
4.5Absence of Certain Developments	11
4.6Legal Proceedings	12
4.7Compliance with Laws	12
4.8Taxes	12
4.9Material Contracts	13
4.10Title to Acquired Assets; Sufficiency	14
4.11Intellectual Property	15
4.12Privacy and Data Security	18
4.13Labor and Employment Matters	19
4.14Acquired Leases	21
4.15Transactions with Related Parties	21
4.16Permits	21
4.17Financial Advisors	21
4.18Environmental, Health and Safety Matters	22
4.19Customers; Suppliers; Channel Partners	22
4.20Insurance	22
4.21Independence	23
4.22Limitations of Representations and Warranties	23
Article 5 REPRESENTATIONS AND WARRANTIES OF BUYER	23
5.1Organization and Power	23

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5.2Authorization of Agreement	23
5.3Conflicts; Consents of Third Parties	24
5.4Legal Proceedings	24
5.5Financial Capability	24
5.6Financial Advisors	24
5.7No Other Representations and Warranties; No Reliance; Buyer Investigation	24
Article 6 COVENANTS	25
6.1Conduct of Business	25
6.2Information and Access	28
6.3Contact with Affiliates, Customers, Suppliers and Other Business Relations	29
6.4Billing and Collection of Accounts Receivable and WIP; Receipt of Property Relating to Acquired Assets	29
6.5R&W Insurance Policy	30
6.6Mutual Cooperation	30
6.7Exclusivity	31
6.8Satisfaction of Conditions Precedent	31
6.9Employment of Seller Personnel and Related Matters	31
6.10Certain Consents	32
6.11Use of Certain Names; No Affiliation	32
6.12Taxes	33
6.13Preservation of Records; Post-Closing Information and Access	34
6.14Publicity	34
6.15Independence Rules and Regulations	35
6.16Bulk Sales	35
6.17Migration of Data	35
6.18Non-Competition	35
6.19Shared Services	36
6.20Supplement to Schedules	36
6.21Further Assurances	36
Article 7 CONDITIONS PRECEDENT	37
7.1Conditions to Each Party’s Obligations	37
7.2Conditions to Obligations of Buyer	37
7.3Conditions to Obligations of Seller	38
Article 8 INDEMNIFICATION	39
8.1Survival; Claims Period	39
8.2Indemnification by Seller	40
8.3Indemnification by Buyer	41
8.4Indemnification Procedures	41
8.5Notice of Claims; Resolution	43
8.6Limitations	43
8.7Payment	44
8.8Adjustment to Purchase Price	45

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8.9Exclusive Remedy	45
Article 9 TERMINATION	45
9.1Termination	45
9.2Effect of Termination	46
Article 10 GENERAL PROVISIONS	46
10.1Notices	46
10.2Entire Agreement; No Third-Party Beneficiaries	47
10.3Governing Law; Consent to Jurisdiction	47
10.4Waiver of Right to Trial by Jury	48
10.5Assignment	49
10.6Waiver; Amendment; Remedies Cumulative; Specific Performance	49
10.7Fees and Expenses	49
10.8Mutual Drafting	49
10.9Representation by Counsel	50
10.10Severability	50
10.11Facsimile Signature; Counterparts	50

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Table of Contents

(continued)

Schedules

Schedule A: Individuals Executing Offer Letters as of the Agreement Date

Schedule 1.1: Certain Matters of Construction; Definitions

Schedule 1.1(a)-1: Non-Continuing Business Employees

Schedule 1.1(a)-2: Included Business Employee

Schedule 2.1(a): Acquired Contracts

Schedule 2.1(b): Acquired Leases & Business Leased Real Property

Schedule 2.1(c): Acquired Tangible Assets

Schedule 2.1(e): Acquired Data

Schedule 2.1(f) Acquired Intellectual Property Rights

Schedule 2.1(g): Acquired Technology

Schedule 2.2(f): Other Excluded Assets

Schedule IV: Seller Disclosure Schedule

Schedule V: Buyer Disclosure Schedule

Schedule 6.11(b): Permitted Factual Statements

Schedule 6.17: Transfer Plan

Schedule 7.2(e)(ix)-1: Required Consents

Schedule 7.2(e)(ix)-2: Required Notice

Schedule 7.2(e)(x): Remediation Plan

Exhibits

Exhibit A:    Wire Instructions

Exhibit B:    Sample Determination of Net Working Capital Amount

Exhibit C:    Form of Non-IP Bill of Sale

Exhibit D:    Form of Intellectual Property Bill of Sale

Exhibit E:    Form of Transition Services Agreement

Exhibit F:    Form of License Back Agreement

Exhibit G:    Form of Subcontractor Agreement

Exhibit H:    R&W Insurance Policy

4

ASSET PURCHASE AGREEMENT

This ASSET PURCHASE AGREEMENT is made and entered into as of this 17th day of December, 2020 (the “Agreement Date”), by and between Deloitte & Touche LLP, a Delaware limited liability partnership (“Seller”) and Model N, Inc., a Delaware corporation (“Buyer”).

WHEREAS, as of the date of this Agreement, Seller and the Business Affiliates conduct a business of developing, marketing, distributing, selling, licensing and providing technology-driven outsourced operational and analytical software applications, tools and solutions (including the ExaLink platform, tools and applications and solutions relating to government pricing, Medicaid claims, rebates and fees, chargebacks, master data management, Federal Supply Schedule (FSS) contract administration and public law assistance, and class of trade and public health service classification) to the life sciences industry and related industries, and related implementation and support services for such technology-driven outsourced operational and analytical software applications, which is known as the Pricing and Contracting Solutions (PaCS) business, but excluding in each case consulting advisory services (the “Business”).

WHEREAS, Seller desires to sell and assign to Buyer, and cause the Business Affiliates to sell and assign to Buyer, and Buyer desires to purchase and assume from Seller and the Business Affiliates, certain assets, properties and rights and certain liabilities and obligations, of Seller and the Business Affiliates on the terms and conditions set forth in this Agreement.

WHEREAS, concurrently with the execution of this Agreement and as a material inducement to the willingness of Buyer to enter into this Agreement, each of the employees set forth on Schedule A are executing employee offer letters or employment agreements with Buyer or an Affiliate of Buyer, together with an employee proprietary information and inventions agreement (each, collectively, an “Offer Letter”), to become effective upon the Closing.

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each party, the parties, intending to be legally bound, agree as follows:

Article 1

CERTAIN MATTERS OF CONSTRUCTION AND DEFINITIONS

1.1    Construction and Definitions

. Certain matters of construction of this Agreement and the definition of capitalized terms used herein, but not otherwise defined in ARTICLE I through ARTICLE X, are set forth on Schedule 1.1.

Article 2

PURCHASE AND SALE OF ACQUIRED ASSETS

2.1    Purchase and Sale of Acquired Assets

. Upon the terms and subject to the conditions set forth in this Agreement, upon and with effect as of the Closing, Seller shall, and shall cause the Business Affiliates to, sell, transfer, convey, assign and deliver to Buyer, and Buyer agrees to purchase and accept from Seller and the Business

Affiliates, all of Seller’s and the Business Affiliates’ right and title to, interest in, and claims under the Acquired Assets, collectively, in each case, free and clear of all Liens, except for Permitted Liens. As used herein, the term “Acquired Assets” shall mean all of the assets, properties and rights of Seller and the Business Affiliates, existing as of the Closing Date, listed in subsections (a) through (k) below:

(a)    the Contracts listed on Schedule 2.1(a) (and, to the extent applicable, incorporating the terms of any other Contract as described therein), as Schedule 2.1(a) may be supplemented or amended in accordance with Section 6.20 (collectively, the “Acquired Contracts”);

(b)    the leases, including all amendments, modifications, or supplements thereto, listed on Schedule 2.1(b) (collectively, the “Acquired Leases”), for the real property set forth on Schedule 2.1(b) (the “Business Leased Real Property”), including Seller’s security deposits related to the Acquired Leases;

(c)    all furniture, office supplies, office equipment, trade fixtures and furnishings located, used or held for use at the Business Leased Real Property other than the equipment and tangible personal property assets listed on Schedule 2.1(c) (the “Acquired Tangible Assets”);

(d)    copies of all books and records (whether written or electronic) (“Books and Records”) of the Business, including, financial, tax and accounting records, copies of the Acquired Contracts and Acquired Leases, customer lists, vendor lists, Customer files and correspondence, billing and receivables history, and marketing information and promotional materials, in each case, of the Business, but excluding such items to the extent relating to Excluded Assets or Excluded Liabilities (collectively, the “Acquired Books and Records”), and provided, that Seller and the Business Affiliates shall be entitled to retain copies of the foregoing;

(e)    the data described on Schedule 2.1(e) (the “Acquired Data”); provided that Seller and the Business Affiliates shall be entitled to retain copies of the Acquired Data as and to the extent required under Law or under Seller’s document retention policies;

(f)    Intellectual Property Rights listed on Schedule 2.1(f) (the “Acquired Intellectual Property Rights”);

(g)    the Technology listed on Schedule 2.1(g) (the “Acquired Technology”);

(h)    (A) accounts receivable for sales or services of the Business rendered pursuant to the Acquired Contracts that have been billed to the applicable Customers as of the Closing Date (the “Accounts Receivable”), and (B) work-in-process representing services of the Business arising from or attributable to the Acquired Contracts as of the Closing Date (“WIP”);

(i)    prepaid expenses, deposits and other prepaid items and credits, including all prepaid commission expenses, in each case to the extent both (A) exclusively relating to the Business and (B) the benefit associated with such prepaid expense, deposit or other prepaid items or credits is capable of being transferred to Buyer, in each case, as of the Closing Date (the “Prepaid Expenses”);

(j)    Seller’s and the Business Affiliates’ causes of action (whether known or unknown) and other enforcement rights to the extent arising under, or on account of, any of the Acquired Assets, including all rights under express or implied warranties and all claims, credits, causes of action or rights of set-off against third parties relating to such Acquired Assets, including all rights to seek and obtain injunctive relief and to recover damages for past, present and future infringement,

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misappropriation or other violation of any Acquired Intellectual Property and Acquired Goodwill (except to the extent such rights or causes of action relate to the Excluded Assets); and

(k)    goodwill to the extent exclusively related to the Business (“Acquired Goodwill”).

2.2    Excluded Assets

. Notwithstanding anything to the contrary herein, Buyer is not acquiring hereunder or otherwise any of Seller’s or its Affiliates’ or related entities’ right and title to, interest in, and claims under any assets, properties, or rights other than those expressly described in Section 2.1 above, which shall therefore not constitute part of the Acquired Assets (collectively, the “Excluded Assets”), including the following assets, properties or rights of Seller or any Affiliate or related entities of Seller:

(a)    cash and cash equivalents;

(b)    any names, logos, trademarks, trade names or service marks including any names, logos, trademarks, trade names or service marks (i) containing any of the “Deloitte,” “Touche” or “Tohmatsu” names, or any derivatives thereof, or (ii) used in the businesses of Seller or its Affiliates, or any other Intellectual Property Rights, in each case other than the Acquired Intellectual Property Rights which include the Transferred Mark;

(c)    any and all Technology, other than the Acquired Technology;

(d)    all (i) company seals, corporate minute books and stock records or similar corporate records of Seller and the Business Affiliates and (ii) Tax Returns;

(e)    all Books and Records (other than the Acquired Books and Records) and a copy of all Acquired Books and Records;

(f)    all Contracts, assets, properties or rights set forth on Schedule 2.2(f);

(g)    all personal property and computer equipment other than the Acquired Tangible Assets;

(h)    all Tax assets, including refunds due to Seller or any Business Affiliate, in respect of periods or portions thereof ending on or prior to the Closing Date;

(i)    all leases to real property other than the Acquired Leases;

(j)    any bank accounts used by the Business;

(k)    current and prior insurance policies of Seller and the Business Affiliates and all rights of any nature with respect thereto, including all insurance recoveries thereunder and rights to assert claims with respect to any such insurance recoveries;

(l)    all assets related to any Employee Benefit Plan; and

(m)    all assets, properties and rights that are subject to the Transition Services Agreement.

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2.3    Liabilities

.

(a)    Assumed Liabilities. In addition to the payment of the Purchase Price, Buyer shall assume and agree to pay, perform and discharge when due, all of the following (collectively, the “Assumed Liabilities”):

(i)    all liabilities and obligations arising out of or relating to the Acquired Assets, but only to the extent such liabilities and obligations arise out of Buyer’s operation of the Business or use or operation of the Acquired Assets after the Closing Date;

(ii)    all liabilities and obligations under the Acquired Contracts (and to the extent that such Contracts are Shared Contracts, subject to Section 2.4) and the Acquired Leases, in each case to the extent such liabilities arise after the Closing Date, and do not relate to any tort, breach, default or violation by or on behalf of Seller or any Business Affiliate prior to the Closing, including all accounts payable of Seller or any Business Affiliate thereunder (the “Accounts Payable”) and Deferred Revenue thereunder;

(iii)    all liabilities and obligations arising out of or relating to the Buyer’s employment of the Transferred Personnel as contemplated by Section 6.9(a), including all liabilities arising out of the employment or association of the Transferred Personnel by or with Buyer after the Closing Date, including obligations for salaries, wages, profit sharing plans, bonuses, retention payments and other liabilities; and

(iv)    all Taxes for which Buyer is liable pursuant to Section 6.12.

For the avoidance of doubt, the parties hereto expressly agree that the Assumed Liabilities shall exclude any liability that (A) arises from Seller’s breach or default under the Acquired Contracts and Acquired Leases prior to the Closing, or (B) is an Excluded Liability.

(b)    Excluded Liabilities. Buyer shall not assume, or in any way be liable or responsible for, any liability other than the Assumed Liabilities, including the following liabilities or obligations of Seller or the Business Affiliates (collectively, the “Excluded Liabilities”):

(i)    any liability or obligation to the extent arising out of or related to the Excluded Assets;

(ii)    any liability or obligation arising out of or relating to any tort, breach, default or violation by Seller or any Business Affiliate on or prior to the Closing Date;

(iii)    any Legal Proceeding to the extent relating to or arising out of the ownership or use of the Acquired Assets or the ownership or operation of the Business on or prior to the Closing Date;

(iv)    any liability or obligation for any Taxes (other than any Taxes that are described in Section 2.3(a)(iv));

(v)    all debts and other obligations of Seller for borrowed money;

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(vi)    all liabilities or obligations relating to any lease of real property (other than with respect to the Acquired Leases);

(vii)    any liability of Seller or the Business Affiliates in connection with the employment of any current or former employee or other service provider of Seller or the Business Affiliates, including any Transferred Personnel, on or prior to the Closing Date, including any liability of Seller or the Business Affiliates constituting workers’ compensation claims of such personnel with respect to occurrences on or prior to the Closing Date, and any liability of Seller or the Business Affiliates in connection with the termination of employment of any current or former employee or other service provider of Seller or the Business Affiliates, including any Transferred Personnel;

(viii)    all liabilities under or related to any Employee Benefit Plan, whether in respect of any current or former employee of Seller or the Business Affiliates, including any Transferred Personnel, or their covered dependents, or any other current or former employees of Seller or the Business Affiliates, for benefits, claims or entitlements under any Employee Benefit Plans;

(ix)    any liabilities of Seller or the Business Affiliates arising out of Seller’s negotiation and preparation of this Agreement and consummation and performance of the Transactions; and

(x)    all liabilities arising from violations of or non-compliance with Financial Services Laws arising out of the operation of the Business on or prior to the Closing Date.

2.4    Approvals and Consents; Shared Contracts

.

(a)    To the extent that the assignment by Seller or a Business Affiliate to Buyer pursuant to the terms hereof of any Acquired Asset or the assumption by Buyer of any Assumed Liability is not permitted without the consent of another Person or Persons or would otherwise constitute a breach or other contravention under any Contract or Law to which Seller or such Business Affiliate is a party or by which it is bound, or in any way adversely affects rights of Seller or such Business Affiliate or, upon transfer, Buyer, with respect to such Acquired Asset or Assumed Liability, this Agreement and the applicable Bill of Sale or Lease Assignment Agreement shall not be deemed to constitute an assignment of any such Acquired Asset or an assumption of any such Assumed Liability until such consent is obtained and is effective in accordance with its terms, and such asset (a “Contingent Asset”) shall only become an Acquired Asset and such liability (a “Contingent Liability”) shall only become an Assumed Liability at such time as such consent has been obtained and becomes effective in accordance with its terms.

(b)    Buyer and Seller shall, and Seller shall cause any applicable Business Affiliate to, use their respective commercially reasonable efforts to obtain any consents or waivers required to assign to Buyer any Contingent Asset or Contingent Liability, without any conditions to such transfer (including the making of any payments) or changes or modifications of terms thereunder; provided, however, that Buyer shall not be obligated to pay any consideration therefor to any third party from whom consent or waiver is requested. Subject to Seller’s compliance with the immediately foregoing sentence, each party hereto agrees that no party hereto or their respective Affiliates shall have any liability to the

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other party arising out of or relating to the failure to obtain any such consent that may be required in connection with the Transactions or because of any circumstances resulting therefrom.

(c)    If any consent referred to in Section 2.4(a) above is not obtained prior to Closing for an Acquired Contract that is not a Contract with a Customer, and until any such consent is obtained, (i) Buyer and Seller will take commercially reasonable actions necessary or appropriate to provide Buyer with all of the benefits, and for Buyer to bear the costs and liabilities, in each case, arising after the Closing, with respect to such Contingent Assets and Contingent Liabilities, to the extent permitted by Law, (ii) Seller shall take such actions as may be reasonably requested by Buyer with respect to such Contingent Assets and Contingent Liabilities, (iii) Buyer will use commercially reasonable efforts to cooperate with Seller and any applicable Business Affiliates in any reasonable arrangement necessary to provide that neither Seller nor any of its Affiliates are responsible for any obligation or liability (other than Excluded Liabilities) relating to or arising out of such Contingent Asset or Contingent Liability, and (iv) Seller shall not amend, modify or supplement in any way the terms of, or terminate, such Acquired Contract without the prior written consent of Buyer.

(d)    If any consent referred to in Section 2.4(a) above is not obtained prior to Closing for an Acquired Contract that is a Contract with a Customer (including to the extent that such Contract with a Customer is a Shared Contract, the portion of each Shared Contract with such Customer relating to the Business), such Acquired Contract shall be subject to the Subcontractor Agreement as provided therein.

Article 3

CLOSING; THE PURCHASE PRICE; ALLOCATION

3.1    Closing

. The closing of the sale and purchase of the Acquired Assets and the assumption of the Assumed Liabilities (the “Closing”) shall take place at the offices of Kramer Levin Naftalis & Frankel LLP, at 1177 Avenue of the Americas, New York, New York 10036, at a time to be specified by Buyer and Seller which, if the conditions set forth in ARTICLE VII (other than conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions at the Closing) are satisfied by December 29, 2020, shall be on December 31, 2020, and otherwise shall be on such date as shall be specified by Buyer and Seller, but no later than the second (2nd) Business Day after the satisfaction or waiver of the conditions set forth in ARTICLE VII (other than conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions at the Closing), or at such other time, date and location as Buyer and Seller agree in writing (the “Closing Date”). The Closing shall be effective as of 11:59 p.m. (New York City time) on the Closing Date.

3.2    Purchase Price

.

(a)    Purchase Price. On the Closing Date, as consideration for the purchase of the Acquired Assets, and in addition to assuming the Assumed Liabilities, Buyer shall pay to Seller by wire transfer in immediately available funds to the account set forth in Exhibit A (or any other account communicated by Seller to Buyer in writing no later than two (2) Business Days prior to the applicable payment date) the Closing Date Payment (as adjusted in accordance with and subject to Section 3.3, the “Purchase Price”).

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(b)    Closing Date Payment. The “Closing Date Payment” shall be an amount equal to:

(i)    (A) Sixty Million Dollars ($60,000,000), plus (B) the Closing Adjustment Amount, if the Estimated Net Working Capital Amount is greater than the Net Working Capital Target;

(ii)    (A) Sixty Million Dollars ($60,000,000), minus (B) the Closing Adjustment Amount, if the Estimated Net Working Capital Amount is less than the Net Working Capital Target; and

(iii)    (A) Sixty Million Dollars ($60,000,000), if the Estimated Net Working Capital Amount is equal to the Net Working Capital Target.

(iv)    For such purposes, the “Closing Adjustment Amount” shall equal the difference (expressed as a positive number), if any, between the Net Working Capital Target and the Estimated Net Working Capital Amount.

3.3    Adjustments to Purchase Price

.

(a)    Delivery of Closing Statement. Seller shall prepare and deliver to Buyer not less than three (3) Business Days prior to the Closing Date a written statement setting forth Seller’s good faith estimate of the Net Working Capital Amount as of the Closing Date (the “Estimated Net Working Capital Amount”) and setting forth, in reasonable detail, Seller’s basis for such estimate (the “Closing Statement”). The Closing Statement shall be substantially in the form of the Sample Net Working Capital Statement and shall be prepared on a basis consistent with the Seller Accounting Principles and shall otherwise be consistent with the Books and Records of the Business. Seller shall provide to Buyer such additional back-up or supporting data relating to the preparation of the Closing Statement and the calculation of the Estimated Net Working Capital Amount as Buyer may reasonably request. A sample determination of the Net Working Capital Amount (for such purposes, substituting a reference to September 19, 2020 for the reference to the Closing Date in the definition of Net Working Capital Amount) setting forth, in reasonable detail, the basis for such determination is attached as Exhibit B hereto (the “Sample Net Working Capital Statement”). The Sample Net Working Capital Statement shall be prepared on a basis consistent with the Seller Accounting Principles and shall otherwise be consistent with the Books and Records of the Business.

(b)    Delivery of Post-Closing Statement. Within sixty (60) days after the Closing Date, Buyer shall prepare and deliver to Seller a written statement setting forth Buyer’s determination of the Net Working Capital Amount as of the Closing Date (the “Actual Net Working Capital Amount”), and setting forth, in reasonable detail, the basis for such determination (the “Post-Closing Statement”). The Post-Closing Statement shall be substantially in the form of the Sample Net Working Capital Statement and shall be prepared on a basis consistent with the Seller Accounting Principles and shall otherwise be consistent with the Books and Records of the Business. Buyer shall provide to Seller such additional back-up or supporting data relating to the preparation of the Post-Closing Statement and the calculation of the Actual Net Working Capital Amount as Seller may reasonably request.

(c)    Acceptance Period; Delivery of Dispute Notice. Seller may, within thirty (30) days following receipt of the Post-Closing Statement, provide Buyer with written notice (the “Post-Closing Statement Dispute Notice”) of its disagreement with the determination of the Actual Net Working

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Capital Amount reflected on the Post-Closing Statement. If no such notice is delivered to Buyer by Seller within such period (or if Buyer otherwise delivers a notice of its acceptance of the Actual Net Working Capital Amount reflected on the Post-Closing Statement), the Post-Closing Statement and the calculation of the Actual Net Working Capital Amount reflected thereon shall be final and binding upon the parties hereto. A Post-Closing Statement Dispute Notice shall set forth Seller’s determination of the Actual Net Working Capital Amount and set forth, in reasonable detail, the basis for such determination. Seller shall provide to Buyer such additional back-up or supporting data relating to the preparation of the Post-Closing Statement Dispute Notice and Seller’s calculation of the Actual Net Working Capital Amount contained therein as Buyer may reasonably request. Any items set forth on the Post-Closing Statement that Seller does not dispute in the Post-Closing Statement Dispute Notice shall be deemed final and shall be binding upon the parties hereto. Buyer and Seller shall endeavor in good faith to resolve any such disagreement within thirty (30) days (the “Negotiating Period”) following the delivery by Seller of such Post-Closing Statement Dispute Notice. Any resolution (including any partial resolution) of such a disagreement shall be set forth in a writing executed by Buyer and Seller, and any such resolution shall be final and binding on the parties hereto for purposes of determining the Actual Net Working Capital Amount.

(d)    Determination of Disputes by Neutral Firm. If Buyer and Seller are unable to completely resolve any such disagreement within the Negotiating Period, the unresolved issues (the “Working Capital Dispute”) shall be promptly submitted for resolution to a recognized, reputable and impartial certified public accounting firm that is mutually acceptable to Buyer and Seller (the “Neutral Firm”). If Buyer and Seller cannot agree upon a Neutral Firm within ten (10) days, the New York City office of the American Arbitration Association shall choose a nationally recognized, reputable and impartial certified public accounting firm (other than Deloitte LLP, PricewaterhouseCoopers LLP, Ernst & Young LLP and KPMG LLP or any of their respective Affiliates) to act as the Neutral Firm. The parties shall instruct the Neutral Firm to (i) promptly (and, to the extent practicable, no later than sixty (60) days after the Neutral Firm’s receipt of such instructions) determine (it being understood that in making such determination, the Neutral Firm shall be functioning as an expert and not as an arbitrator), based solely on written submissions by Seller and Buyer, and not by independent review, only those issues in dispute and (ii) render a written report as to the resolution of the Working Capital Dispute which, absent manifest error, shall be conclusive and binding on the parties for purposes of determining the Actual Net Working Capital Amount. In resolving any Working Capital Dispute, the Neutral Firm (A) shall be instructed to comply with the provisions of this Section 3.3(d) and (B) may not assign a value to any item greater than the greatest value for such items claimed by either party or less than the smallest value for such items claimed by either party. Neither Buyer nor Seller (or any of their respective Affiliates or representatives) shall have any ex parte communications or meetings with the Neutral Firm without reasonable prior notice (which notice shall provide the other party a reasonable opportunity to participate in such communications or meetings) to the other party. The fees and expenses of the Neutral Firm shall be allocated between Buyer and Seller based on the inverse of the percentage that its determination (before such allocation) in favor of a party bears to the aggregate amount of the items in dispute as originally submitted to the Neutral Firm. By way of illustration and not limitation, assuming the items in dispute total an amount equal to $1,000 and the Neutral Firm awards $600 in favor of the Seller’s position, 60% of the costs of its review would be borne by Buyer and 40% of such costs would be borne by Seller.

(e)    Post-Closing Reconciliation.

(i)    If the Actual Net Working Capital Amount as finally determined pursuant to Section 3.3(c) or Section 3.3(d) is greater than the Estimated Net Working Capital

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Amount, the Reconciliation Payment shall be paid by Buyer to Seller. If the Actual Net Working Capital Amount as finally determined pursuant to Section 3.3(c) or Section 3.3(d) is less than the Estimated Net Working Capital Amount, the Reconciliation Payment shall be paid by Seller to Buyer. If the Actual Net Working Capital Amount as finally determined pursuant to Section 3.3(c) or Section 3.3(d) is equal to the Estimated Net Working Capital Amount, no payment shall be required under this Section 3.3(e).

(ii)    If a payment is required to be made by Buyer or Seller, as applicable, under Section 3.3(e)(i), such payment shall be made within five (5) days of the date on which the Actual Net Working Capital Amount is finally determined pursuant to Section 3.3(c) or Section 3.3(d), as the case may be, by wire transfer of immediately available funds to such account(s) as Seller or Buyer, as applicable, designates by written notice at least two (2) days prior to the date such payment is due.

(iii)    If the Reconciliation Payment is not paid by the applicable party when such amount is due, then interest shall accrue monthly on such unpaid amount at a rate per annum equal to the sum of the rate of interest per annum (over a year of 360 days) announced by JPMorgan Chase Bank, N.A. (or any successor thereto) from time to time, as its “base rate” in effect on such date and 200 basis points.

3.4    Allocation

. The Purchase Price (plus all other capitalizable costs and all Assumed Liabilities to the extent properly taken into account pursuant to the Code) will be allocated for Tax purposes among the Acquired Assets in accordance with Section 1060 of the Code, as mutually agreed upon by Buyer and Seller. No portion of the Purchase Price shall be allocated in respect of the Lease Assignments. Seller shall submit a proposed allocation to Buyer not more than ninety (90) days after the date on which the Actual Net Working Capital Amount is finally determined pursuant to Section 3.3(c) or Section 3.3(d), as the case may be, and such proposed allocation shall be subject to consent from Buyer. Buyer shall have thirty (30) days from notice of such proposed allocation to object thereto. Any such objection shall be made by written notice to Seller and shall specify, in reasonable detail, the specific areas of Buyer’s disagreement with Seller’s proposed allocation and the reasons therefor. Seller and Buyer shall negotiate in good faith to resolve any dispute relating to the proposed allocation (and any adjustments necessitated by adjustments to the Purchase Price); provided, that if Seller and Buyer are unable to resolve any such dispute, neither Buyer nor Seller shall be bound by any portion of the proposed allocation as prepared by Seller, and each party may independently determine its own allocation of the Purchase Price and file its Tax Returns (and Tax Returns of its Affiliates) using alternative allocations of its choosing. If (a) Buyer does not timely object to Seller’s proposed allocation, or (b) Buyer does timely object but the parties ultimately agree to an allocation of the Purchase Price (in either case, such an allocation, the “Allocation”), the parties shall prepare and file all Tax Returns (including Internal Revenue Service Form 8594) in a manner consistent with the Allocation; provided, that nothing contained herein shall prevent a party from settling any proposed deficiency or adjustment by any taxing authority based upon or arising out of the Allocation, and neither party shall be required to litigate before any court any proposed deficiency or adjustment by a taxing authority challenging such Allocation. Each of the parties shall notify the other if it receives notice that any tax authority proposes any allocation different from that set forth in the Allocation and any adjustments thereto agreed to by the parties. In the event of any adjustment to the Purchase Price pursuant to Section 3.3 or ARTICLE VIII, the Allocation shall be adjusted in accordance with the principles set forth in this Section 3.4.

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Article 4

REPRESENTATIONS AND WARRANTIES

OF SELLER

Except as set forth on the disclosure schedule delivered by Seller to Buyer on the date hereof concurrently with entry into this Agreement and attached to this Agreement as Schedule IV (the “Seller Disclosure Schedule”) (and provided that disclosure in any section of such Seller Disclosure Schedule shall be deemed disclosed with respect to any other Section of this Agreement (in addition to the Section referenced in such schedule) to the extent that it is reasonably apparent on the face of such disclosure that such disclosure is applicable to such other Section), Seller represents and warrants to Buyer that:

4.1    Organization and Power

. Seller and each Business Affiliate is an entity duly formed or organized, validly existing and in good standing under the laws of its jurisdiction of formation. Seller and each Business Affiliate is duly licensed or qualified to do business in each jurisdiction in which its operations relating to the Business or the character or location of the Acquired Assets owned or leased by it makes such licensing or qualification necessary, except for those jurisdictions where the failure to be so qualified would not have a Seller Material Adverse Effect. Seller has the requisite power and authority to execute and deliver this Agreement, and Seller and each Business Affiliate has the requisite power and authority to execute and deliver each Transaction Document to which it is or will be a party, to perform its obligations hereunder and thereunder, as applicable, and to consummate the Transactions. A true, correct and complete list of Seller and the Business Affiliates and the jurisdiction where each is duly formed or organized is set forth on Section 4.1 of the Seller Disclosure Schedule.

4.2    Authorization of Agreement

. The execution and delivery of this Agreement and each Transaction Document to which Seller or a Business Affiliate is a party and the consummation of the Transactions have been duly authorized by the requisite action on the part of Seller and, as applicable, each such Business Affiliate. No other action on the part of Seller or the Business Affiliates is necessary to authorize the execution and delivery of this Agreement and each Transaction Documents to which it is or will be a party or the performance of Seller’s or the Business Affiliates’ obligations hereunder or thereunder. This Agreement and each Transaction Document to which Seller or a Business Affiliate is or will be a party has been or will be at or prior to the Closing duly and validly executed and delivered by Seller and each such Business Affiliate and, assuming the due authorization, execution and delivery by the other parties thereto, this Agreement and each such Transaction Document when so executed and delivered, will constitute, the legal, valid and binding obligations of Seller and each such Business Affiliate, enforceable against such party in accordance with the applicable terms thereof, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other Laws of general applicability affecting the rights of creditors and by general equitable principles (the “Enforceability Exception”).

4.3    Conflicts; Consents of Third Parties

.

(a)    Except as listed on Section 4.3(a) of the Seller Disclosure Schedule and assuming all Governmental Approvals described in Section 4.3(b) have been obtained, the execution, delivery and

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performance by Seller of this Agreement, and the execution, delivery and performance by Seller or any Business Affiliate of any Transaction Document to which it is or will be a party, and the consummation of the Transactions by Seller and the Business Affiliates, will not: (i) result in the creation of any Lien upon any of the Acquired Assets (other than Permitted Liens), (ii) conflict with or violate the Organizational Documents of Seller or any Business Affiliate, (iii) conflict with, violate or constitute a default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, modification or cancellation by third parties under any Acquired Contract to which Seller or any Business Affiliate is a party or by which any of the Acquired Assets are bound, or (iv) conflict with or violate any Law applicable to Seller or any Business Affiliate.

(b)    No consent, waiver, approval, waiting period expiration or termination, Order, Permit or authorization of, or declaration or filing with, or notification to, any Governmental Entity (a “Governmental Approval”) is required on the part of Seller in connection with the execution and delivery by Seller of this Agreement or by Seller or any Business Affiliate of each Transaction Document to which it is or will be a party or the consummation of the Transactions by Seller and the Business Affiliates, except (i) as set forth on Section 4.3(b) of the Seller Disclosure Schedule, (ii) as may be necessary as a result of the identity or the legal or regulatory status of Buyer or its Affiliates, and (iii) where the failure to obtain such Governmental Approval would not reasonably be expected to affect Seller’s ability to consummate the Transactions, or to adversely and materially affect any of the Acquired Assets or the Business or Buyer’s ownership and rights with respect to the Business or any of the Acquired Assets after the Closing.

4.4    Financial Information

.

(a)    Section 4.4(a) of the Seller Disclosure Schedule sets forth (i) the unaudited, unreviewed management carve-out statements of profits and losses of the Business for the fiscal year ended May 30, 2020 and for the four (4) month period ending on September 30, 2020 and (ii) the unaudited, unreviewed management carve-out net working capital statement of the Business for each of Seller’s four most recently completed fiscal quarters (collectively clauses (i) and (ii), the “Business Financial Information”). May 30, 2020, shall be referred to herein as the “Financial Information Reference Date”.

(b)    The Business Financial Information has been prepared on a pro forma basis to reflect Seller’s good faith estimate of the results of operations of the Business for the applicable periods presented had the Business been operated as a stand-alone business entity not associated with Seller or its Affiliates during such period, except that the Business Financial Information does not include an allocation of overhead costs to the Business. The Business Financial Information (i) is accurate and (ii) was compiled from and is in accordance with (x) the Books and Records of the Business and (y) the accounting policies and practices of the Seller as applied in all material respects, including the policies set forth in Section 4.4(b) of the Seller Disclosure Schedule (the “Seller Accounting Principles”), and subject to such principles and the inherent limitations ordinarily associated with synthetic carve-out financial statements, reasonably presents the profits and losses of the Business for the periods indicated therein, except that such Business Financial Information may be subject to normal fiscal year-end adjustments.

4.5    Absence of Certain Developments

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. Except as set forth on Section 4.5 of the Seller Disclosure Schedule, since the Financial Information Reference Date, (a) the Business has been conducted in all material respects in the Ordinary Course of Business, (b) there has not been any event, change, occurrence or circumstance that has had, or would reasonably be expected to have a Seller Material Adverse Effect, and (c) neither Seller nor any Business Affiliate has taken any action that, if taken after the date hereof and prior to the Closing, would require the consent of Buyer pursuant to Section 6.1(b).

4.6    Legal Proceedings

. Except as set forth on Section 4.6 of the Seller Disclosure Schedule, there are no material (a) pending or, to Seller’s Knowledge, threatened Legal Proceedings against Seller or the Business Affiliates relating to the Acquired Assets, the Business or the Business Employees, or (b) Orders imposed upon Seller or the Business Affiliates relating to the Acquired Assets, the Business or the Business Employees other than Orders generally applicable to the industries in which Seller and the Business Affiliates operate or assets of the nature of the Acquired Assets. There is no Legal Proceeding by Seller or the Business Affiliates pending or which Seller or the Business Affiliates intend to initiate relating to the Acquired Assets, the Business or the Business Employees. To Seller’s Knowledge, there is no proposed Order, other than proposed Orders generally applicable to the industries in which Seller and the Business Affiliates operate or assets of the nature of the Acquired Assets that, if issued or otherwise put into effect, would reasonably be expected to have an adverse and material effect on the Business, any of the Acquired Assets or Assumed Liabilities or the ability of Seller to comply with or perform any covenant or obligation under this Agreement or any of the Transaction Documents.

4.7    Compliance with Laws

. Except as set forth on Section 4.7(a) of the Seller Disclosure Schedule, Seller and the Business Affiliates, as applicable, are and, since January 1, 2017 has been in material compliance with all Laws applicable to the ownership of the Acquired Assets and the operation of the Business, including all Health Care Laws, Food and Drug Laws and Financial Services Laws. Without limiting the foregoing, the conduct of the Business as presently conducted does not constitute a violation of any Law or a tort, in either case in respect of unfair competition or unfair trade practices. None of Seller or any Business Affiliate has, since January 1, 2017, been given written notice of any alleged violation or non-compliance with any Law or Order relating to the Business or the Acquired Assets. To Seller’s Knowledge, none of Seller or any Business Affiliate is, nor has been, under investigation with respect to or been threatened to be charged with or given notice of any violation of any Law or Order relating to the Business or the Acquired Assets.

4.8    Taxes

. Except as set forth on Section 4.8 of the Seller Disclosure Schedule:

(a)    Seller has (or has caused to be) prepared and timely filed (taking into account any valid extensions) with the appropriate Taxing Authorities all Tax Returns required to be filed with respect to the Acquired Assets, and all such Tax Returns were prepared in substantial compliance with all applicable requirements of Law.

(b)    Seller has timely paid, or caused to be timely paid, all Taxes required to be paid by it (whether or not shown on any Tax Return) with respect to the Acquired Assets, and has no liability for Taxes with respect to the Acquired Assets in excess of the amounts so paid.

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(c)    No material deficiencies for any Taxes have been proposed, asserted or assessed in writing against Seller with respect to the Acquired Assets that are still pending or have not been paid in full.

(d)    No extensions of the period for assessment of any Taxes or the assertion of any deficiency in respect of Taxes are in effect with respect to the Acquired Assets.

(e)    Seller is not under current material examination, claim, audit, action, suit, proceeding or investigation by any Taxing Authority with respect to the Acquired Assets, nor has Seller received written notice from any Taxing Authority of an intention to begin such a proceeding.

(f)    No claim has been made by any Taxing Authority in a jurisdiction where Seller does not file Tax Returns with respect to a particular Tax that Seller is or may be subject to taxation in such jurisdiction with respect to the Acquired Assets which claim has not been resolved.

(g)    There are no Liens for Taxes upon any of the Acquired Assets and there is no claim for Taxes that would reasonably be expected to give rise to a Lien on any of the Acquired Assets.

4.9    Material Contracts

.

(a)    Section 4.9(a) of the Seller Disclosure Schedule sets forth a list (referencing the applicable subsection of this Section 4.9(a)) identifying each of the Contracts which meets the following criteria (collectively, the “Material Contracts”, and the Material Contracts that are Acquired Contracts (each of which Acquired Material Contracts is marked with an * on the Seller Disclosure Schedule) being, collectively, the “Acquired Material Contracts”):

(i)    any Customer Contract or Contract for the sale or provision by Seller or a Business Affiliate of Business Products (except for those Contracts solely for the sale or provision of the Non-PaCS Applications);

(ii)    any Contract granting most favored customer pricing to any Person with respect to the Business, or any Contract providing for the grant of exclusive sales, distribution, marketing or other exclusive rights, rights of first refusal, rights of first negotiation or similar rights and/or terms with respect to the Business to any Person, or any Contract prohibiting or limiting the right of Seller or a Business Affiliate to conduct the Business (including any non-competition provisions) or prohibiting or restricting their ability to conduct the Business with any Person (other than restrictions imposed by law or customary confidentiality provisions entered into in the Ordinary Course of Business) or provide services of the Business to any Person in any geographic area, in each case, other than restrictions that would not be applicable to Buyer’s conduct of the Business immediately after Closing;

(iii)    any Contract Related to the Business with any vendor or supplier;

(iv)    each IP Contract;

(v)    any Contract Related to the Business with any reseller, distributor, original equipment manufacturer, value added reseller or similar indirect channel partner;

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(vi)    any Contract Related to the Business pursuant to which Seller or its Affiliates is a lessor or lessee of (A) any real property or (B) any office furniture, fixtures or other personal property involving payments in excess of Twenty-Five Thousand Dollars ($25,000) individually during the fiscal year ending May 29, 2021;

(vii)    any Contract granting a Lien upon any Acquired Asset, other than Permitted Liens;

(viii)    any partnership, joint venture, or other similar equity investment Contract that involves a sharing of profits of the Business with a third party;

(ix)    any Contract providing for a material acquisition or a material disposition of any Person, asset or business in connection with, or constituting part of, the Business (other than the Transaction Documents);

(x)    any settlement agreement imposing material limitations on the conduct or operation of the Business (including the operation or conduct of the Business by Buyer or its Affiliates after Closing);

(xi)    any Contract with any labor union or any collective bargaining agreement that governs the employment or service terms of any Business Employees;

(xii)    any Contract requiring any capital commitment or capital expenditures (including any series of related expenditures) Related to the Business in excess of Twenty-Five Thousand Dollars ($25,000) individually or One Hundred Thousand Dollars ($100,000) in the aggregate, other than any Contract with a Customer not expressly requiring capital expenditures as such; and

(xiii)    any Contract Related to the Business with any Governmental Entity.

(b)    Except as set forth on Section 4.9(b) of the Seller Disclosure Schedule, each Acquired Material Contract is in full force and effect and is a legal, valid, binding and enforceable obligation of Seller or the applicable Business Affiliate, and, to Seller’s Knowledge, of the other party or parties thereto, except as enforceability may be limited by the Enforceability Exception. None of Seller or the applicable Business Affiliate is in breach or default under any such Acquired Material Contract, and, except as set forth on Section 4.3(a) or Section 4.3(b) of the Seller Disclosure Schedule, no event has occurred or circumstances exist (in each case solely with respect to Seller and the Business Affiliates) which, with the delivery of notice, the passage of time or both, would constitute a breach or default, or permit the termination, modification or acceleration under any such Acquired Material Contract. No party to any Acquired Material Contract has exercised any termination rights with respect thereto, and no party has given written notice of any dispute with respect to any Acquired Material Contract. Seller has made available to Buyer true, accurate and complete copies of all Acquired Material Contracts, including all amendments, modifications, or supplements thereto or, with respect to any Acquired Material Contracts that are not in written form, Section 4.9(b) of the Seller Disclosure Schedule provides an accurate and complete description of the material terms of such Acquired Material Contract.

4.10    Title to Acquired Assets; Sufficiency

.

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(a)    Except as set forth in Section 4.10(a) of the Seller Disclosure Schedule, Seller or a Business Affiliate has good and marketable title to (or a valid leasehold or license interest in) the Acquired Assets (other than items of tangible personal property that individually and in the aggregate are immaterial to the operation of the Business), and such title or leasehold interests are free and clear of all Liens other than Permitted Liens. All material items of tangible personal property included in the Acquired Assets are in reasonably good operating condition and repair (ordinary wear and tear excepted).

(b)    After giving effect to the Transition Services Agreement, and subject to the employment of the Business Employees as contemplated by Section 6.9(a), receipt of all Governmental Approvals described in Section 4.3(b) of the Seller Disclosure Schedule, and giving of notice or receipt of consent as contemplated by Section 4.3(a) of the Seller Disclosure Schedule, and except for the Shared Services and as set forth in Section 4.10(b) of the Seller Disclosure Schedule, the Acquired Assets constitute all of the Contracts, assets, rights and properties (whether real, personal or mixed and whether tangible or intangible) necessary, and such assets, rights and properties are sufficient, to enable Buyer, following the Closing, to conduct the Business in the manner the Business is presently conducted.

4.11    Intellectual Property

.

(a)    Seller and its Affiliates (i) own and have independently developed or acquired or (ii) have the valid right or license to all Acquired Intellectual Property. Except for the (i) Acquired Intellectual Property, (ii) Excluded Assets set forth on Schedule 2.2(f), (iii) Intellectual Property Rights and Technology provided to Seller through the Shared Services or provided to Buyer after the Closing Date under the Transition Services Agreement, and (iv) Intellectual Property Rights and Technology set forth on Section 4.11(a) of the Seller Disclosure Schedule, neither Seller nor its Affiliates use or own or license for use in the operation of the Business any Technology or Intellectual Property Rights, including websites, patents, domain names, copyrights (other than unregistered copyrights in product and marketing materials and website content), trademarks, service marks, tradenames, databases or software (other than commercially available software).

(b)    Schedule 4.11(b) of the Seller Disclosure Schedule sets forth each item of Registered Intellectual Property registered or applied for in the name of Seller or the Business Affiliates that is included in the Acquired Intellectual Property (the “Acquired Registered Intellectual Property”) and indicates for each item the registration and application numbers and dates, the applicable filing jurisdiction, title, registered owner or registrant, and the status of such application or registration, as applicable. All necessary documents, recordations, affidavits and certificates currently due for filing as of the date hereof in connection with such Acquired Registered Intellectual Property have been filed with the relevant patent, copyright, trademark or other authorities in the United States or foreign jurisdictions, as the case may be, for the purposes of prosecuting, registering or maintaining such Acquired Registered Intellectual Property.

(c)    Each item of Acquired Registered Intellectual Property is subsisting, and to Seller’s Knowledge, valid (or in the case of applications, being examined for validity) and enforceable. No Legal Proceeding to which Seller or any of its Affiliates is a party (other than office actions in connection with the application for, or prosecution of, any Acquired Registered Intellectual Property) is pending or, to Seller’s Knowledge, threatened, by or before any Governmental Entity, that challenges the legality, validity, enforceability, registration, use or ownership of any Acquired Registered Intellectual Property.

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(d)    Seller or one of the Business Affiliates exclusively owns all right, title and interest in and to the Acquired Intellectual Property free and clear of all Liens, other than Permitted Liens and subject to the foregoing, all such Acquired Intellectual Property is, and immediately following Closing, will be, fully transferable, alienable, licensable and, to Seller’s Knowledge, enforceable by Buyer without restriction and without payment of any kind to any Person. Neither Seller nor any of the Business Affiliates has granted or transferred (or is obligated to grant or transfer) to any Person or has permitted (or is obligated to permit) any Person to retain any ownership interest, including any joint ownership interest, or any exclusive rights in, any Acquired Intellectual Property material to the conduct of the Business.

(e)    No funding, facilities or resources of a Governmental Entity or university, college or other educational institution or research center were used in the creation, design or development of any Acquired Intellectual Property in such a way that would grant such Person ownership rights therein. Neither Seller nor any of its Affiliates has made any contribution to any standards setting organization that requires or creates obligations that Seller or any of the Business Affiliates license or offer to license any Acquired Intellectual Property.

(f)    No Legal Proceedings are pending or, to Seller’s Knowledge, threatened against Seller or any of the Business Affiliates, alleging that any part of the Business or the Acquired Intellectual Property is infringing, misappropriating, diluting or otherwise violating the Intellectual Property Rights of any Person. The Acquired Intellectual Property and the conduct of the Business as presently conducted, including the use of the Acquired Intellectual Property in connection therewith, have not, do not, and, except to any extent caused by Buyer’s modification of the Acquired Intellectual Property, will not, infringe or misappropriate the Intellectual Property Rights of any Person.

(g)    To Seller’s Knowledge, no third party is infringing, misappropriating, diluting, using in an unauthorized manner or otherwise violating any rights in respect of the Acquired Intellectual Property, and no Legal Proceedings have been instituted by or on behalf of Seller or its Affiliates or, to Seller’s Knowledge, threatened against any Person alleging such Person is infringing, misappropriating, diluting, using in an unauthorized manner or otherwise violating any Acquired Intellectual Property.

(h)    In each case in which Seller or any Business Affiliate has engaged or hired a Person who has created or developed any Acquired Intellectual Property, Seller or such Business Affiliate has obtained, either by operation of law or valid assignment or transfer exclusive ownership of all Intellectual Property Rights in such Acquired Intellectual Property. All Persons who have created or developed any Acquired Intellectual Property have executed an agreement under which (i) all rights, title and ownership in and to such Acquired Intellectual Property have been assigned to Seller or a Business Affiliate or, in the case of personnel of Seller or a Business Affiliate, were subject to Sellers’ or its Business Affiliates’ internal policies or procedures of the Business relating to the assignment (via a present grant of assignment) by such Person to Seller or the applicable Business Affiliate of all right, title and ownership in and to all such Acquired Intellectual Property, and (ii) such Person is required to maintain as confidential all confidential information and Trade Secrets of Seller and its Affiliates Related to the Business.

(i)    Seller and its Affiliates have taken commercially reasonable security measures to maintain and protect the secrecy, confidentiality and value of all Trade Secrets used in or held for the benefit of the Business. To Seller’s Knowledge, there has been no unauthorized disclosure of, or access to, confidential information or materials that Seller maintains in connection with a Trade Secret relating to the Business.

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(j)    To Seller’s Knowledge, no Business Product contains any undisclosed disabling codes or instructions, “time bombs,” “Trojan horses,” “back doors,” “trap doors,” “worms,” “viruses,” bugs, faults, security vulnerabilities or other Software routines, in any case that have resulted in (i) any Person accessing without authorization or disabling or erasing any Business Product, (ii) a significant adverse effect on the functionality of any Business Product or (iii) unauthorized acquisition of or access to confidential or proprietary information or Personal Data created, received, maintained or transmitted on or through any Business Products. Seller employs commercially reasonable measures to ensure that the Business Product is free from any “viruses” that would materially affect the performance of the Business Product. For the purposes of this Agreement, “virus” means any computer code which has the ability to damage, interfere with, disrupt or otherwise adversely affect the operation of any computer programs, Software or hardware without the consent or intent of the computer user.

(k)    Section 4.11(k)(i) of the Seller Disclosure Schedule contains a true and complete list of all the Software and systems included in the Acquired Intellectual Property. Except as set forth on Section 4.11(k)(ii) of the Seller Disclosure Schedule, Seller has not incorporated any Open Source Software, copyleft or community source code into the Software included in the Acquired Intellectual Property.

(l)    Neither Seller nor any of the Business Affiliates has distributed any Software or database that is part of the Acquired Intellectual Property under an Open Source License in a manner that would require any Acquired Intellectual Property (i) to be disclosed or distributed in Source Code form, (ii) to be licensed for purposes of preparing derivative works or (iii) to be redistributed at no charge. Seller and the Business Affiliates are and have been in compliance with all Open Source Licenses related to the Acquired Intellectual Property to which they are subject.

(m)    Section 4.11(m) of the Seller Disclosure Schedule contains a complete and accurate list of, and Seller has made available to Buyer true and complete copies of, all Contracts pursuant to which Seller or any of its Business Affiliates (i) grants any license, covenant not to assert, release, agreement not to enforce or prosecute, or other immunity to any Person under or to any Acquired Intellectual Property Rights, except for any outbound licenses solely for the use of the Non-PaCS Applications, or (ii) is granted a license, covenant not to assert, release, agreement not to enforce or prosecute, or immunity relating to the Acquired Intellectual Property, except for any inbound licenses that are Excluded Assets (the foregoing, the “IP Contracts”).

(n)    Neither Seller nor any of its Affiliates nor any other Person acting on their behalf has provided, licensed or disclosed to any third party the Source Code of any Acquired Intellectual Property, or had any such Source Code deposited into or released from escrow under any source code escrow agreement or other arrangement. No event has occurred, and no circumstance or condition exists, that (with or without notice or lapse of time, or both) will, or would reasonably be expected to, result in the disclosure, delivery or license by Seller or any of its Affiliates or any Person then acting on their behalf to any Person of any Source Code included in the Acquired Intellectual Property (other than to Buyer or its representatives in connection with the Transactions).

(o)    The IT Systems (i) materially operate and perform in accordance with their documentation and functional specifications and otherwise as required by the Seller and the Business Affiliates in connection with the Business and (ii) have not malfunctioned or failed in a manner that has had a material impact on the Business. Seller and the Business Affiliates use commercially reasonable efforts to protect the confidentiality, integrity, operation, and security of the IT Systems and all data, information, and transactions of the Business stored therein or transmitted thereby from any unauthorized

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use, access, interruption or modification by third parties. Seller and the Business Affiliates have implemented commercially reasonable backup, cybersecurity and disaster recovery technology processes and procedures, and no Person has gained unauthorized access to the IT Systems.

(p)    The execution, delivery and performance of this Agreement, and the consummation of the Transactions, will not result in (i) the disclosure of any Source Code included in the Acquired Intellectual Property or (ii) the grant (or requirement to grant) to any Person of any license, covenant not to assert, release, agreement not to enforce or prosecute, or other immunity to or under any Acquired Intellectual Property, except in the case of clause (i) and clause (ii) for such disclosure and license grants to Buyer as contemplated by this Agreement and the other Transaction Documents in connection with the consummation of the Transactions. The execution, delivery and performance of this Agreement, and the consummation of the Transactions, will not, by the express terms of any Contracts to which Seller or any of the Business Affiliates is a party (but to which Buyer and its Affiliates are not) result in the grant (or requirement to grant) to any Person of any license, covenant not to assert, release, agreement not to enforce or prosecute, or other immunity by or on behalf of Buyer or any of its Affiliates with respect to any Acquired Intellectual Property.

4.12    Privacy and Data Security

.

(a)    Seller’s and each of the Business Affiliates’ receipt, collection, transmission, use and disclosure of Personal Data and any such activities performed on behalf of Seller or any of the Business Affiliates, in each case in connection with the operation of the Business, have materially complied with (i) provisions governing privacy, data protection, or information security matters in any Material Contracts, (ii) applicable Information Privacy and Security Laws and (iii) applicable policies and procedures adopted by Seller and any of its Affiliates relating to privacy, data protection, or information security with respect to Personal Data (the “Privacy Commitments”).

(b)    There has been no data security breach of, unauthorized access to, or malicious disruption of Seller’s IT Systems that transmit or maintain Personal Data used in the Business, that would constitute a breach for which notification by Seller or the Business Affiliates to individuals and/or Governmental Entities and/or Customers, in each case with respect to the Business, is required under any Information Privacy and Security Laws applicable to the Business or under any Material Contracts, and no such notification has been made. To Seller’s Knowledge, none of the Business’s vendors, suppliers and subcontractors, have (x) suffered any security breach that resulted in any unauthorized access to or use of any Personal Data used in the Business, or (y) breached any obligations relating to Personal Data in any Material Contracts.

(c)    Seller maintains and implements a reasonably appropriate written information security program covering the Business designed to (i) identify and address internal and external risks to the security of any Personal Data, and (ii) implement administrative, technical and physical safeguards to control these risks. For each of fiscal year 2018, 2019 and 2020, Seller has performed a security risk assessment covering the Business and has taken commercially reasonable measures to address and remediate all critical and high risk (or similar designation) threats and deficiencies identified in those security risk assessments. Seller has made available to Buyer the third party assessments of the information systems included in the Acquired Assets or applicable to the Business in the possession or control of Seller or any Business Affiliate.

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(d)    No Person has made any written complaint or claim against Seller or any of the Business Affiliates or commenced any Legal Proceeding by or before any Governmental Entity or arbitration body against Seller or any of the Business Affiliates with respect to (i) any alleged violation of Information Privacy and Security Laws by Seller or any of its Affiliates or (ii) Seller’s or any of its Affiliates’ privacy or data security practices with respect to Personal Data, in each case of (i) and (ii), in relation to the operation of the Business.

(e)    The execution, delivery and performance of this Agreement, and the consummation of the Transactions, will not result in a breach of the Privacy Commitments.

4.13    Labor and Employment Matters

.

(a)    Section 4.13(a)(i) of the Seller Disclosure Schedule lists, as of the date hereof, all Business Employees including each such Business Employee’s name, title, level mapping, current annual base salary, most recent cash bonus (if any), current target bonus (if any), employee classification as exempt/non-exempt, whether on a leave of absence (and if on leave, the type of leave and estimated date of return), any rights to severance, any rights to a bonus or other compensation in connection with the transactions under this Agreement, any visa or immigration application status, and date of hire. Seller shall regularly update the list of Business Employees in Section 4.13(a)(i) of the Seller Disclosure Schedule to reflect any changes (in each case, such changes only as permitted under this Agreement including the restriction in Section 6.1(b) of this Agreement), with the final update of the list of Business Employees occurring no later than fifteen (15) Business Days prior to Closing. No Business Employee has been granted or has any entitlement to receive any incentive compensation awards in respect of periods after Seller’s current fiscal year. As of the date hereof, none of the Business Employees is not actively at work due to long-term disability leave. No Business Employee is a party to, or is otherwise bound by, any Contract Related to the Business, including any Contract containing confidentiality or non-competition covenants, that adversely affects or restricts the performance of such employee’s duties for the Business, other than any Contract with Seller or any of its Affiliates that will not affect or restrict the performance of such employee’s duties for the Business following the Closing. The list of Business Employees consists solely of employees who are exclusively dedicated to the Business. Except for personnel that provide Shared Services, and except as otherwise set forth on Schedule 4.13(a)(ii), the list of Business Employees includes all employees that are necessary to conduct and operate the Business as conducted and operated as of the date hereof. Except as set forth in Section 4.13(a)(iii) of the Seller Disclosure Schedule, Seller has not, in the twelve (12) month period prior to the date of this Agreement, transferred any employee of Seller or its Affiliates into the Business, or any Business Employee out of the Business, or modified a Business Employee’s role or duties, such that, in each case, he or she became, or ceased to be, exclusively dedicated to the Business.

(b)    With respect to the Business, Seller and each Business Affiliate that employs Business Employees has, in all material respects with respect to such employment, complied with all Laws relating to the employment of labor, including those relating to wages, hours, collective bargaining and the payment and withholding of Taxes, and has withheld and remitted to the applicable taxing authority all amounts required by Law or agreement to be withheld from the wages or salaries of its Business Employees and is not liable for any arrears of wages or other Taxes or penalties for failure to comply with any of the foregoing. None of the Business Employees is currently designated or has been designated in Seller’s current fiscal year as a “business confirmed low performer.”

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(c)    Neither Seller nor any Affiliate of Seller is party to any collective bargaining agreement or similar Contract with any labor organization with respect to any Business Employees. Except as set forth on Section 4.13(c) of the Seller Disclosure Schedule, since January 1, 2017, (i) there have been no material strikes, work stoppages, work slowdowns, lockouts, picketing or other similar labor disputes involving Business Employees pending or, to Seller’s Knowledge, threatened against Seller or any Affiliate of Seller with respect to Business Employees, (ii) there have been no material unfair labor practice charges or material grievances, charges or complaints involving Business Employees pending or, to Seller’s Knowledge, threatened by or on behalf of any Business Employees against Seller or any Affiliate of Seller and (iii) to Seller’s Knowledge, there have been no union organizing or decertification activities involving Business Employees pending or threatened.

(d)    Section 4.13(d) of the Seller Disclosure Schedule sets forth a list of all Employee Benefit Plans. Seller has made available to Buyer a summary of the Employee Benefit Plans, and all Employee Benefit Plans are in material compliance with all Laws.

(e)    Neither the Seller nor any of its ERISA Affiliates, nor any predecessor thereof, sponsors, maintains or contributes to, or in the past three years has sponsored, maintained or contributed to, a “multiemployer plan” within the meaning of Section 3(37) of ERISA, that would result in the imposition of any material liability on Buyer or any of its Affiliates following the Closing. No circumstances exist that would result in any material liability to Seller or any of its ERISA Affiliates, under Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, that would reasonably be expected to result in the imposition of any material liability on Buyer or any of its Affiliates in respect of the Business Employees. Seller and its ERISA Affiliates have no liability to provide, and no liability with respect to an obligation to provide, medical, dental or life insurance coverage or any other welfare benefits after a termination of employment in respect of any Business Employee, except as may be required under Laws or Section 4980 of the Code. “ERISA Affiliates” means any trade or business (whether or not incorporated) that is treated as a single employer with Seller within the meaning of Section 414(b), (c), (m) or (o) of the Code.

(f)    None of the execution, delivery and performance of this Agreement, the consummation of the transactions thereunder, any termination of employment or service and any other event in connection therewith or subsequent thereto will, individually or together or with the occurrence of some other event (whether contingent or otherwise), (i) result in any material payment or benefit (including severance, unemployment compensation, golden parachute, bonus or otherwise) becoming due or payable, or required to be provided, to any Business Employee, (ii) materially increase the amount or value of any benefit or compensation otherwise payable or required to be provided to any Business Employee, (iii) result in the acceleration of the time of payment, vesting or funding of any such benefit or compensation, or (iv) increase the amount of compensation due to any Business Employee. No amount paid or payable by Seller or its Affiliates in connection with the Transactions, whether alone or in combination with another event, will be an “excess parachute payment” within the meaning of Code Section 280G or Code Section 4999 or will not be deductible by Seller and its Affiliates by reason of Code Section 280G.

(g)    Section 4.13(g) of the Seller Disclosure Schedule lists, as of the date hereof, all consultants, independent contractors and other individual non-employee service providers whose services are Related to the Business, including each individual’s compensation, initial date of engagement and each subsequent engagement (if applicable).

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(h)    No allegations of sexual harassment, sexual assault, or misconduct have been made against any Business Employee in the course of being employed by Seller or any Business Affiliate and neither Seller nor any Business Affiliate has made any payment arising out, or entered into any settlement agreement or conducted any investigation related to, allegations of sexual harassment, sexual assault or misconduct by or regarding any Business Employee. To the extent any allegation of sexual harassment, sexual assault, or misconduct has been made, Seller and each Business Affiliate have promptly, thoroughly and impartially investigated all sexual harassment allegations of which they are aware. With respect to each such allegation with potential merit, Seller or a Business Affiliate, as applicable, has taken prompt corrective action that is reasonably calculated to prevent further harassment. To Seller’s Knowledge, there is no liability with respect to any such allegations.

4.14    Acquired Leases

. Seller has delivered to Buyer a true and complete copy of each Acquired Lease. With respect to each Acquired Lease:

(a)    except as set forth on Section 4.14(a) of the Seller Disclosure Schedule, such Acquired Lease is in full force and effect and is a legal, valid, binding, and enforceable obligation of Seller or the applicable Business Affiliate, and, to Seller’s Knowledge, of the landlord under the Acquired Lease, except as enforceability may be limited by the Enforceability Exception;

(b)    Seller’s leasehold with respect to such property is free and clear of all Liens other than Permitted Liens; and

(c)    neither Seller, nor to Seller’s Knowledge, the landlord under the Acquired Lease is in breach or default under such Acquired Lease, and no event has occurred or circumstance exists which, with the delivery of notice, passage of time or both, would constitute such a breach or default by Seller or, to Seller’s Knowledge, the landlord under the Acquired Lease, and Seller has paid all rent due and payable under such Acquired Lease.

4.15    Transactions with Related Parties

. Except as set forth on Section 4.15 of the Seller Disclosure Schedule, as of the date hereof, (a) no individual officer, director, partner or principal of Seller or any Business Affiliate, and (b) no Affiliate of Seller or any Business Affiliate (other than Seller and the Business Affiliates) (each, a “Related Party”), is a party to any material transaction, Acquired Lease, Acquired Contract or any other Contract Related to the Business (other than employment, consulting, and other related agreements entered into with individuals, and the Shared Services).

4.16    Permits

. Seller and the Business Affiliates have obtained, and are in compliance with, all Permits required to conduct the Business as currently conducted, except where the failure to obtain such Permits would not have a Seller Material Adverse Effect. The Permits required to conduct the Business are valid and in full force and effect.

4.17    Financial Advisors

. Except as set forth on Section 4.17 of the Seller Disclosure Schedule, no Person (a) has acted, directly or indirectly, as a broker, finder, agent, investment banker or financial advisor for Seller or

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any Business Affiliate and (b) is entitled to any fee or commission or like payment from Seller or any Business Affiliate in connection with the Transactions that would be an Assumed Liability.

4.18    Environmental, Health and Safety Matters

. Seller and the Business Affiliates are, and have at all times been, in compliance in all material respects with all Environmental, Health and Safety Requirements in connection with the ownership, use, maintenance or operation of the Business or the Acquired Assets. Seller has not treated, stored, arranged for or knowingly permitted the disposal of, transported, handled, manufactured, distributed, released, or exposed any Person to, any Hazardous Materials, or owned or operated any property or facility that is or has been contaminated by any Hazardous Materials, in connection with the Business that would reasonably be expected to give rise to any current or future liabilities. There is no pending, or to Seller’s Knowledge, threatened allegation by any Person that the Acquired Assets are not, or that its Business has not been conducted, in compliance with all Environmental, Health and Safety Requirements. Seller has not retained or assumed any liability of any other Person under any Environmental, Health and Safety Requirements in connection with the Business. To Seller’s Knowledge, there are no past or present facts, circumstances or conditions that would reasonably be expected to give rise to any material liability of Seller or the Business Affiliates Related in connection with the Business under any Environmental, Health and Safety Requirements.

4.19    Customers; Suppliers; Channel Partners

.

(a)    Section 4.19(a) of the Seller Disclosure Schedule sets forth a list of the top twenty (20) Customers that have a Contract with Seller or the Business Affiliates based on revenues of the Business from such Customers for the one (1) fiscal year period ended May 30, 2020 and the four (4) month period ended September 30, 2020, in the aggregate (each, a “Material Customer”). Neither Seller nor any of the Business Affiliates has received any written notice from any Material Customer that such Material Customer shall not continue as a Customer of Seller on the same terms as are currently in effect, or that such Material Customer intends to terminate, modify in any material respect or not renew existing Contracts with Seller or the Business Affiliates.

(b)    Section 4.19(b) of the Seller Disclosure Schedule sets forth a list of the top twenty (20) suppliers or vendors of the Business based on total spend by the Business for such suppliers or vendors during the one (1) fiscal year period ended May 30, 2020 and the four (4) month period ended September 30, 2020 (each, a “Material Supplier”). As of the date hereof, neither Seller nor any of the Business Affiliates has received any written notice from any Material Supplier that such Material Supplier shall not continue as a supplier or vendor to Seller or the Business Affiliates, that such Material Supplier intends to terminate, modify in any material respect or not renew existing Contracts with Seller or the Business Affiliates, or to materially change the terms upon which it currently sells products or services to the Business.

(c)    None of the revenues of the Business arise from any resellers, distributors, original equipment manufacturer, value added reseller or similar indirect channel partner engaged by Seller or the Business Affiliates.

4.20    Insurance

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. Since January 1, 2017, no material claims with respect to the Business have been made against the insurance policies of Seller or the Business Affiliates.

4.21    Independence

. As of the date hereof, to Seller’s Knowledge, there is no prohibition under the Independence Rules to the execution, delivery and performance of this Agreement or any of the Transaction Documents by Seller or the consummation of the Transactions.

4.22    Limitations of Representations and Warranties

. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY CONTAINED IN THIS ARTICLE IV (AS MODIFIED BY THE SELLER DISCLOSURE SCHEDULE), THE ACQUIRED ASSETS AND THE ASSUMED LIABILITIES ARE BEING SOLD AND TRANSFERRED TO BUYER, AND BUYER IS ACCEPTING THE SAME “AS IS” AND “WHERE IS”, AND SELLER AND ITS AFFILIATES MAKE NO, AND HAVE NOT AUTHORIZED ANY PERSON TO MAKE, AND BUYER IS NOT RELYING ON, ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WITH RESPECT TO SELLER, THE BUSINESS AFFILIATES, THE ACQUIRED ASSETS, THE ASSUMED LIABILITIES, THE BUSINESS OR THE TRANSACTION, INCLUDING WITH RESPECT TO MERCHANTABILITY AND FITNESS FOR USE OR A PARTICULAR PURPOSE, THE OPERATION OF THE BUSINESS BY BUYER AFTER THE CLOSING, OR ANY REPRESENTATION OR WARRANTY ARISING FROM STATUTE OR OTHERWISE IN LAW, AND ANY SUCH REPRESENTATION OR WARRANTY IS EXCLUDED FROM THE SALES AND TRANSFERS HEREUNDER.

Article 5

REPRESENTATIONS AND WARRANTIES OF BUYER

Except as set forth on the disclosure schedule delivered by Buyer to Seller concurrently with entry into this Agreement and attached to this Agreement as Schedule V (the “Buyer Disclosure Schedule”), Buyer represents and warrants to Seller that:

5.1    Organization and Power

. Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Buyer has the requisite corporate power and authority to execute and deliver this Agreement and each Transaction Document to which it is or will be a party, to perform its obligations hereunder and thereunder and to consummate the Transactions. Buyer has the power and authority to own or lease all of its properties and assets and to carry on its business as it is now being conducted. Buyer is duly licensed or qualified to do business in each jurisdiction in which the nature of its business or the character or location of any properties or assets owned or leased by it makes such licensing or qualification necessary, except for those jurisdictions where the failure to be so licensed or qualified would not have a Buyer Material Adverse Effect.

5.2    Authorization of Agreement

. The execution and delivery of this Agreement and each Transaction Document to which it is or will be a party and the consummation of the Transactions has been duly authorized by the requisite corporate action on the part of Buyer. This Agreement and each Transaction Document to which Buyer is

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or will be a party has been or will be at or prior to the Closing, duly and validly executed and delivered by Buyer, and, assuming the due authorization, execution and delivery by the other parties thereto, this Agreement and each Transaction Document, when so executed and delivered, will constitute, the legal, valid and binding obligations of Buyer, enforceable against it in accordance with the applicable terms thereof, subject to the Enforceability Exception.

5.3    Conflicts; Consents of Third Parties

.

(a)    The execution, delivery and performance by Buyer of this Agreement and each Transaction Document to which it is or will be a party, and the consummation of the Transactions, will not conflict with, violate or constitute a default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, modification or cancellation under, any provision of (i) the Organizational Documents of Buyer; (ii) any Contract to which Buyer is a party or by which any of the properties or assets of Buyer are bound; or (iii) any Law applicable to Buyer.

(b)    No Governmental Approval is required on the part of Buyer or any of its Affiliates in connection with the execution and delivery by Buyer of this Agreement or each Transaction Document to which it is or will be a party, or the consummation of the Transactions by Buyer, except (i) as may be necessary as a result of the identity or the legal or regulatory status of Buyer and (ii) where the failure to obtain such Governmental Approval would not reasonably be expected to affect Buyer’s ability to consummate the Transactions or to pay the Purchase Price.

5.4    Legal Proceedings

. There are no pending or, to the knowledge of Buyer, threatened, Legal Proceedings against Buyer or any of its Affiliates that would have, individually or in the aggregate, a Buyer Material Adverse Effect. There is no outstanding material Order imposed upon Buyer or any of its Affiliates or any of their respective assets, except for Legal Proceedings which, if adversely determined, would not have, individually or in the aggregate, a Buyer Material Adverse Effect.

5.5    Financial Capability

. Buyer has, and will have as of the Closing, sufficient cash on hand (without giving effect to any unfunded financing regardless of whether any such financing is committed) to pay the Purchase Price and all related fees and expenses incurred by Buyer in connection with the Transactions. Buyer is solvent, and, immediately following the consummation of the Transactions, Buyer shall be solvent and shall: (a) be able to pay its debts as they become due; (b) own property that has a fair saleable value greater than the amounts required to pay its debts (including a reasonable estimate of the amount of all contingent liabilities); and (c) have adequate capital to carry on its business.

5.6    Financial Advisors

. Except as set forth on Section 5.6 of the Buyer Disclosure Schedule, no Person (a) has acted, directly or indirectly, as a broker, finder, agent, investment banker or financial advisor for Buyer or its Affiliates and (b) is entitled to any fee or commission or like payment from Buyer or its Affiliates in connection with the Transactions that would be payable by Seller.

5.7    No Other Representations and Warranties; No Reliance; Buyer Investigation

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. Buyer acknowledges and agrees that, except as expressly set forth in ARTICLE IV, Seller makes no, and Seller and the Business Affiliates have made no (and Buyer has not relied upon any)representation or warranty, express or implied, relating to the Seller, the Business Affiliates, the Acquired Assets, the Assumed Liabilities, the Business or any of its businesses, operations, assets, liabilities, conditions or prospects, or the Transactions, including with respect to merchantability, fitness for any particular or ordinary purpose, the operation of the Business by Buyer after the Closing, or any representation or warranty arising from statute or otherwise, or as to the accuracy or completeness of any information regarding any of the foregoing, or as to any other matter, notwithstanding the delivery or disclosure to Buyer or any of its Affiliates or representatives of any documents, opinions, projections, forecasts, statements, teasers, memorandums, presentations, advice or information (whether communicated orally or in writing), and any such other promises, representations or warranties, or liability or responsibility therefor, are hereby expressly disclaimed.

Article 6

COVENANTS

6.1    Conduct of Business

.

(a)    From the date hereof and until the earlier of the Closing Date or the termination of this Agreement pursuant to Section 9.1, Seller shall, and shall cause each of the Business Affiliates to:

(i)    conduct the Business in the Ordinary Course of Business (except to the extent expressly provided otherwise herein or as consented to in writing by Buyer) and in compliance with Law, in each case, in all material respects;

(ii)    (A) pay and perform all of the debts and other obligations (including Taxes) of the Business when due, (B) use commercially reasonable efforts to collect Accounts Receivable of the Business in a manner consistent with past practice and policies and not extend credit in relation to the Business outside of the Ordinary Course of Business, (C) sell the Business Products in a manner consistent with past practice and policies as to discounting, license, service and maintenance terms, incentive programs, revenue recognition and other terms and (D) use its commercially reasonable efforts consistent with past practice and policies to keep available the services of the Business Employees (except to the extent Buyer has identified any of them in writing as individuals who will not be Transferred Personnel) and preserve intact in all material respects the Business’s relationships with its customers and Material Suppliers, except in respect of any Contracts with customers and Material Suppliers which expire during such period by their terms;

(iii)    maintain each of the Business Leased Real Property in all material respects in accordance with the terms of the applicable Acquired Lease;

(iv)    promptly notify Buyer of any written notice, or receipt, to the actual knowledge of Mel Walker, Guy Merritt or Adnan Amjad, of any other communication, from any Person alleging that the consent of such Person is or may be required in connection with the Transactions;

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(v)    promptly notify Buyer, to the extent permitted by Law, of any written notice, or upon Seller obtaining actual knowledge, of any other communication, from any Governmental Entity (A) relating to the Transactions, (B) indicating that a Permit Related to the Business is required in any jurisdiction in which such Permit has not been obtained, which failure to obtain would reasonably be expected to be material to the Business;

(vi)    promptly notify Buyer of any material inaccuracy in or breach of any representation or warranty of Seller contained herein or breach of any material covenant of Seller herein, provided that the phrase “as of the Agreement Date” in any such representation and warranty shall be disregarded for such purpose, in each case as to which Mel Walker, Guy Merritt or Adnan Amjad obtain actual knowledge;

(vii)    keep Buyer reasonably informed of any material actions taken, or expected to be taken, by Seller or any Business Affiliate in relation to the Business relating to COVID-19 and, in the case of such actions other than those being taken by Seller and its Affiliates with respect to their businesses generally (including with respect to remote work), consult with Buyer in good faith prior to implementing any such actions by Seller or such Business Affiliate in relation to the Business.

(b)    Except (i) as contemplated, permitted or required pursuant to the terms hereof or any Transaction Document or as reasonably necessary in connection with the Transactions, (ii) as required by Law, (iii) as disclosed on Schedule 6.1(b) of the Seller Disclosure Schedule, or (iv) as Buyer shall have approved in writing in advance, from the date hereof and until the earlier of the Closing Date or the termination of this Agreement pursuant to Section 9.1, Seller shall not, and Seller shall cause the Business Affiliates not to, do any of the following to the extent such actions relate to the Business:

(i)    mortgage, pledge or subject any of the Acquired Assets, or any part thereof, to any Lien other than Permitted Liens and Liens that will be released at or prior to Closing;

(ii)    sell, assign, transfer or otherwise dispose of any of the Acquired Assets (other than (A) personal property sold or otherwise disposed of in the Ordinary Course of Business, which is excess, obsolete or not material to the Business, or (B) non-exclusive licenses of Intellectual Property Rights granted to any Customer in the Ordinary Course of Business);

(iii)    (A) commence a Legal Proceeding relating to the Acquired Assets other than (I) for breach of this Agreement or (II) for the routine collection of bills (for (II), after reasonable consultation with Buyer prior to filing such a suit) or (B) settle or compromise any pending or threatened Legal Proceedings relating to the Acquired Assets or the operation of the Business;

(iv)    (A) transfer any employee of Seller or its Affiliates into the Business such that he or she would become exclusively dedicated to the Business, transfer any Business Employee out of the Business such that he or she would no longer be exclusively dedicated to the Business, hire any Business Employee (except to fill current vacancies set forth on Section 6.1(b)(iv) of the Seller Disclosure Schedule or vacancies arising after the date of this Agreement due to the departure of any Business Employee) or terminate any Business Employees (except for any Business Employees whom Buyer has identified in writing as not being Transferred Personnel), or (B) increase the compensation or benefits of any Business Employees, other than,

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in the case of clause (B), (I) as required by Law or in the Ordinary Course of Business or in accordance with any pre-existing contractual obligations set forth in Section 6.1(b)(iv) of the Seller Disclosure Schedule, or (II) retention payments or bonuses that may be paid by Seller or the Business Affiliates in connection with the Transactions as set forth in Section 6.1(b)(iv) of the Seller Disclosure Schedule;

(v)    enter into any collectively bargained agreements or similar agreements, or enter into any amendments or modifications of such agreements, in each case which relate to or involve the Business, the Business Employees or the Acquired Assets;

(vi)    grant or pay, or enter into any Contract providing for the granting of any severance, retention or termination pay, or the acceleration of vesting or other benefits, to any Business Employee, other than retention payments or bonuses that may be paid by Seller or the Business Affiliates in connection with the Transactions as set forth in Section 6.1(b)(iv) of the Seller Disclosure Schedule;

(vii)    acquire any business or any corporation, partnership, association or other business organization or division thereof, or otherwise acquire or agree to acquire any material assets, that in each case is or are Related to the Business, or enter any joint venture, strategic alliance or partnership Related to the Business;

(viii)    (A) acquire any material assets that would constitute an Acquired Asset or (B) license any Acquired Intellectual Property (other than non-exclusive licenses of Intellectual Property Rights granted to any Customer in the Ordinary Course of Business);

(ix)    terminate or waive any right of material value related to the Acquired Assets or Related to the Business;

(x)    enter into any Contract binding on Seller, the Business Affiliates or the Business granting “most favored nation” status or similar rights to any Person with respect to the Business, granting exclusive sales, distribution, marketing or other exclusive rights, rights of refusal, rights of first negotiation or similar rights or terms to any Person with respect to the Business or limiting the freedom to engage in the Business, operate the Business in any geographic area or compete with any Person in connection with the conduct of the Business;

(xi)    extend the period for payment of Accounts Payable or accelerate the payment of Accounts Receivable other than in the Ordinary Course of Business;

(xii)    change the invoicing practices of the Seller or the Business Affiliates with respect to the Business in a manner that would accelerate the timing for delivering invoices for services of the Business to Customers under Acquired Contracts;

(xiii)    enter into any Contract that that if in effect on the Agreement Date would be an Acquired Material Contract or amend, renew or waive any material provision of, or transfer or terminate, any Acquired Material Contract (other than automatic renewals in accordance with the terms of such Acquired Material Contract);

(xiv)    directly or indirectly engage in any transaction, arrangement or Contract Related to the Business with any Related Party (other than in the Ordinary Course of Business),

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except for transactions, arrangements or Contracts that by their terms expire or will be terminated at or prior to the Closing; or

(xv)    agree to do any of the foregoing.

(c)    Notwithstanding anything in this Agreement to the contrary, nothing contained in this Agreement shall (x) give Buyer, directly or indirectly, the right to control or direct the operations of Seller or the Business prior to the Closing or (y) restrict Seller’s ability to obtain any consents or waivers as contemplated hereunder in connection with the Transactions. Prior to the Closing, Seller shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over the Business. Notwithstanding anything to the contrary set forth in this Agreement, no consent of Buyer shall be required with respect to any matter set forth in this Section 6.1 to the extent that the requirement of such consent would reasonably be expected to violate any Laws.

6.2    Information and Access

.

(a)    From the date of this Agreement until the earlier of the termination of this Agreement and the Closing Date upon reasonable prior written request, subject to Section 6.2(b), and except as determined by Seller in good faith to (x) be appropriate to ensure compliance with Law, (y) reasonably be expected to violate the attorney-client privilege or other contractual confidentiality obligations or (z) without limiting the foregoing (but solely in the case of access prior to the Closing), reasonably be expected to cause competitive harm to the Business if the Transactions are not consummated, Seller shall, and shall cause each Business Affiliate to, afford each Designated Representative reasonable access to the offices, personnel, properties, books and records of the Business, in each case at the sole cost and expense of Buyer and solely for the purposes of preparing for and implementing the post-Closing ownership of the Acquired Assets and operation of the Business and the consummation of the Transactions; provided, however, that (i) all requests by Buyer or its Designated Representative for access shall be directed to Marty Pletkin or Will J. Flynt Jr. and such access shall be conducted during normal business hours under the supervision of Seller’s personnel and in such a manner so as not to interfere with the normal operations of Seller and the Business Affiliates; (ii) if the parties are in an adversarial relationship in litigation or arbitration, the furnishing of information, documents or records in accordance with this Section 6.2(a) shall be subject to applicable rules relating to discovery; and (iii) any access to Seller’s and the Business Affiliates’ offices and properties (A) shall be subject to (1) any COVID-19 Measures or COVID-19 Responses, (2) Seller’s and the Business Affiliates’ reasonable security and insurance measures, and (3) any restrictions applicable to the offices properties, including the terms of any leases, (B) may be limited (in Seller’s sole discretion) to visual inspection only, and (C) shall not include the right to conduct any environmental testing, sampling or intrusive investigations of any kind.

(b)    Notwithstanding anything in this Agreement to the contrary, Seller and the Business Affiliates may take such action as they reasonably deem appropriate to separate or redact information unrelated to the Business or the Acquired Assets from documents and other materials made available or delivered pursuant to Section 6.2(a). Notwithstanding anything in this Agreement to the contrary, prior to the Closing, Seller shall not be required to, or to cause any Business Affiliate to, disclose (or to provide access to any of its offices, properties, books or records to the extent that such access would reasonably be expected to result in the disclosure of) any confidential information to the extent that disclosure would reasonably be expected to violate any Laws, nor shall Seller be required to

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permit Buyer or its Affiliates or Designated Representatives to have access to or to copy or remove from the offices or properties of Seller or any of the Business Affiliates any documents, drawings or other materials that would reasonably be excepted to reveal any such confidential information.

(c)    Buyer acknowledges that the information provided to Buyer and its representatives prior to the Closing in connection with this Agreement (including this Section 6.2) and the Transactions are subject to the terms of the Nondisclosure Agreement, the terms of which are incorporated herein by reference and, notwithstanding anything herein to the contrary, shall survive the Closing in accordance with the terms thereof; provided, however, that Buyer’s obligations thereunder shall terminate as of the Closing solely in respect of that portion of the Confidential Information (as defined in the Nondisclosure Agreement) exclusively related to the Business or the Acquired Assets. If this Agreement is terminated prior to the Closing, the Nondisclosure Agreement and the provisions of this Section 6.2(c) shall nonetheless continue in full force and effect.

6.3    Contact with Affiliates, Customers, Suppliers and Other Business Relations

. Buyer hereby agrees that, except as expressly contemplated in this Agreement, Buyer is not authorized to and shall not (and shall not permit any of its representatives, employees or Affiliates to) contact any Affiliate of Seller, or any employee, tenant, landlord, customer, supplier, content provider, advertiser, distributor or other business relation of Seller or its Affiliates, regarding the Transactions prior to the Closing without the prior written consent of Seller. If Seller consents to any such contact, Seller shall be given the reasonable opportunity to participate in any discussions and meetings, and shall be copied on all correspondence, with any such Persons prior to Closing.

6.4    Billing and Collection of Accounts Receivable and WIP; Receipt of Property Relating to Acquired Assets

.

(a)    After the Closing Date, Buyer shall be responsible for the collection of any and all Accounts Receivable and WIP (except to the extent otherwise provided in the Subcontractor Agreement). Seller shall cooperate with Buyer in connection with any reasonable enforcement action to collect such Accounts Receivable or WIP (or portions thereof) or otherwise enforce any right in connection therewith; provided, that Buyer shall pay the out-of-pocket expenses (including reasonable legal fees and disbursements) of Seller and of its Affiliates and their respective officers, directors, partners, principals, employees and agents reasonably incurred in connection with providing such cooperation.

(b)    In the event that at any time or from time to time after the Closing, Seller or any of its Affiliates (i) receives any monies, checks or negotiable instruments, invoices, mail or packages or other communications or Acquired Assets, in each case in respect of the Business, that should belong to Buyer or its Affiliates pursuant to this Agreement (the “Seller Mistakenly Received Items”) or (ii) inadvertently makes payment on an invoice (or other reasonably documented expense) properly belonging to the Business (a “Seller Mistaken Payment”), then, in the case of any Seller Mistakenly Received Items, Seller shall transfer, or cause to be transferred, as soon as reasonably practicable, such Seller Mistakenly Received Item to Buyer, for no additional consideration and, in the case of a Seller Mistaken Payment, Buyer shall, as soon as reasonably practicable, reimburse the payor in respect of such payment, without any right of offset or reimbursement.

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(c)    In the event that at any time or from time to time after the Closing, Buyer or any of its Affiliates (i) receives any monies, checks or negotiable instruments, invoices, mail or packages or other communications or Excluded Assets that should belong to Seller or its Affiliates pursuant to this Agreement (the “Buyer Mistakenly Received Items”) or (ii) inadvertently makes payment on an invoice (or other reasonably documented expense) properly belonging to Seller or its Affiliates (a “Buyer Mistaken Payment”), then, in the case of any Buyer Mistakenly Received Items, Buyer shall transfer, or cause to be transferred, as soon as reasonably practicable, such Buyer Mistakenly Received Item to Seller, for no additional consideration and, in the case of a Buyer Mistaken Payment, Seller shall, as soon as reasonably practicable, reimburse the payor in respect of such payment, without any right of offset or reimbursement.

6.5    R&W Insurance Policy

. Prior to the Closing, Buyer shall cause the R&W Insurance Policy to be issued. Seller shall use commercially reasonable efforts to cooperate with Buyer’s efforts and provide assistance as reasonably requested by Buyer to cause the R&W Insurance Policy to be issued and to provide information reasonably requested by Buyer to remove any exclusions or exceptions thereto. Seller shall reimburse Buyer for the out-of-pocket costs and expenses payable to Ambridge Partners LLC to obtain the R&W Insurance Policy, including the total premium, underwriting costs, and brokerage commissions of such policy, up to a maximum aggregate reimbursement of Five Hundred Thousand Dollars ($500,000) (the “R&W Reimbursement Amount”) subject to Closing and receipt of documentation reasonably acceptable to Seller of evidencing Buyer’s payment of such fees and expenses. Buyer may set off any mutually agreed R&W Reimbursement Amount against the Closing Date Payment. Buyer agrees not to make or enter into any amendment to the R&W Insurance Policy, including with respect to subrogation, without Seller’s prior written consent.

6.6    Mutual Cooperation

. After the Closing Date, Seller shall, and shall cause the Business Affiliates to, use their commercially reasonable efforts to provide to Buyer, and Buyer shall use its commercially reasonable efforts to provide to Seller (the party providing such records or information or making available such personnel, the “providing party,” and the party or parties requesting such records, information or personnel, the “requesting party”) such records and information and to make available to the requesting party such personnel, in each case as may be reasonably requested in writing by the requesting party, for the purpose of reasonably assisting the requesting party in responding to governmental or professional inquiries, making required governmental filings or defending or prosecuting any action or other proceeding relating to the Acquired Assets prior to or after the Closing Date, involving any Person; provided, however, that (a) except as otherwise provided herein, including in ARTICLE VIII, the requesting party shall promptly reimburse the providing party for any reasonable out-of-pocket expenses incurred by the providing party in connection with the provision of any such assistance (including reasonable legal fees and disbursements), provided, that the requesting party shall not be responsible to reimburse the providing party for such party’s time spent in such cooperation or the salaries or costs of fringe benefits or other similar expenses paid by the providing party to its Affiliates or their respective personnel while such Persons are providing any such assistance, and (b) no providing party shall be required to (i) provide information, records or personnel under circumstances which the providing party believes in its sole reasonable determination may expose it to liability to any Person or may materially prejudice any commercial, legal or other interest of the providing party or involves a breach of law or (ii) take any action that, in the providing party’s sole determination, materially and unreasonably interferes with its business.

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6.7    Exclusivity

. From the date of this Agreement until the earlier of the Closing and the termination of this Agreement pursuant to Section 9.1, Seller shall not, and will cause its Affiliates and its and their respective representatives not to, (a) solicit, initiate, seek or knowingly encourage or knowingly facilitate the making or submission of an Acquisition Proposal; (b) enter into, participate in, maintain or continue any communications or negotiations regarding, or deliver or make available to any Person any information with respect to, an Acquisition Proposal; (c) agree to, accept, approve, endorse or recommend any Acquisition Proposal; or (d) enter into any letter of intent, memorandum of understanding or similar document or any Contract or agreement contemplating or otherwise relating to any Acquisition Proposal. Seller shall, and shall cause its Affiliates and its and their respective representatives to, immediately cease and cause to be terminated any and all existing activities, communications or discussions or negotiations with any Persons conducted prior to or on the date of this Agreement with respect to any Acquisition Proposal. Seller shall promptly notify Buyer in writing of any written Acquisition Proposal that is received by it or its representatives after the date hereof. Seller shall be responsible for any breach of this Section 6.7 by any of its Affiliates and their respective representatives to the extent such Affiliates and representatives are acting on their behalf.

6.8    Satisfaction of Conditions Precedent

. From the date hereof through the Closing Date or the termination of this Agreement, each of the parties hereto shall use its commercially reasonable efforts to satisfy, or cause to be satisfied, all of the conditions precedent to each party’s obligation to consummate the Transactions as set forth in ARTICLE VII, and shall not take or fail to take any action that could reasonably be expected to result in the nonfulfillment of any such condition.

6.9    Employment of Seller Personnel and Related Matters

.

(a)    Not later than ten (10) days after the Agreement Date, Buyer shall offer employment, effective as of the Closing Date and subject to a background check, to all Business Employees who have not already executed an Offer Letter as of the date hereof, including Business Employees who are not actively at work due to vacation, illness, jury duty, bereavement leave, short-term disability leave, workers’ compensation or other authorized leave of absence (such Business Employees who have already executed Offer Letters as of the date hereof or accept offers pursuant to this Section 6.9(a) and, in either event, begin employment with Buyer being, the “Transferred Personnel”), on such terms and conditions as (i) in respect of base salary, are in the aggregate no less favorable than, and (ii) in respect of benefits (for purposes of clarity, excluding discretionary bonuses), are in the aggregate no less than substantially equivalent to, those that such Business Employees were provided by Seller immediately prior to the Closing Date. Effective as of the Closing to the extent permitted by the applicable Buyer plans, plan administrators and Law, Buyer shall offer to all such Transferred Personnel accepting such offers group health benefit coverage with respect to which Buyer shall have caused to be waived all pre-existing condition exclusions and actively-at-work requirements and similar limitations, eligibility waiting periods, and evidence of insurability requirements. Seller and its Affiliates will be solely responsible for complying with the requirements of Section 4980B of the Code for all Business Employees. Seller shall cash out to the Transferred Personnel all accrued but unused vacation and other paid time-off of such Transferred Personnel in accordance with the terms and conditions applicable to the

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provision thereof under the vacation pay or other paid time-off policy of Seller or its Affiliates applicable to such Transferred Personnel as of the Closing.

(b)    Seller and its Affiliates shall be solely responsible for any and all liabilities in respect of the Business Employees, including the Transferred Personnel, and their beneficiaries and dependents, arising prior to the Closing, and relating to or arising out of or in connection with, to the extent applicable, (i) the employment of any personnel by Seller or its Affiliates, (ii) the participation in or accrual of benefits or compensation under, or the failure to participate in or to accrue compensation under, any Employee Benefit Plans, (iii) accrued but unpaid salaries, wages, bonuses, incentive compensation, commissions, retention payments, severance, vacation or sick pay or other compensation or payroll items (including deferred compensation), (iv) any severance, separation or termination liabilities, including such liabilities incurred in connection with the Closing and (v) any unpaid payroll Taxes, social security or equivalent Taxes, unpaid fees for medical insurance or similar coverage, and unemployment or equivalent Taxes imposed on Seller in its capacity as employer, and performance of any obligation to any Governmental Entity to withhold income or other Taxes from wages of employees.

(c)    Nothing in this Section 6.9, expressed or implied, shall confer upon any personnel of Seller, Buyer or their Affiliates (including the Transferred Personnel and other personnel of Seller) any rights or remedies (including any right to employment or continued employment for any specified period) of any nature or kind whatsoever. It is expressly agreed that the provisions of this Section 6.9 are not intended to be for the benefit of or otherwise be enforceable by, any third party, including any Transferred Personnel or any other personnel of Seller or Buyer. Nothing in this Section 6.9 shall be construed as an amendment to any employee benefit plan or shall be construed to limit the right of Buyer to amend or terminate any employee benefit plan in accordance with the terms thereof.

6.10    Certain Consents

. Each party hereto shall, as promptly as possible following the execution of this Agreement, use its commercially reasonable efforts to obtain, or cause to be obtained, and to cooperate with the other party’s efforts to obtain, all Governmental Approvals required in connection with the execution and delivery of this Agreement and the Transaction Documents or the consummation of the Transactions.

6.11    Use of Certain Names; No Affiliation

.

(a)    Buyer acknowledges that it has not purchased any right to use any Marks of Seller and its Affiliates and related entities, other than the Transferred Mark, and the Marks of Seller and its Affiliates and related entities, other than the Transferred Mark, constitute Excluded Assets. Buyer shall not, and shall cause its Affiliates not to, use any such Marks of Seller and its Affiliates and related entities, other than the Transferred Mark, in connection with the Business or otherwise.

(b)    Notwithstanding the foregoing, (i) Buyer may make references to Seller in identifying the entity with whom Transferred Personnel were formerly associated, and (ii) Buyer may make the factual statements set forth in Schedule 6.11(b) in the following contexts: oral communications with actual or potential clients or employees or written communications with such persons limited to individually addressed letters, e-mail messages, presentations and proposals and internal communications to employees, in all cases individually addressed, and in each case so long as (A) such statement remains factually correct at the time made; (B) such statement is presented as a statement of fact in text and

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neither the presentation nor the context of the statement lends prominence to the name of Seller or any of its Affiliates (by highlighting, placement in a headline, or otherwise) over the general textual presentation in which it appears; (C) such presentation makes clear that the Business is no longer affiliated with Seller and any of its Affiliates; and (D) no such statement shall use the name of Seller or any of its Affiliates as a trademark, trade name or service mark. Buyer may request the prior written consent of Seller to use the factual statements contained in Schedule 6.11(b) in a context other than described above. Any such request shall include a reasonably detailed description of the proposed use, the context in which it is proposed to appear, and other information that Buyer deems relevant or that Seller may request.

(c)    None of Buyer or its Affiliates or their respective partners, officers, directors, personnel, employees, agents, or Affiliates shall, in connection with the Transaction or otherwise: (i) hold itself, himself or herself out as directors, officers, partners, principals, employees, personnel, agents or associates of Seller or any of its Affiliates or (ii) represent to any third party that any partnership, joint venture, association, fiduciary relationship or agency relationship exists with Seller or any of its Affiliates other than as set out in the Transaction Documents.

6.12    Taxes

.

(a)    All property Taxes or similar ad valorem obligations levied with respect to the Acquired Assets for any taxable period that includes the Closing Date and ends after the Closing Date, whether imposed or assessed before or after the Closing Date, shall be prorated between Seller and Buyer as of effectiveness of the Closing based on the number of days in such period ending on or before the Closing Date and the number of days in such period following the Closing Date. Seller shall be liable for all such Taxes attributable to the period ending on or before the Closing Date, and Buyer shall be liable for such Taxes attributable to the period following the Closing Date. If any Taxes subject to proration are fully paid by either Buyer or Seller, or if a refund of Taxes subject to proration is fully received by either Buyer or Seller, the proportionate amount of such Taxes allocable to the other party shall be paid promptly by (or to) such other party after notice of the payment of such Taxes by the payor to such other party or following the receipt of such refund, as applicable.

(b)    Notwithstanding anything to the contrary in this Agreement, all Transfer Taxes arising from the sale of the Business and the Acquired Assets shall be borne and paid fifty percent by Buyer and fifty percent by Seller when due. “Transfer Taxes” means all excise, sales, use, transfer, stamp, documentary, filing, recordation and similar Taxes and fees which may be imposed or assessed as a result of the transactions effected pursuant to this Agreement, together with any interest, additions, penalties with respect thereto. The party charged by Law with the duty of filing Tax Returns and making other filings shall do so in accordance with Law.

(c)    Seller and Buyer shall cooperate with each other in paying any Taxes, filing any Tax Return and conducting any Tax audit (including any judicial or administrative proceeding) relating to Taxes described in Section 6.12(a) or Section 6.12(b) or Taxes relating to periods ending on or prior to the Closing Date and in connection therewith take such action as the other party may reasonably request. Seller and Buyer hereby agree to reimburse each other for reasonable out-of-pocket expenses (excluding partner, principal, or employee compensation and general corporate overhead and other similar expenses) incurred by the other party and such other party’s Affiliates, officers, directors, partners, principals, employees and agents in connection with satisfying its obligations under this Section 6.12.

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6.13    Preservation of Records; Post-Closing Information and Access

.

(a)    Buyer and Seller agree not to dispose of or destroy any records relating to the Business that relate to periods prior to the Closing for a period of seven (7) years from the Closing Date and shall make such records available to the other party or its Affiliates as may be reasonably requested (during normal business hours and at the requesting party’s (or its Affiliate’s, as applicable) sole cost and expense) in connection with any proper purpose, including insurance claims by, Legal Proceedings (other than Legal Proceedings between Seller or its Affiliates, on the one hand, and Buyer, on the other hand, related to this Agreement or the Transactions) or tax audits or governmental investigations of, Buyer, Seller or their respective Affiliates, as applicable, or in order to enable Buyer or Seller, as applicable, to comply with its obligations under this Agreement and each other Transaction Document; provided, that if requested by the requesting party, any such Person shall enter into a customary confidentiality agreement with and benefiting the party to whom such request has been made and, if applicable, its Affiliates; provided, further, that notwithstanding the foregoing, neither party shall be required to retain any records relating to the Business for any period of time beyond the requirements set forth in its internal policies regarding record retention.

(b)    Following the Closing, upon reasonable prior written request by Buyer or its Designated Representative, subject to Section 6.2(b), and except as determined by Seller in good faith to (x) be appropriate to ensure compliance with Law or (y) reasonably be expected to violate the attorney-client privilege or other contractual confidentiality obligations, Seller shall, and shall cause each Business Affiliate to, afford each Designated Representative reasonable access to personnel knowledgeable about the Business and any Books and Records of the Business not transferred to Buyer, in each case at the sole cost and expense of Buyer, to the extent determined in good faith by Buyer to be necessary to enable Buyer to conduct the Business following the Closing; provided, however, that (i) such access shall be conducted during normal business hours under the supervision of Seller’s personnel and in such a manner so as not to interfere with the normal operations of Seller and the Business Affiliates; and (ii) if the parties are in an adversarial relationship in litigation or arbitration, the furnishing of information, documents or records in accordance with this Section 6.13(b) shall be subject to applicable rules relating to discovery.

(c)    Within five (5) Business Days following the Closing, Seller shall deliver to Buyer one or more USB drives or other digital media containing a true, correct and complete copy of the documents and materials uploaded to the Merrill VDR, which shall indicate, for each document, the date that such document was first uploaded to the Merrill VDR.

6.14    Publicity

. Buyer may issue a press release announcing the execution and delivery of this Agreement in a form mutually agreed upon by Buyer and Seller. None of Seller and its Affiliates, on the one hand, or Buyer and its Affiliates, on the other hand, shall issue any other press release or public announcement concerning this Agreement, the other Transaction Documents or the Transactions or make any other public disclosure containing or pertaining to the terms thereof without obtaining Seller’s or Buyer’s, as applicable, prior written consent, unless, in the reasonable judgment of the party seeking to make such disclosure, such disclosure is otherwise required by Law or by the applicable rules of any stock exchange on which such disclosing party lists securities and, if such press release, public announcement or other public disclosure would include information about the Transactions or the other party or its Affiliates that is not substantially the same as previous disclosures made in compliance with

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this Section 6.14, Buyer or Seller, as applicable, has (x) provided the other with as much advance notice of such required disclosure as is reasonably practicable, (y) provided the other with the proposed contents of such required disclosure as soon as is reasonably practicable and (z) considered in good faith any comments that are timely provided by the other; it being acknowledged that disclosure of any such information by either Buyer or Seller to its respective directors, officers, partners, principals, personnel, agents, advisors, underwriters and lenders and their respective counsel who have a need to know the information and who agree to keep such information confidential shall not be deemed a public announcement or public disclosure for purposes hereof.

6.15    Independence Rules and Regulations

. Notwithstanding any provision of this Agreement or any Transaction Document to the contrary, if performance of or compliance with any agreement or covenant of Seller or an Affiliate under this Agreement or any Transaction Document (in each case, not already performed or complied with) is determined in good faith by Seller or its Affiliates to be inconsistent with or in violation of Seller’s or any such Affiliate’s obligations pursuant to the rules and regulations of any Governmental Entity or professional entity (including the Securities and Exchange Commission, the Public Company Accounting Oversight Board and the American Institute of Certified Public Accountants) that are applicable to Seller or its Affiliates or related entities (collectively, the “Independence Rules”), then Seller or such Affiliate (upon notice to Buyer) shall not be obligated to perform or comply with such agreement or covenant (to the extent not already performed or complied with but excluding payments for Buyer Indemnifiable Matters unless the payment of any such amount pursuant to this Agreement (if, as and when due), in and of itself would be inconsistent with or in violation of the Independence Rules) and Buyer shall not be entitled to receive any benefit in connection with such agreement or covenant. Seller shall, however, use reasonable good faith efforts to, and to cause the Business Affiliates to, cooperate with Buyer in an attempt to address such circumstances in a manner intended to minimize the adverse impact on the rights of the parties hereto. The parties hereto acknowledge and agree that neither Seller nor any of its Affiliates shall incur any liability to Buyer as a result of any failure to so perform or comply pursuant to this Section 6.15.

6.16    Bulk Sales

. Buyer waives compliance by Seller and the Business Affiliates with all applicable bulk sales or bulk transfer laws.

6.17    Migration of Certain Acquired Assets

. Seller shall cause certain of the Acquired Assets, to be migrated to such equipment of Buyer as Buyer may reasonably request in accordance with the Transfer Plan set out in Schedule 6.17.

6.18    Non-Competition

.

(a)    For a period of five (5) years from the Closing Date, Seller shall not, and shall cause its Affiliates not to, directly or indirectly, engage in the Business anywhere in the world. Notwithstanding the foregoing, Seller or any of its Affiliates may (i) provide services or products to third parties outside of the Business, including, for the avoidance of doubt, consulting advisory services and consulting services relating to the selection or implementation of software or systems within the scope of the Business; (ii) acquire any Person or business that includes a business unit or entity engaged in the

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Business, provided that a majority of the aggregate revenue of such acquired Person or business across all of its service lines is not attributable to such Business; and (iii) own, directly or indirectly, solely as an investment, securities of any Person engaged in the Business, if Seller or any of its Affiliates, as applicable, is not a controlling person of, or a member of a group which controls, such Person. Buyer further acknowledges and agrees that no actions or services contemplated by this Agreement or the Transaction Documents shall be prohibited by, or a breach of, this Section 6.18, including the (A) provision of services contemplated by the Transition Services Agreement and the Subcontractor Agreement, and (B) Seller’s and its Affiliate’s exercise of their rights under the License Back Agreement in support of business activities that are not otherwise prohibited by or a breach of this Section 6.18.

(b)    Seller acknowledges that (i) provisions of this Section 6.18 are an integral part of the sale of the Acquired Assets and of the Business contemplated by this Agreement upon which Buyer is relying and (ii) irreparable damage may occur if the provisions of this Section 6.18 are not performed in accordance with the terms hereof or are otherwise breached. It is accordingly agreed that, in addition to any other remedy to which Buyer is entitled at law or in equity in respect of a breach of this Section 6.18, Buyer shall be entitled to seek an injunction or injunctions to prevent breaches of this Section 6.18 and to enforce specifically the terms and provisions of this Agreement, without the necessity of proving either actual damages or the absence of adequate remedies at law.

6.19    Shared Services

. Buyer acknowledges that the Business currently receives from Seller and certain of its Affiliates certain Shared Services. Buyer acknowledges that Seller and its Affiliates shall cease providing any and all Shared Services to the Business, and any agreements with respect thereto shall terminate without penalty and shall be of no further force or effect, in each case as of the Closing Date, and Seller and its Affiliates shall have no obligation from and after the Closing Date to provide any Shared Services to the Business, in each case except as expressly set forth in the Transition Services Agreement.

6.20    Supplement to Schedules

. Prior to the Closing, Seller and Buyer shall, if they so mutually agree in writing, supplement or amend Schedule 2.1(a) to (i) add any Contract entered into by Seller after the date hereof and before Closing, and any such Contract shall be deemed an “Acquired Contract” for all purposes under this Agreement, and (ii) remove from Schedule 2.1(a) any Contract as to which Seller or counterparty as of the Closing Date no longer has any obligations, which shall thereafter no longer be deemed an “Acquired Contract” for any purpose under this Agreement.

6.21    Further Assurances

. After the Closing, each party shall from time to time, at the request of and without further cost or expense to the other, execute and deliver such other instruments of conveyance and assumption and take such other actions as may be reasonably required in order to carry out the provisions of this Agreement and the Transaction Documents and make effective the Transactions. If, at any time after the Agreement Date, Buyer in good faith identifies in writing to Seller (each such written identification, an “Additional Asset Request”) any asset of Seller or any of Seller’s Affiliates that was not included in the Acquired Assets but exclusively relates to the Business (excluding any Excluded Asset that is set forth on Schedule 2.2(f) or constitutes a Shared Service) (any such asset, an “Additional Asset”), then Seller shall, or cause such Affiliate, as applicable, to, sell, transfer, convey, assign and deliver, or cause to be sold, transferred, conveyed, assigned and delivered, to Buyer at (in the case of

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assets identified between the Agreement Date and the Closing Date) or after the Closing (in the case of assets identified after the Closing Date), without any further payment by Buyer, all of Seller’s or such Affiliate’s, as applicable, right, title and interest in and to such Additional Asset.

Article 7

CONDITIONS PRECEDENT

7.1    Conditions to Each Party’s Obligations

. The respective obligations of each party hereto to consummate the Transactions shall be subject to (a) there being no Law or Order, which is in effect, having been enacted, entered, promulgated or enforced by a Governmental Entity of competent jurisdiction restraining, enjoining or otherwise prohibiting the consummation of the Transactions and (b) there being no pending Legal Proceeding seeking such a result; provided, that a party shall not be entitled to rely on the failure of this condition to be satisfied if such Order or Legal Proceeding was initiated by such party or an Affiliate of such party or such Order or Legal Proceeding was primarily due to the failure of such party to perform any of its covenants or agreements under this Agreement.

7.2    Conditions to Obligations of Buyer

. The obligations of Buyer to consummate the Transactions shall be subject to the satisfaction or waiver by Buyer as of the Closing of the following conditions:

(a)    Seller shall have performed and complied in all material respects with the covenants and obligations required to be performed by Seller under this Agreement on or prior to the Closing Date.

(b)    Each of the representations and warranties of Seller set forth in this Agreement shall be true and correct in all material respects (disregarding all qualifications or limitations as to “materiality”, “Seller Material Adverse Effect” and words of similar import set forth therein but, for purposes of clarity, not disregarding the word “Material” in uses of the defined terms “Material Contracts”, “Acquired Material Contracts”, “Material Customer” and “Material Supplier”) as of the Closing Date with the same force and effect as if made on and as of the Closing Date (other than those representations and warranties which address matters only as of a particular date, which shall have been true and correct only as of such particular date).

(c)    There shall not have occurred a Seller Material Adverse Effect.

(d)    (i) Each of the Business Employees set forth on Schedule A hereof and (ii) no fewer than eighty five percent (85%) of the other Business Employees set forth on Section 4.13 of the Seller Disclosure Schedule as of the Agreement Date will, in each case, have remained continuously employed with Seller or the applicable Business Affiliate until the Closing and have delivered a signed offer letter for employment with Buyer and an employee proprietary information and inventions agreement, and no action will have been taken by any such individual to rescind such offer letter or employee proprietary information and inventions agreement.

(e)    At the Closing, Seller shall have delivered, or shall have caused to be delivered, to Buyer:

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(i)    a bill of sale and assignment and assumption agreement, substantially in the form attached hereto as Exhibit C (the “Non-IP Bill of Sale”), executed by Seller or any applicable Business Affiliate;

(ii)    an intellectual property bill of sale, substantially in the form attached hereto as Exhibit D (the “Intellectual Property Bill of Sale”, and together with the Non-IP Bill of Sale, the “Bills of Sale”), executed by Seller or any applicable Business Affiliate;

(iii)    an assignment and assumption agreement for each Acquired Lease (the “Lease Assignments”), covering the assignment of such Acquired Lease by Seller or its Business Affiliate, as applicable, to Buyer and assumption of such Acquired Lease by Buyer, executed by Seller or any applicable Business Affiliate;

(iv)    a transition services agreement, substantially in the form attached hereto as Exhibit E (the “Transition Services Agreement”), with such modifications to Exhibit A thereto as are reasonably satisfactory to Buyer, executed by Seller or any applicable Business Affiliate;

(v)    an Intellectual Property license-back agreement, substantially in the form attached hereto as Exhibit F (the “License Back Agreement”), executed by Seller or any applicable Business Affiliate;

(vi)    a subcontractor agreement, substantially in the form attached hereto as Exhibit G (the “Subcontractor Agreement”), executed by Seller;

(vii)    a certificate dated as of the Closing Date, duly executed by an authorized partner or principal of Seller, certifying as to the satisfaction of the conditions set forth in Section 7.2(a), Section 7.2(b) and Section 7.2(c);

(viii)    all other Transaction Documents to which Seller or any Business Affiliate is a party; and

(ix)    evidence satisfactory to Buyer of (A) the consent to assignment or novation required in connection with the Transactions under the Acquired Contracts set forth on Schedule 7.2(e)(ix)-1 and (B) the delivery of notice as promptly as practicable following the Agreement Date, and in any event prior to the earlier of the Closing and the date on which notice is required to be delivered under the applicable Acquired Contract, to the party to the Acquired Contract set forth on Schedule 7.2(e)(ix)-2.

7.3    Conditions to Obligations of Seller

. The obligations of Seller to consummate the Transactions shall be subject to the fulfillment on or prior to the Closing Date of the following conditions, any one or more of which may be waived by Seller in Seller’s sole discretion:

(a)    Buyer shall have performed and complied in all material respects with the covenants and obligations required to be performed by Buyer under this Agreement on or prior to the Closing Date.

(b)    Each of the representations and warranties of Buyer set forth in this Agreement shall be true and correct in all material respects (disregarding all qualifications or limitations as to

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“materiality”, “Buyer Material Adverse Effect” and words of similar import set forth therein) as of the Closing Date with the same force and effect as if made on and as of the Closing Date.

(c)    At the Closing, Buyer shall have delivered to Seller:

(i)    the Bills of Sale, executed by Buyer;

(ii)    the Lease Assignments, executed by Buyer;

(iii)    the Transition Services Agreement, with such modifications to Exhibit A thereto as are reasonably satisfactory to Seller, executed by Buyer;

(iv)    the License Back Agreement, executed by Buyer;

(v)    the Subcontractor Agreement, executed by Buyer;

(vi)    a certificate dated as of the Closing Date, duly executed by an authorized officer of Buyer, certifying as to the satisfaction of the conditions set forth in Section 7.3(a) and Section 7.3(b); and

(vii)    all other Transaction Documents to which Buyer is a party.

Article 8

INDEMNIFICATION

8.1    Survival; Claims Period

.

(a)    If the Transactions are consummated, the following survival periods will apply (each, a “Survival Period”):

(i)    All representations and warranties of Buyer contained in this Agreement or in any Transaction Document shall survive the Closing and shall thereafter terminate and expire on the date that is eighteen (18) months following the Closing Date; provided that the representations and warranties contained in Section 5.1 (Organization and Power), Section 5.2 (Authorization of Agreement), and Section 5.6 (Financial Advisors) (the representations and warranties referred to in the foregoing, collectively, the “Buyer Fundamental Representations”) shall survive the Closing and shall thereafter terminate and expire upon the expiration of the applicable statute of limitations.

(ii)    All representations and warranties of Seller contained in this Agreement or in any Transaction Document shall survive the Closing and expire on the date that is eighteen (18) months following the Closing Date; provided that (A) the representations and warranties set forth in Section 4.11 (Intellectual Property) and Section 4.12 (Privacy and Data Security) (the “Seller Special IP Representations”) shall survive the Closing and shall thereafter terminate and expire upon the date that is three (3) years following the Closing Date; and (B) the representations and warranties contained in Section 4.1 (Organization and Power), Section 4.2 (Authorization of Agreement), Section 4.3 (Conflicts; Consents of Third Parties), the first sentence of Section

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4.10(a) (Title to Acquired Assets) and Section 4.17 (Financial Advisors) (collectively, the “Seller Fundamental Representations”) shall survive the Closing and shall thereafter terminate and expire upon the expiration of the applicable statute of limitations.

(b)    The period during which claims may be made by an Indemnitee in respect of any Indemnifiable Matter will be the 60-day anniversary of the expiration of the applicable Survival Period (each, as applicable, a “Claims Period”).

(c)    If written notice of a Claim has been given and received before the expiration of the applicable Claims Period, such Claim shall not be barred by the expiration of such Claims Period and shall survive until such Claim has been finally resolved.

(d)    Notwithstanding anything to the contrary contained herein, the limitations set forth in Section 8.1 shall not apply with respect to (i) any claim for Fraud, (ii) claims made pursuant to Section 8.3(d) or (iii) claims made pursuant to Section 8.2(e).

8.2    Indemnification by Seller

. From and after the Closing, Seller shall indemnify, defend and hold harmless Buyer, its Affiliates and their respective directors, officers, employees, agents and permitted assigns (collectively, the “Buyer Indemnified Parties”), from and against any losses, liabilities, damages, deficiencies, costs, expenses (including interest, penalties and reasonable attorneys’ fees and disbursements and costs of investigation and enforcement) (“Losses”) sustained or incurred by any such Buyer Indemnified Party, arising or resulting from (collectively, items (a) – (f), the “Buyer Indemnifiable Matters”):

(a)    any failure of any representation or warranty made by the Seller in this Agreement, other than the Seller Special IP Representations and the representations and warranties contained in Section 4.10(b) (collectively, the “Seller Special Representations”) and Seller Fundamental Representations, to be true and correct on the Agreement Date and as of the Closing Date, or in the case of any such representation and warranty that by its terms speaks only as of a specific date or dates, any failure to be true and correct on and as of such specified date or dates;

(b)    any failure of any Seller Special Representation in this Agreement to be true and correct on the Agreement Date and as of the Closing Date, or in the case of any Seller Special Representation that by its terms speaks only as of a specific date or dates, any failure to be true and correct on and as of such specified date or dates;

(c)    any failure of any Seller Fundamental Representation in this Agreement to be true and correct on the Agreement Date and as of the Closing Date, or in the case of any Seller Fundamental Representation that by its terms speaks only as of a specific date or dates, any failure to be true and correct on and as of such specified date or dates;

(d)    any breach of any covenant or obligation of Seller in this Agreement or any Transaction Document, except for a breach of Section 6.1(a)(iv), (v) or (vi) that occurs without actual knowledge that the failure to give the requisite notice constitutes such a breach (it being acknowledged that the foregoing shall not exclude or diminish Seller’s obligations under this Section 8.2, if any, with respect to any representation, warranty or covenant giving rise to Seller’s obligations under Section 6.1(a)(vi));

(e)    any Excluded Asset or Excluded Liability; or

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(f)    any Fraud committed by or on behalf of Seller in connection with the Transactions.

8.3    Indemnification by Buyer

. From and after the Closing, Buyer shall indemnify, defend and hold harmless Seller, its Affiliates and their respective directors, officers, partners, principals, employees, agents and permitted assigns (collectively, the “Seller Indemnified Parties”), from and against any and all Losses sustained or incurred by any such Seller Indemnified Party, arising or resulting from (collectively, items (a) – (e), the “Seller Indemnifiable Matters” and collectively with the Buyer Indemnifiable Matters, the “Indemnifiable Matters” and each, an “Indemnifiable Matter”):

(a)    any failure of any representation or warranty made by Buyer in this Agreement, other than Buyer Fundamental Representations, to be true and correct on the Agreement Date and as of the Closing Date, or in the case of any such representation and warranty that by its terms speaks only as of a specific date or dates, any failure to be true and correct on and as of such specified date or dates;

(b)    any failure of any Buyer Fundamental Representation in this Agreement to be true and correct on the Agreement Date and as of the Closing Date, or in the case of any Buyer Fundamental Representation that by its terms speaks only as of a specific date or dates, any failure to be true and correct on and as of such specified date or dates;

(c)    any breach of any covenant or obligation of Buyer in this Agreement or any Transaction Document;

(d)    any Assumed Liability; or

(e)    any Fraud committed by or on behalf of Buyer in connection with the Transactions.

8.4    Indemnification Procedures

.

(a)    Whenever any claim, action, suit or proceeding shall arise for which indemnification may be sought under this ARTICLE VIII (a “Claim”), the Person entitled to indemnification (the “Indemnitee”) shall promptly give notice (a “Claim Notice”) to the party obligated to provide indemnification (the “Indemnitor”) with respect to the Claim. Such Claim Notice by the Indemnitee shall contain (i) a description of the Claim in reasonable detail (based upon the information then possessed by the Indemnitee), including copies of any material written evidence thereof, (ii) the amount of any Losses incurred, paid, reserved or accrued or reasonably expected to be incurred, paid, reserved or accrued by the Indemnitee (which, in the case of Losses not yet incurred may be the maximum amount believed by the Indemnitee in good faith to be incurred, paid, reserved or accrued), including reasonable supporting documentation in respect of the determination of such amount, to the extent available, (iii) a statement that the Indemnitee is entitled to indemnification under this ARTICLE VIII for such Losses, and (iv) a demand for payment in the amount of such Losses. Such Claim Notice (A) need only specify such information to the knowledge of the Indemnitee as of the date thereof, (B) will not limit any of the rights or remedies of any Indemnitee with respect to the underlying facts and circumstances specifically set forth in such Claim Notice and (C) may be updated and amended from time to time by the Indemnitee by delivering any updated or amended Claim Notice to the Indemnitor, so long

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as the delivery of the original Claim Notice is made within the applicable Claims Period and such update or amendment relates to the underlying facts and circumstances specifically set forth in such original Claims Notice; provided that all claims for Losses properly set forth in a Claim Notice or any update or amendment thereto will remain outstanding until such claims have been resolved or satisfied, notwithstanding the expiration of such Claims Period. The failure by the Indemnitee to timely give such notice shall not relieve the Indemnitor from any obligation under this Agreement, except to the extent, if any, that the Indemnitor is materially prejudiced thereby.

(b)    Upon receipt of a Claim Notice from the Indemnitee of a Claim by a third party (a “Third Party Claim”), the Indemnitor may elect to assume and control the defense of such Claim by providing counsel (such counsel subject to the reasonable approval of the Indemnitee) to defend the Indemnitee against the matter from which the Third Party Claim arose, at the Indemnitor’s sole cost and expense. Notwithstanding the foregoing, the Indemnitor shall not be entitled to assume control of the defense of any Third Party Claim if (i) the Third Party Claim relate to or arise in connection with any criminal proceeding, action, indictment, allegation or investigation, (ii) involves monetary damages in excess of the amounts that the Indemnitor would otherwise be liable for pursuant to this ARTICLE VIII, (iii) seeks specific performance or injunctive relief against the Indemnitee, (iv) alleges, or seeks a finding or admission of, a violation of Law by the Indemnitee or any of its Affiliates, (v) the Indemnitor failed or is failing to diligently prosecute or defend such Third Party Claim, (vi) the Indemnitor is also a party to such claim and the Indemnitee determines in good faith that joint representation would be inappropriate or (vii) would materially and adversely affect the ongoing business (including any dispute with any material customer, supplier or employee) of the Indemnitee (including, in the case of the Buyer Indemnified Parties, the Business). In circumstances where the Indemnitor is assuming control of the defense of a Third Party Claim in accordance with this Section 8.4(b), the Indemnitee shall cooperate in all reasonable respects, and at the Indemnitor’s sole cost and expense, with the Indemnitor in the investigation, trial, defense and any appeal arising from the matter from which the Third Party Claim arose; provided, however, that the Indemnitee may (but shall not be obligated to) participate in (but not control) any such investigation, trial, defense and any appeal arising in connection with the Third Party Claim at its sole cost and expense. If the Indemnitee elects to so participate, the Indemnitor shall cooperate with the Indemnitee, and, in any event, regardless of such participation, the Indemnitor shall deliver to the Indemnitee or its counsel copies of all pleadings and other information within the Indemnitor’s knowledge or possession reasonably requested by the Indemnitee or its counsel that is relevant to the defense of such Third Party Claim and that will not prejudice the Indemnitor’s position, claims or defenses. The Indemnitor shall have the right to elect to settle any Third Party Claim without the Indemnitee’s consent only if (A) the settlement is for only monetary damages, the full amount of which shall be paid by the Indemnitor, and (B) the settlement includes, as a condition thereof, an express, unconditional release of the Indemnitee from any liability or obligation with respect to such Third Party Claim without any admission of wrongdoing by the Indemnitee and without any restrictions on any future actions of the Indemnitee and (C) the Indemnitee does not have any obligation or liability with respect to such settlement. Any other settlement will be subject to the consent of the Indemnitee. If the subject of any Third Party Claim results in a judgment or settlement consistent with the terms of this Section 8.4(b) for which the Indemnitor is liable hereunder, the Indemnitor shall promptly pay such judgment or settlement.

(c)    If the Indemnitor elects not to, or is not entitled to assume the defense of any Third Party Claim in accordance with the terms of Section 8.4(b), the Indemnitee may defend against the subject of the Third Party Claim, at the Indemnitor’s sole cost and expense, in such manner and on such terms as the Indemnitee reasonably deems appropriate, including settling the subject of the Third Party Claim. For the avoidance of doubt, any such costs and expenses incurred by the Indemnitee in connection

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with such defense, settlement or resolution, including reasonable attorneys’ fees, other professionals’ and experts’ fees and court or arbitration costs, will be included as Losses indemnifiable hereunder regardless of whether it is ultimately determined that such Third Party Claim was caused by or arose or resulted from a matter listed in Section 8.2 or Section 8.3, as applicable; provided that the Indemnitor shall not be liable for any settlement effected without its prior consent. If the Indemnitee defends the subject of a Third Party Claim in accordance with this Section 8.4(c), the Indemnitor shall cooperate with the Indemnitee and its counsel, at the Indemnitor’s sole cost and expense, in all reasonable respects, and shall deliver to the Indemnitee or its counsel copies of all pleadings and other information within the Indemnitor’s knowledge or possession reasonably requested by the Indemnitee or its counsel that are relevant to the defense of the subject of any such Third Party Claim and that will not prejudice the Indemnitor’s position, claims or defenses. The Indemnitee shall maintain confidentiality with respect to all such information consistent with the conduct of a defense hereunder.

8.5    Notice of Claims; Resolution

. In the case of a Claim that is not a Third Party Claim covered by Section 8.4(b) and Section 8.4(c) hereof, during the thirty (30) day period immediately following the date on which the Claim Notice is received (the “Mediation Period”), the Indemnitee and the Indemnitor will exercise good faith efforts to resolve the dispute. In the event that such dispute is not resolved by such parties prior to the expiration of the Mediation Period, either Buyer or Seller may commence an arbitration in accordance with the terms of Section 10.3 with respect to the matter. The decision of the arbitrator as to the validity and amount of any claim in such Claim Notice shall be non-appealable, binding and conclusive upon the parties hereto.

8.6    Limitations

.

(a)    Threshold. Neither a Buyer Indemnified Party nor Seller Indemnified Party shall be entitled to make a claim for indemnification for any Losses pursuant to Sections 8.2(a) or (b) or Section 8.3(a), as applicable, until the aggregate amount of all claims for Losses by all Buyer Indemnified Parties or Seller Indemnified Parties, as the case may be, exceeds Three Hundred Thousand Dollars ($300,000) (the “Threshold”), in which event Buyer or Seller, as applicable, shall be responsible only for Losses exceeding the Threshold, subject to the other limitations set forth in this Section 8.6.

(b)    Buyer Cap. The aggregate amount of all Losses for which Buyer shall be liable pursuant to: (i) Section 8.3(a) shall not exceed Fifteen MillionDollars ($15,000,000), and (ii) Sections 8.3(b) and/or (c) shall not exceed the Purchase Price; provided that, for purposes of determining satisfaction of the foregoing caps, such amounts are inclusive of all other Losses for which Buyer is liable hereunder or which were previously recovered from Buyer hereunder. The aggregate amount of all Losses for which Buyer shall be liable pursuant to Sections 8.3(a), (b) and (c) shall not exceed the Purchase Price. For the avoidance of doubt, the limitations set forth in the preceding sentences shall not apply to Losses arising pursuant to Sections 8.3(d) or (e), Buyer’s liability for which shall be uncapped.

(c)    Seller Cap. The aggregate amount of all Losses for which Seller shall be liable pursuant to: (i) Section 8.2(a) shall not exceed Three Hundred Thousand Dollars ($300,000), (ii) Section 8.2(a) and Section 8.2(b) shall not, in the aggregate, exceed Fifteen Million Dollars ($15,000,000), and (iii) Section 8.2(a) through Section 8.2(d) shall not, in the aggregate, exceed the Purchase Price. For the

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avoidance of doubt the limitations set forth in the preceding sentence shall not apply to Losses arising pursuant to Section 8.2(e) or (f), Seller’s liability for which shall be uncapped.

(d)    Additional Limitations. Notwithstanding any provision of this Agreement to the contrary:

(i)    the amount of any Loss for which indemnification is provided under this ARTICLE VIII shall be net of any amounts covered under insurance policies in effect and applicable to such Loss (including the R&W Insurance Policy) (such recoveries, however, calculated net of any collection costs and reserves, expenses, deductibles or premium adjustments or retrospectively rated premiums (as determined in good faith by an Indemnitee) incurred or paid to procure such recoveries); provided that, other than pursuant to the R&W Insurance Policy, no Indemnitee will have any obligation to seek to obtain or continue to pursue any such recoveries under insurance policies;

(ii)    each party agrees that it will not seek, and is not entitled to, indemnification for special, punitive or exemplary damages as to any matter under, relating to or arising out of this Agreement, under any form of action whatsoever, whether in contract or otherwise, even if the other party has been advised of the possibility of such damages, except, in each case, for recovery of those payable by an Indemnitee in respect of a Third Party Claim;

(iii)    (A) the rights and remedies of the Indemnitees after the Closing shall not be limited by (x) any investigation by or on behalf of, or disclosure to (other than in the Seller Disclosure Schedule, subject to any limitations expressly set forth therein), any Indemnitee at or prior to the Closing regarding any failure, breach or other event or circumstance or (y) any waiver of any condition to the Closing related thereto and (B) if an Indemnitee’s Claim under this ARTICLE VIII may be properly characterized in multiple ways in accordance with this ARTICLE VIII such that such Claim may or may not be subject to different limitations depending on such characterization, then such Indemnitee shall have the right to characterize such claim in a manner that maximizes the recovery and time to assert such Claim permitted in accordance with this ARTICLE VIII;

(iv)    notwithstanding Section 8.6(d)(iii) or anything to the contrary set forth herein, no party shall be entitled to any payment, adjustment or indemnification more than once with respect to the same matter; and

(v)    Buyer and Seller shall reasonably cooperate with each other with respect to resolving any claim or liability with respect to which one party is obligated to indemnify the other party hereunder.

(e)    The indemnification provisions contained herein are intended solely for the benefit of the Persons expressly identified in this ARTICLE VIII (and their permitted successors and assigns) and are in no way intended to, nor shall they, constitute an agreement for the benefit of, or be enforceable by, any other Person.

8.7    Payment

. In the event that any Buyer Indemnified Party is entitled to indemnification pursuant to Section 8.2(b) or (c), if and to the extent such matters are covered by the R&W Insurance Policy, Buyer shall first seek and use commercially reasonable efforts to recover against all reasonably available

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remedies under the R&W Insurance Policy, and shall only recover from Seller to the extent such Losses have exceeded the policy limit set forth in the R&W Insurance Policy, and solely to the extent otherwise recoverable in accordance with the limitations set forth in Section 8.6.

8.8    Adjustment to Purchase Price

. Any indemnification payment made pursuant to this ARTICLE VIII shall be treated as an adjustment to the Purchase Price for Tax purposes.

8.9    Exclusive Remedy

. The indemnification provisions in this ARTICLE VIII shall be the Buyer Indemnified Parties’ and the Seller Indemnified Parties’ exclusive remedy with respect to any breach, inaccuracy, failure to perform or comply, default, or violation of this Agreement; provided, however, that the foregoing shall not limit any party’s rights to seek equitable remedies otherwise available to such party.

Article 9

TERMINATION

9.1    Termination

. This Agreement may be terminated at any time prior to the Closing:

(a)    by written agreement of Seller and Buyer;

(b)    by Seller by written notice to Buyer:

(i)    if Buyer has materially breached its obligations under this Agreement and such breach (A) remains uncured for a period of at least thirty (30) days after written notice thereof has been given by the non-breaching party to the breaching party and (B) cannot be cured prior to the Drop Dead Date; or

(ii)    if there shall have been a breach of any representation or warranty by Buyer set forth in this Agreement such that the condition set forth in Section 7.3 would not be satisfied and such breach (A) remains uncured for a period of at least thirty (30) days after written notice thereof has been given by the non-breaching party to the breaching party and (B) cannot be cured prior to the Drop Dead Date;

(c)    by Buyer by written notice to Seller:

(i)    if Seller has materially breached its obligations under this Agreement and such breach (A) remains uncured for a period of at least thirty (30) days after written notice thereof has been given by the non-breaching party to the breaching party and (B) cannot be cured prior to the Drop Dead Date; or

(ii)    if there shall have been a breach of any representation or warranty by Seller set forth in this Agreement such that the condition set forth in Section 7.2(b) would not be satisfied and such breach (A) remains uncured for a period of at least thirty (30) days after written

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notice thereof has been given by the non-breaching party to the breaching party and (B) cannot be cured prior to the Drop Dead Date; or

(d)    by either Seller or Buyer, if the Closing shall not have occurred on or before February 15, 2021 (the “Drop Dead Date”);

provided, however, that the right to terminate this Agreement under this Section 9.1 shall not be available to a party whose failure to take any action required hereunder to fulfill any obligation under this Agreement shall have been the cause of, or shall have resulted in, the failure of the Closing to occur prior to such date or a party that is in material breach of its obligations under this Agreement at the time of such termination. The party desiring to terminate this Agreement pursuant to this Section 9.1 shall give notice of such termination to the other party.

9.2    Effect of Termination

. If this Agreement is terminated as provided in Section 9.1, this Agreement shall forthwith become void and there shall be no liability on the part of any party to this Agreement; provided, however, that the provisions of Section 6.2(c) and ARTICLE X shall survive any termination of this Agreement; and provided, further, that nothing in this Agreement shall relieve any party hereto from liability for intentional breach of this Agreement prior to termination of this Agreement pursuant to Section 9.1. Without limitation, nothing in this Section 9.2 shall limit or prevent a party from exercising any rights or remedies it may have under Section 10.7 to compel the occurrence of the Closing hereunder prior to termination of this Agreement pursuant to Section 9.1.

Article 10

GENERAL PROVISIONS

10.1    Notices

. All notices, requests, demands, consents and other communications hereunder among the parties hereto shall be in writing and shall be deemed given: (i) upon personal delivery; (ii) three (3) days after being mailed by certified or registered mail, postage prepaid, return receipt requested; (iii) the next Business Day after being sent via a nationally recognized overnight courier service; or (iv) upon receipt of electronic or other confirmation of transmission if sent via electronic mail to the parties hereto, their successors in interest or their assignees at the following addresses and electronic mail addresses, or at such other addresses or electronic mail addresses as the parties may designate by written notice in accordance with this Section 10.1:

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(a)    if to Buyer:

Model N, Inc.

777 Mariners Island Blvd, Suite 300

San Mateo, CA 94404

E-mail:

Attn: Office of General Counsel, Errol Hunter, Esq.

with a copy (which shall not constitute notice) to:

Fenwick & West LLP

801 California Street

Mountain View, CA 94041

E-mail:

Attn: David K. Michaels

(b)    if to Seller:

Deloitte & Touche LLP

1111 Bagby St.

Suite 4500

Houston, TX 77002

e-mail:

Attn: Adnan Amjad

with a copy (which shall not constitute notice) to:

Deloitte LLP

1221 Avenue of the Americas

New York, NY 10020

E-mail:

Attn: Office of General Counsel, Evan Schwartz, Esq.

and

Kramer Levin Naftalis & Frankel LLP

1177 Avenue of the Americas

New York, NY 10036

E-mail:

Attn: Thomas E. Molner, Esq.

10.2    Entire Agreement; No Third-Party Beneficiaries

. This Agreement, together with the Transaction Documents, and the Nondisclosure Agreement, constitutes the entire agreement and supersedes all other prior and contemporaneous agreements and understandings, both written and oral, among any of the parties with respect to the subject matter hereof and thereof. Except for the rights of any Seller Indemnified Parties or Buyer Indemnified Parties pursuant to ARTICLE VIII, no provisions of this Agreement are intended, nor should they be interpreted, to provide or create any third party beneficiary rights or remedies, or any other rights or remedies, of any kind whatsoever under or by reason of this Agreement in any Person, or the legal representatives of such Person, other than the parties to this Agreement.

10.3    Governing Law; Consent to Jurisdiction

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.

(a)    All matters arising out of or relating to this Agreement or the Transaction Documents shall be governed, including as to validity, interpretation and effect, by, and construed in accordance with, the internal Laws of the State of Delaware applicable to agreements made and fully performed within the State of Delaware, without regard to the principles of conflicts of Laws that might otherwise apply the Laws of any other jurisdiction.

(b)    IN THE EVENT THAT A RESOLUTION IS NOT REACHED AMONG THE PARTIES HERETO WITHIN THIRTY (30) DAYS AFTER WRITTEN NOTICE OF ANY DISPUTE WITH RESPECT TO THIS AGREEMENT, SUCH DISPUTE SHALL BE FINALLY SETTLED BY BINDING ARBITRATION. THE SEAT, OR LEGAL PLACE, OF ARBITRATION SHALL BE IN THE STATE OF DELAWARE. SUCH ARBITRATION SHALL BE CONDUCTED IN ENGLISH IN ACCORDANCE WITH THE CPR RULES FOR NON-ADMINISTERED ARBITRATION (THE “CPR ARBITRATION RULES”) IN EFFECT AT THE TIME OF THE COMMENCEMENT OF THE ARBITRATION, EXCEPT TO THE EXTENT MODIFIED BY THIS SECTION 10.3(b). THE ARBITRATION SHALL BE CONDUCTED BEFORE A PANEL OF THREE ARBITRATORS. Each of the parties shall designate one arbitrator in accordance with the “screened” appointment procedure provided in the CPR ARBITRATION Rules and the two party-designated arbitrators shall jointly select the third in accordance with the CPR ARBITRATION Rules. No arbitrator may serve on the panel unless he or she has agreed in writing to abide by the terms of this Section 10.3(b). THE PARTIES ACKNOWLEDGE THAT THIS AGREEMENT EVIDENCES A TRANSACTION INVOLVING INTERSTATE COMMERCE. Except with respect to the interpretation and enforcement of these arbitration procedures (which shall be GOVERNED BY THE FEDERAL ARBITRATION ACT (9 U.S.C., SECS. 1-16)), the arbitrators shall apply the governing law set forth in Section 10.3(a) in connection with the Dispute. No discovery shall be permitted in connection with the arbitration, except to the extent that it is expressly authorized by the arbitrators upon a showing of substantial need by the party seeking discovery. THE AWARD OF ARBITRATION SHALL BE FINAL AND BINDING UPON THE PARTIES HERETO. Further, judgment on the arbitrators’ award may be entered in any court having jurisdiction. Each party shall bear its own costs in the arbitration; however, the parties shall share the fees and expenses of the arbitrators and all arbitration case management fees equally. NOTWITHSTANDING THE AGREEMENT OF THE PARTIES TO ARBITRATE DISPUTES ARISING OUT OF OR RELATING OT THIS AGREEMENT, THE PARTIES MAY APPLY TO A COURT OF COMPETENT JURISDICTION TO SEEK TO ENJOIN PRELIMINARILY OR PERMANENTLY ANY BREACH OR THREATENED BREACH OF SECTION 6.2(c).

(c)    Subject to the foregoing clause (b), each of the parties hereto irrevocably submits to the exclusive jurisdiction of any state or federal courts sitting in Wilmington, Delaware. Each party hereto also hereby irrevocably waives any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court and further waives any claim that any such suit, action or proceeding which has been brought in any such court has been brought in an inconvenient forum. In addition to any other form of service of process authorized by Law, service of process in any suit, action or proceeding hereunder shall be sufficient if mailed to the address specified in Section 10.1, and such service shall constitute “personal service” for purposes of such suit or proceeding.

10.4    Waiver of Right to Trial by Jury

. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHTS SUCH PARTY MAY HAVE TO A

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TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) RELATING TO THIS AGREEMENT, ANY TRANSACTION DOCUMENT OR THE TRANSACTION.

10.5    Assignment

. Except as expressly provided herein, neither this Agreement nor any of the rights, interests and obligations under this Agreement may be assigned by Buyer or Seller, without the prior written consent of the other party; provided that, notwithstanding the foregoing, any or all rights and obligations of Buyer may be assigned to one or more wholly owned subsidiaries of Buyer, so long as such assignment does not relieve Buyer of any of its obligations hereunder. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns.

10.6    Waiver; Amendment; Remedies Cumulative; Specific Performance

.

(a)    No waiver of any term, condition or obligation of this Agreement shall be valid unless in writing and signed by the waiving party. No failure or delay by any party hereto at any time to require the other parties hereto to perform strictly in accordance with the terms hereof shall preclude any party from requiring performance by the other parties hereto at any later time. No waiver of any one or several of the terms, conditions or obligations of this Agreement, and no partial waiver thereof, shall be construed as a waiver of any of the other terms, conditions or obligations of this Agreement. This Agreement may not be amended, changed or modified in any fashion except by written instrument signed by Buyer and Seller.

(b)    All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available.

(c)    The parties hereto agree that irreparable damage may occur if any provisions of this Agreement are not performed in accordance with the terms hereof or are otherwise breached. It is accordingly agreed that each of the parties hereto shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, this being in addition to any other remedy to which they are entitled at law or in equity. Each of the parties hereto hereby waives any requirement under any Law to post a bond or other security as a prerequisite to obtaining equitable relief.

10.7    Fees and Expenses

. All fees, costs and expenses incurred in connection with the preparation, negotiation, execution, delivery or performance of this Agreement, the Transaction Documents and the Transactions shall be the responsibility of and paid by the party incurring such fees, costs or expenses.

10.8    Mutual Drafting

. The parties hereto are sophisticated and have been represented by attorneys throughout the Transactions who have carefully negotiated the provisions hereof. As a consequence, the parties do not intend that the presumptions of any Law or rules relating to the interpretation of contracts against the drafter of any particular clause should be applied to this Agreement or any agreement or instrument executed in connection herewith, and therefore waive their effects.

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10.9    Representation by Counsel

.

(a)    Each party hereto acknowledges that such party has been advised and represented by counsel in the negotiation, execution and delivery of this Agreement and accordingly agrees that if an ambiguity exists with respect to any provision of this Agreement, such provision shall not be construed against any party because such party or such party’s representatives drafted such provision.

(b)    Buyer agrees that, after the Closing, neither Buyer, nor any of its Affiliates will have any right to access or control any of Kramer Levin Naftalis & Frankel LLP’s records relating to or affecting the Transactions with respect to its representation of Seller or the Business, which will be and remain the property of (and be controlled by) Seller. In addition, Buyer agrees that it would be impractical to remove all attorney-client communications from the records (including e-mails and other electronic files) of the Business. Accordingly, Buyer shall not knowingly and intentionally use any attorney-client communication remaining in the records of the Business after Closing in a manner that would reasonably be expected to be adverse to Seller. Buyer agrees, on its own behalf and on behalf of its Affiliates, that from and after Closing (i) the attorney-client privilege, all other evidentiary privileges, and the expectation of client confidence as to all attorney-client communications belong to Seller and will not pass to or be claimed by Buyer or its Affiliates, and (ii) Seller shall have the exclusive right to control, assert or waive the attorney-client privilege, any other evidentiary privilege, and the expectation of client confidence with respect to such attorney-client communications. Accordingly, Buyer shall not (x) assert any attorney-client privilege, other evidentiary privilege, or expectation of client confidence with respect to any attorney-client communication, except in the event of a post-Closing dispute with a Person that is not Seller or an Affiliate of Seller; or (y) knowingly and intentionally take any action which would reasonably be expected to cause any attorney-client communication to cease being a confidential communication or to otherwise lose protection under the attorney-client privilege or any other evidentiary privilege, including waiving such protection in any dispute with a Person that is not Seller or an Affiliate of Seller.

10.10    Severability

. If any term or other provision of this Agreement shall be determined by any court of competent jurisdiction to be invalid, illegal or incapable of being enforced, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect.

10.11    Facsimile Signature; Counterparts

. Facsimile or electronic transmission in portable document format of any signed original document or retransmission of any signed facsimile or electronic transmission in portable document format will be deemed to have the same legal effect as delivery of an original. This Agreement may be executed in one or more counterparts, each of which when executed shall be deemed to be an original, but all of which shall constitute but one and the same agreement.

[Signature page follows]

- 50 -

IN WITNESS WHEREOF, each party hereto has duly executed this Asset Purchase Agreement as of the date first above written.

DELOITTE & TOUCHE LLP

By:     /s/ Ted DeZabala    

    Name: Ted DeZabala    

    Title: Principal

[Signature Page to Asset Purchase Agreement]

IN WITNESS WHEREOF, each party hereto has duly executed this Asset Purchase Agreement as of the date first above written.

MODEL N, INC.

By:     /s/ Cathy Lewis    

    Name: Cathy Lewis    

    Title: Chief Accounting Officer

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jason Blessing, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q of Model N, Inc.;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

    a.    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

    b.    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

    c.    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

    d.    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.    The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

    a.    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

    b.    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 9, 2021

By:	/s/ JASON BLESSING
	Jason Blessing
	Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, John Ederer, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q of Model N, Inc.;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

    a.    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

    b.    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

    c.    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

    d.    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.    The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

    a.    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

    b.    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 9, 2021

By:	/s/ John Ederer
	John Ederer
	Chief Financial Officer
	(Principal Financial Officer and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Jason Blessing, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge, the Quarterly Report of Model N, Inc. on Form 10-Q for the fiscal quarter ended December 31, 2020 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Model N, Inc.

Date: February 9, 2021

By:	/s/ JASON BLESSING
	Jason Blessing
	Chief Executive Officer
	(Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, John Ederer, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge, the Quarterly Report of Model N, Inc. on Form 10-Q for the fiscal quarter ended December 31, 2020 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in such Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Model N, Inc.

Date:  February 9, 2021

By:	/s/ John Ederer
	John Ederer
	Chief Financial Officer
	(Principal Financial Officer and Accounting Officer)

XML

Cover - shares	3 Months Ended
	Dec. 31, 2020	Jan. 29, 2021
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Dec. 31, 2020
Document Transition Report	false
Entity File Number	001-35840
Entity Registrant Name	Model N, Inc.
Entity Incorporation, State	DE
Entity Tax Identification Number	77-0528806
Entity Address, Street Address	777 Mariners Island Boulevard,
Entity Address, Suite	Suite 300
Entity Address, City	San Mateo,
Entity Address, State	CA
Entity Address, Postal Zip Code	94404
City Area Code	650
Local Phone Number	610-4600
Title of each class	Common Stock, par value $0.00015 per share
Trading Symbol	MODN
Name of each exchange on which registered	NYSE
Entity Current Filing Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		35,049,340
Amendment Flag	false
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q1
Entity Central Index Key	0001118417
Current Fiscal Year End Date	--09-30

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2020	Sep. 30, 2020
Current assets
Cash and cash equivalents	$ 143,517	$ 200,491
Accounts receivable, net of allowance for doubtful accounts of $110 as of December 31, 2020 and $47 as of September 30, 2020	39,807	35,796
Prepaid expenses	3,678	2,797
Other current assets	6,777	7,314
Total current assets	193,779	246,398
Property and equipment, net	1,568	1,034
Operating lease right-of-use assets	15,837	3,332
Goodwill	66,860	39,283
Intangible assets, net	51,418	24,380
Other assets	7,055	5,863
Total assets	336,517	320,290
Current liabilities
Accounts payable	5,833	3,009
Accrued employee compensation	11,513	17,056
Accrued liabilities	5,036	5,237
Operating lease liabilities, current portion	1,889	1,460
Deferred revenue, current portion	55,638	50,904
Total current liabilities	79,909	77,666
Long term debt	116,795	114,438
Operating lease liabilities, less current portion	13,604	2,067
Other long-term liabilities	1,355	1,448
Total liabilities	211,663	195,619
Commitments and contingencies
Stockholders’ equity
Common Stock, $0.00015 par value; 200,000 shares authorized; 35,049 and 34,821 shares issued and outstanding at December 31, 2020 and September 30, 2020, respectively	5	5
Preferred Stock, $0.00015 par value; 5,000 shares authorized; no shares issued and outstanding	0	0
Additional paid-in capital	357,106	351,952
Accumulated other comprehensive loss	(1,031)	(1,213)
Accumulated deficit	(231,226)	(226,073)
Total stockholders’ equity	124,854	124,671
Total liabilities and stockholders’ equity	$ 336,517	$ 320,290

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2020	Sep. 30, 2020
Statement of Financial Position [Abstract]
Accounts receivable, allowance for doubtful accounts	$ 110	$ 47
Common Stock, par value (in dollars per share)	$ 0.00015	$ 0.00015
Common Stock, shares authorized (in shares)	200,000,000	200,000,000
Common Stock, shares issued (in shares)	35,049,000	34,821,000
Common Stock, shares outstanding (in shares)	35,049,000	34,821,000
Preferred Stock, par value (in dollars per share)	$ 0.00015	$ 0.00015
Preferred Stock, shares authorized (in shares)	5,000,000	5,000,000
Preferred Stock, shares issued (in shares)	0	0
Preferred Stock, shares outstanding (in shares)	0	0

XML

Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Revenues
Total revenues	$ 42,734	$ 38,388
Cost of revenues
Total cost of revenues	17,116	16,352
Gross profit	25,618	22,036
Operating expenses
Research and development	8,697	8,516
Sales and marketing	9,456	9,013
General and administrative	8,787	6,965
Total operating expenses	26,940	24,494
Loss from operations	(1,322)	(2,458)
Interest expense, net	3,462	563
Other expenses (income), net	130	(12)
Loss before income taxes	(4,914)	(3,009)
Provision for (benefit from) income taxes	239	(11)
Net loss	$ (5,153)	$ (2,998)
Net loss per share attributable to common stockholders:
Basic and diluted (in dollars per share)	$ (0.15)	$ (0.09)
Weighted average number of shares used in computing net loss per share attributable to common stockholders:
Basic and diluted (in shares)	34,936	33,145
Subscription
Revenues
Total revenues	$ 31,435	$ 28,182
Cost of revenues
Total cost of revenues	8,992	8,710
Professional services
Revenues
Total revenues	11,299	10,206
Cost of revenues
Total cost of revenues	$ 8,124	$ 7,642

XML

Condensed Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Statement of Comprehensive Income [Abstract]
Net loss	$ (5,153)	$ (2,998)
Other comprehensive income, net of tax
Unrealized gain on cash flow hedges	65	18
Foreign currency translation gain	117	25
Total comprehensive loss	$ (4,971)	$ (2,955)

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Cash flows from operating activities
Net loss	$ (5,153)	$ (2,998)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization	1,320	1,452
Stock-based compensation	5,128	5,823
Amortization of debt discount and issuance costs	2,357	109
Deferred income taxes	60	(190)
Amortization of capitalized contract acquisition costs	651	624
Changes in assets and liabilities, net of acquisition
Accounts receivable	(233)	(4,141)
Prepaid expenses and other assets	(602)	(398)
Accounts payable	(422)	136
Accrued employee compensation	(5,563)	(6,384)
Other current and long-term liabilities	(878)	(573)
Deferred revenue	3,114	1,549
Net cash used in operating activities	(221)	(4,991)
Cash flows from investing activities
Purchases of property and equipment	(336)	(29)
Acquisition of business	(56,444)	0
Net cash used in investing activities	(56,780)	(29)
Cash flows from financing activities
Proceeds from exercise of stock options	26	18
Net cash provided by financing activities	26	18
Effect of exchange rate changes on cash and cash equivalents	1	11
Net decrease in cash and cash equivalents	(56,974)	(4,991)
Cash and cash equivalents
Beginning of period	200,491	60,780
End of period	$ 143,517	$ 55,789

XML

The Company and Significant Accounting Policies and Estimates

3 Months Ended

Dec. 31, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

The Company and Significant Accounting Policies and Estimates

The Company and Significant Accounting Policies and Estimates

Model N, Inc. (“Model N,” “we,” “us,” “our,” and “the Company”) was incorporated in Delaware on December 14, 1999. The Company is a provider of cloud revenue management solutions for the life sciences and high tech industries. The Company’s solutions enable its customers to maximize revenues and reduce revenue compliance risk by transforming their revenue life cycle from a series of tactical, disjointed operations into a strategic end-to-end process, which enables them to manage the strategy and execution of pricing, contracting, incentives and rebates. The Company’s corporate headquarters are located in San Mateo, California, with additional offices in the United States, India and Switzerland.

Fiscal Year

The Company’s fiscal year ends on September 30. References to fiscal year 2021, for example, refer to the fiscal year ending September 30, 2021.

Basis for Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. The unaudited condensed consolidated balance sheet as of September 30, 2020 has been derived from the audited financial statements which are included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2020 (“the Annual Report”) on file with the SEC. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Annual Report.

In the opinion of management, the unaudited interim consolidated financial statements include all the normal recurring adjustments necessary to present fairly our condensed consolidated financial statements. The results of operations for the three months ended December 31, 2020 are not necessarily indicative of the operating results for the full fiscal year 2021 or any future periods.

The condensed consolidated financial statements include the accounts of Model N and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities and reported amounts of revenues and expenses during the reporting periods. Significant items subject to such estimates include revenue recognition, liability and equity allocation of convertible senior notes, legal contingencies, income taxes, stock-based compensation and valuation of goodwill and intangibles. These estimates and assumptions are based on management’s best estimates and judgment. Management regularly evaluates its estimates and assumptions using historical experience and other factors. However, actual results could differ significantly from these estimates.

COVID-19

The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. At this point, the extent to which COVID-19 may impact the Company’s financial condition or results of operations is uncertain. As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require us to update our estimates, judgments or revise the carrying value of our assets or liabilities. The estimates discussed above may change, as new events occur and additional information is obtained, and are recognized in the condensed consolidated financial statements as soon as they become known.

New Accounting Pronouncements

Recently Adopted Accounting Guidance

In August 2018, the FASB issued ASU 2018-15, Intangibles (Topic 350), Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This standard also requires customers to amortize the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. ASU 2018-15 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019, with early adoption permitted. The Company adopted this guidance beginning in the first quarter of fiscal year 2021 and it did not have a material impact on the condensed consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model which requires the use of forward-looking information to calculate credit loss estimates. ASU 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019, with early adoption permitted. ASU 2016-13 requires a cumulative effect adjustment to the balance sheet as of the beginning of the first reporting period in which the guidance is effective. The Company adopted this guidance beginning in the first quarter of fiscal year 2021 and it did not have a material impact on the condensed consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes, which simplifies the accounting for incomes taxes by removing certain exceptions to the general principles in Topic 740 and amending existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact this standard will have on its condensed consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40), Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, the new guidance modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation. ASU 2020-06 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2021, with early adoption permitted. The Company is currently evaluating the impact this standard will have on its condensed consolidated financial statements.

Significant Accounting Policies

There have been no changes in the significant accounting policies from those that were disclosed in the audited consolidated financial statements for the fiscal year ended September 30, 2020 included in the Annual Report on Form 10-K.

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Revenues from Contracts with Customers

3 Months Ended

Dec. 31, 2020

Revenue from Contract with Customer [Abstract]

Revenues from Contracts with Customers

Revenues from Contracts with Customers

Revenue Recognition

The Company derives revenues primarily from subscription revenues and professional services revenues.

Disaggregation of Revenues

See Note 13, Geographic Information, for information on revenue by geography.

Customer Contract Balances

The following table reflects contract balances related to contracts with customers (in thousands):

	As of December 31, 2020		As of September 30, 2020
Accounts receivable, net	$	39,807	$	35,796
Contract asset	3,432		4,482
Deferred revenue	56,369		51,786
Capitalized contract acquisition costs	8,580		7,506

Accounts Receivable

Accounts receivable represents the Company’s right to consideration that is unconditional, net of allowances for doubtful accounts. The allowance for doubtful accounts is based on management’s assessment of the collectability of accounts receivable amounts.

Contract Asset

Contract asset represents revenue that has been recognized for satisfied performance obligations for which the Company does not have an unconditional right to consideration.

Deferred Revenue

Deferred revenue, which is a contract liability, consists of amounts that have been invoiced and for which the Company has the right to bill, but that have not been recognized as revenue because the related goods or services have not been transferred.

The non-current portion of deferred revenue is included in other long-term liabilities in the condensed consolidated balance sheets. During the three months ended December 31, 2020, and 2019, the Company recognized revenue of $22.8 million and $19.8 million, respectively, that was included in the deferred revenue balances at the beginning of the periods.

Capitalized Contract Acquisition Costs

The Company capitalizes incremental costs incurred to acquire contracts with customers, primarily sales commissions, for which the associated revenue is expected to be recognized in future periods. The Company incurs these costs in connection with both initial contracts and renewals. Such costs for renewals are not considered commensurate with those for initial contracts given the substantive difference in commission rates in proportion to their respective contract values. The costs in connection with initial contracts and renewals are deferred and amortized over an expected customer life of five years and over the renewal term, respectively, which corresponds to the period of benefit to the customer. The Company determined the period of benefit by considering the Company’s history of customer relationships, length of customer contracts, technological development and obsolescence, and other factors. The current and non-current portion of capitalized contract acquisition costs are included in other current assets and other assets on the condensed consolidated balance sheets. Amortization expense is included in sales and marketing expenses on the condensed consolidated statements of operations.

As of December 31, 2020, the current and non-current portions of capitalized contract acquisition costs were $2.7 million and $5.9 million, respectively. As of September 30, 2020, the current and non-current portions of capitalized contract acquisition costs were $2.3 million and $5.2 million, respectively.The Company amortized $0.7 million of contract acquisition costs during the three months ended December 31, 2020.

For the three months ended December 31, 2020, there was no impairment related to capitalized contract acquisition costs.

Customer Deposits

Customer deposits primarily relate to payments received from customers which could be refundable pursuant to the terms of the arrangement. These amounts are included in accrued liabilities on the condensed consolidated balance sheets. Customer deposits were immaterial as of December 31, 2020 and September 30, 2020.

Standard payment terms to customers generally range from thirty to ninety days; however, payment terms and conditions in our customer contracts may vary. In some cases, customers prepay for subscription and services in advance of the delivery; in other cases, payment is due as services are performed or in arrears following the delivery.

Performance Obligations

Remaining performance obligations represent non-cancelable contracted revenue that has not yet been recognized, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. As of December 31, 2020, the aggregate amount of the transaction price allocated to performance obligations either unsatisfied or partially unsatisfied was $187.0 million, 53% of which we expect to recognize as revenue over the next 12 months and the remainder thereafter.

XML

Leases

3 Months Ended

Dec. 31, 2020

Leases [Abstract]

Leases

Leases

The Company leases facilities under noncancelable operating leases with lease terms between three years and 10 years. Certain leases include options to extend or terminate the lease. The Company factored into the determination of lease payments the options that it is reasonably certain to exercise.

Operating lease costs were $0.8 million for both the three months ended December 31, 2020 and 2019. Short-term lease costs, variable lease costs, and sublease income were immaterial for the three months ended December 31, 2020 and 2019.

Cash flow information related to operating leases is as follows (in thousands):

	Three months ended December 31, 2020		Three months ended December 31, 2019
Cash paid for amounts included in the measurement of operating lease liabilities	$	692	$	899
Operating lease ROU assets obtained in exchange for new operating lease liabilities	12,592		—

The Company’s headquarter’s lease commenced on December 1, 2020 which resulted in an increase of ROU assets of $10.3 million.

The weighted-average remaining lease term is 4.8 years and the weighted-average discount rate is 3.1% as of December 31, 2020.

Maturities of operating lease liabilities as of December 31, 2020 are as follows (in thousands):

Fiscal Year
Remaining fiscal 2021	$	1,425
2022	3,756
2023	3,607
2024	3,321
2025	2,833
2026 and thereafter	1,867
Total operating lease payments	16,809
Less imputed interest	1,316
Total operating lease liabilities	$	15,493

In January 2021, the Company entered into a new noncancelable operating lease for office space in India with a five year lease term that will commence upon the Company taking control of the space, which is anticipated to be in the second quarter of fiscal year 2021. The new lease has an early termination option and a five year renewal option which the Company is not reasonably certain to exercise. The future payments over the five year lease term are approximately $7.5 million.

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Fair Value of Financial Instruments

3 Months Ended

Dec. 31, 2020

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, debt and certain accrued liabilities. The Company regularly reviews its financial instruments portfolio to identify and evaluate such instruments that have indications of possible impairment. The Company estimates the fair value of its financial instruments when there is no readily available market data, which involves some level of management estimation and judgment and may not necessarily represent the amounts that could be realized in a current or future sale of these assets.

The table below sets forth the Company’s marketable securities which are measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

									Reported as:
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value		Cash and Cash Equivalents
As of December 31, 2020
Level 1:
Money market funds	$	64,804	$	—	$	—	$	64,804	$	64,804
US Treasury securities	49,998		—		—		49,998		49,998
Total	$	114,802	$	—	$	—	$	114,802	$	114,802
As of September 30, 2020
Level 1:
Money market funds	$	31,915	$	—	$	—	$	31,915	$	31,915
US Treasury securities	149,982		—		—		149,982		149,982
Total	$	181,897	$	—	$	—	$	181,897	$	181,897

The Company’s financial instruments not measured at fair value on a recurring basis include cash, accounts receivable, accounts payable and certain accrued liabilities. These financial instruments are reflected in the financial statements at cost and approximate their fair value due to their short-term nature.

See Note 6 for the fair value measurement of the Company’s derivative contracts and Note 7 for the fair value measurement of the Company’s convertible senior notes.

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Acquisition, Goodwill, and Intangible Assets

3 Months Ended

Dec. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Acquisition, Goodwill, and Intangible Assets

Acquisition, Goodwill, and Intangible Assets

Acquisition

On December 31, 2020, the Company acquired certain assets, properties and rights and certain liabilities and obligations from Deloitte & Touche LLP’s pricing and contracting solutions business for a contractual purchase price of $60.0 million subject to net working capital adjustments (the “Acquisition”). The acquired business operates primarily in the same markets as the Company’s existing operations. The reason for the Acquisition was to increase the Company’s addressable market and expand the opportunity to sell existing Model N products. This Acquisition has been accounted for as a business combination. The Company has included the results of the acquired business in its condensed consolidated financial statements since the date of Acquisition. The Company incurred $2.4 million acquisition-related expense during the three months ended December 31, 2020, which was recorded as general and administrative expenses.

The total purchase consideration was $59.9 million reflecting a $0.1 million of estimated net working capital adjustment from the contractual purchase price. The Company paid $56.4 million purchase consideration in cash during the three months ended December 31, 2020. The total purchase consideration of $59.9 million is subject to working capital settlement in the

post-combination period and the excess over $56.4 million will be paid in cash during the remainder of fiscal year 2021. The Company does not expect the working capital settlement to be material.

The purchase price was allocated to assets acquired and liabilities assumed based upon their estimated fair values as of the date of the acquisition. The excess of the purchase price over the estimated fair value of the net assets acquired was recorded as goodwill. The following table sets forth the preliminary allocation of the purchase price in connection with the Acquisition (in thousands):

	Acquisition Date Fair Value
Accounts receivable	$	3,760
Prepaid expenses	794
Property and equipment, net	511
Operating lease right-of-use assets	2,764
Goodwill	27,577
Intangible assets	28,210
Total assets acquired	63,616
Operating lease liabilities, current portion	656
Deferred revenue, current portion	1,449
Operating lease liabilities, less current portion	1,657
Total liabilities assumed	3,762
Total purchase price	$	59,854

The fair value of the assets acquired and liabilities assumed is subject to change within the measurement period (up to one year from the Acquisition date), as the valuation is finalized and if new information becomes available. The Company does not expect the change to be material.

Intangible assets included customer relationships of $15.5 million, developed technology of $10.2 million, non-compete of $1.6 million, and trade name of $0.9 million, which are amortized on a straight-line basis over 15 years, 6 years, 5 years, and 3 years, respectively, and over a weighted average period of 10.8 years. The Company applied significant judgment in determining the fair value of the intangible assets acquired, which involved the use of significant estimates and assumptions including customer attrition rate, royalty rate and technology migration curve. Goodwill is comprised of expected synergies for the combined operations and the assembled workforce acquired in the Acquisition. This goodwill is deductible for income tax purposes.

The Company has not presented the supplemental pro forma information for revenue and earnings related to the Acquisition, as it is deemed impracticable to determine and disclose this information, due to the unavailability of the information provided to the Company by Deloitte & Touche LLP, management’s inability to reasonably estimate the amounts from the carve out business and due to the difference in fiscal year-ends of the Company and Deloitte & Touche LLP.

Goodwill

The following table summarizes the changes in the carrying amount of goodwill (in thousands):

Balance at September 30, 2020	$	39,283
Addition from Acquisition	27,577
Balance at December 31, 2020	$	66,860

Intangible Assets

Intangible assets consisted of the following (in thousands):

	Estimated	As of December 31, 2020
	Useful Life (in Years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Intangible Assets:
Customer relationships	3-15	$	52,109	$	(15,648)	$	36,461
Developed technology	5-6	22,333		(9,826)		12,507
Non-compete	5	1,600		—		1,600
Trade name	3	850		—		850
Total		$	76,892	$	(25,474)	$	51,418

	Estimated	As of September 30, 2020
	Useful Life (in Years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Intangible Assets:
Customer relationships	3-10	$	36,599	$	(14,758)	$	21,841
Developed technology	5-6	12,083		(9,544)		2,539
Total		$	48,682	$	(24,302)	$	24,380

The Company recorded amortization expense related to the acquired intangible assets of $1.2 million for both the three months ended December 31, 2020 and 2019.

Estimated future amortization expense for the intangible assets as of December 31, 2020 is as follows (in thousands):

Fiscal Year
Remaining fiscal 2021	$	6,024
2022	8,032
2023	7,186
2024	6,691
2025	6,620
2026 and thereafter	16,865
Total future amortization	$	51,418

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Derivative Instruments and Hedging

3 Months Ended

Dec. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging

Derivative Instruments and HedgingThe Company uses foreign currency forward contracts to hedge a portion of the forecasted foreign currency-denominated expenses incurred in the normal course of business. These contracts are designated as cash flows hedges. These hedging contracts reduce, but do not entirely eliminate, the impact of adverse foreign exchange rate movements. The Company does not use any of the derivative instruments for trading or speculative purposes. These contracts have maturities of 12 months or less. The Company records changes in the fair value of cash flow hedges in accumulated other comprehensive loss in the condensed consolidated balance sheets, until the forecasted transaction occurs, at which point, the related gain or loss on the cash flow hedge is reclassified to the financial statement line item to which the derivative relates. The amounts reclassified to expenses

related to the hedged transactions were immaterial for the periods presented. The fair value of the outstanding non-deliverable foreign currency forward contracts was measured using Level 2 fair value inputs and was immaterial as of December 31, 2020 and September 30, 2020.

Notional Amounts of Derivative Contracts

Derivative transactions are measured in terms of the notional amount but this amount is not recorded on the balance sheet and is not, when viewed in isolation, a meaningful measure of the risk profile of the instruments. The notional amount is generally not exchanged but is used only as the basis on which the value of foreign exchange payments under these contracts are determined. The notional amounts of the outstanding foreign currency forward contracts designated as cash flow hedges were $5.6 million and $5.5 million as of December 31, 2020 and September 30, 2020, respectively.

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Convertible Senior Notes

3 Months Ended

Dec. 31, 2020

Debt Disclosure [Abstract]

Convertible Senior Notes

Convertible Senior Notes

In May 2020, the Company issued $172.5 million aggregate principal amount of 2.625% convertible senior notes in a private placement, including $22.5 million which represents the exercise in full of the initial purchasers’ option to purchase additional notes. The net proceeds from the issuance of the Notes was $166.4 million, net of initial purchasers’ discounts and debt issuance costs of $6.1 million. The Company used $40.0 million of the net proceeds to repay in full the debt outstanding under, and terminated the Credit Agreement dated May 4, 2018, as amended, by and among the Company, Wells Fargo, as administrative agent, and the lenders party thereto.

The Notes are senior, unsecured obligations of the Company and bear an interest rate of 2.625% per year payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2020. The Notes mature on June 1, 2025 unless repurchased, redeemed or converted in accordance with their terms prior to such date.

The Notes are convertible into cash, shares of the Company’s common stock or a combination thereof, at the Company’s election, at an initial conversion rate of 30.0044 shares of common stock per $1,000 principal amount of the Notes, which is equal to an initial conversion price of approximately $33.33 per share of common stock subject to adjustment, with a maximum conversion rate of 38.2555. The Company intends to settle the principal amount of the Notes with cash. Prior to the close of business on the scheduled trading day immediately preceding March 1, 2025, holders of the Notes may convert all or a portion of their Notes in multiples of $1,000 principal amount, only under the following circumstances:

•during any calendar quarter commencing after the calendar quarter ending on September 30, 2020 (and only during such calendar quarter), if the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

•during the five business day period after any five consecutive trading day period (the “measurement period”) in which the trading price per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the conversion rate on each such trading day;

•if the Company calls any or all of the notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or

•upon the occurrence of specified corporate events.

On or after March 1, 2025 and prior to the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the Notes may convert all or a portion of their Notes in multiples of $1,000 principal amount regardless of the foregoing conditions.

Holders of the Notes who convert their Notes in connection with a make-whole fundamental change (as defined in the Indenture) or in connection with any optional redemption are, under certain circumstances, entitled to an increase in the conversion rate. Additionally, in the event of a fundamental change (as defined in the Indenture), holders of the Notes may require the Company to repurchase all or a portion of their Notes at a price equal to 100% of the principal amount of Notes, plus any accrued and unpaid interest to, but excluding, the repurchase date.

The Company may not redeem the Notes prior to June 6, 2023. The Company may redeem for cash all or part of the Notes, at its option, on or after June 6, 2023 and on or before the 41st scheduled trading day immediately before the maturity date, at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption. No sinking fund is provided for the Notes.

During the three months ended December 31, 2020, the conditions allowing holders of the Notes to convert were not met. The Notes were classified as long-term debt on the condensed consolidated balance sheets as of December 31, 2020.

In accounting for the issuance of the Notes, the Company separated the Notes into liability and equity components. The carrying amount of the liability component of $115.3 million was calculated by measuring the fair value of a similar debt instrument that does not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was $57.2 million and was determined by deducting the fair value of the liability component from the principal amount of the Notes. The excess of the principal amount of the Notes over the carrying amount of the liability component is amortized to interest expense at an effective interest rate over the contractual terms of the Notes. The equity component was recorded in additional paid-in capital and is not remeasured as long as it continues to meet the conditions for equity classification.

In accounting for the issuance costs related to the Notes, the Company allocated the total amount incurred to the liability and equity components of the Notes based on the proportion of the proceeds allocated to the debt and equity components. Issuance costs attributable to the liability component were $4.1 million and are amortized to interest expense using the effective interest method over the contractual terms of the Notes. Issuance costs attributable to the equity component of $2.0 million were netted with the equity component in stockholders’ equity.

The net carrying amounts of the liability and equity components for the Notes were as follows (in thousands):

	As of December 31, 2020		As of September 30, 2020
Liability component:
Principal amount	$	172,500	$	172,500
Unamortized discount	(51,908)		(54,147)
Unamortized issuance costs	(3,797)		(3,915)
Net carrying amount	$	116,795	$	114,438
Equity component, net of issuance costs	$	55,227	$	55,227

The following table sets forth the interest expense recognized related to the Notes (in thousands):

	Three months ended December 31, 2020
Coupon interest expense	$	1,132
Amortization of debt discount	2,239
Amortization of debt issuance costs	118
Total interest expense related to the Notes	$	3,489
Effective interest rate of the liability component	12.32		%

The unamortized debt discount and debt issuance costs will be amortized over 53 months as of December 31, 2020.

As of December 31, 2020, the total estimated fair value of the Notes was approximately $224.9 million which includes the equity component. The fair value was determined based on the closing trading price per $100 of the Notes as of the last day of trading for the period. The fair value of the Notes is primarily affected by the trading price of the Company’s common stock and market interest rates. The fair value of the Notes is considered a Level 2 measurement as they are not actively traded.

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Stockholders' Equity

3 Months Ended

Dec. 31, 2020

Equity [Abstract]

Stockholders' Equity

Stockholders’ Equity

The following tables present the changes of the components of stockholders’ equity (in thousands):

	Three Months Ended December 31, 2020
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at September 30, 2020	34,821	$	5	$	351,952	$	(1,213)	$	(226,073)	$	124,671
Issuance of common stock upon exercise of stock options	4	—		26		—		—		26
Issuance of common stock upon release of restricted stock units	224	—		—		—		—		—
Stock-based compensation	—	—		5,128		—		—		5,128
Equity component of convertible senior notes, net of issuance costs	—	—		—		—		—		—
Other comprehensive income	—	—		—		182		—		182
Net loss	—	—		—		—		(5,153)		(5,153)
Balance at December 31, 2020	35,049	$	5	$	357,106	$	(1,031)	$	(231,226)	$	124,854

	Three Months Ended December 31, 2019
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at September 30, 2019	32,995	$	5	$	266,295	$	(1,169)	$	(212,409)	$	52,722
Issuance of common stock upon exercise of stock options	3	—		18		—		—		18
Issuance of common stock upon release of restricted stock units	336	—		—		—		—		—
Stock-based compensation	—	—		9,553		—		—		9,553
Other comprehensive income	—	—		—		43		—		43
Net loss	—	—		—		—		(2,998)		(2,998)
Balance at December 31, 2019	33,334	$	5	$	275,866	$	(1,126)	$	(215,407)	$	59,338

For the three months ended December 31, 2019, the additional paid-in capital included $3.7 million related to restricted stock unit grants for the portion of the bonus recorded as stock-based compensation for the year ended September 30, 2019.

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Stock-Based Compensation

3 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation

Stock-based CompensationAs of December 31, 2020, the Company had approximately 2.2 million shares available for future stock awards under its equity plans and any additional releases resulting from an over-achievement relating to performance-based restricted stock units.

The following table summarizes our restricted stock unit (“RSU”) activity which includes performance-based RSUs under all equity plans for the three months ended December 31, 2020:

	Restricted  Stock Units Outstanding (in thousands)	Weighted Average Grant Date Fair Value
Balance at September 30, 2020	1,957	$	22.43
Granted	677	35.09
Released	(224)	22.15
Forfeited	(145)	23.12
Balance at December 31, 2020	2,265	$	26.20

Stock-based compensation recorded in the condensed consolidated statements of operations is as follows (in thousands):

	Three Months Ended December 31,
	2020		2019
Cost of revenues
Subscription	$	523	$	522
Professional services	654		597
Total stock-based compensation in cost of revenues	1,177		1,119
Operating expenses
Research and development	1,131		1,426
Sales and marketing	1,553		1,406
General and administrative	1,267		1,872
Total stock-based compensation in operating expenses	3,951		4,704
Total stock-based compensation	$	5,128	$	5,823

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Income Taxes

3 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company recorded an income tax provision of $0.2 million, representing effective income tax rates of (4.9)% for the three months ended December 31, 2020. The income tax benefit was immaterial for the three months ended December 31, 2019. The income tax provision for the three months ended December 31, 2020 was primarily related to foreign taxes on the Company’s profitable foreign operations and foreign withholding taxes on dividends. The income tax benefit for the three months ended December 31, 2019 was primarily related to a discrete tax benefit for a true-up in federal income tax payable partially offset by foreign taxes on the Company’s profitable foreign operations, state minimum taxes, and foreign withholding taxes on dividend distributions.

The Company elected to partially reinvest foreign earnings in certain foreign jurisdictions and expects to repatriate future foreign earnings in certain foreign jurisdictions over time. As a result, the Company will record a deferred tax liability for the additional non-U.S. taxes that are expected to be incurred related to the repatriation of these earnings.

The Company elected to record GILTI as a period cost. The Company realized no benefit for current period losses due to maintaining a full valuation allowance against the U.S. net deferred tax assets.

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Net Loss Per Share

3 Months Ended

Dec. 31, 2020

Earnings Per Share [Abstract]

Net Loss Per Share

Net Loss per Share

The following table sets forth the computation of the basic and diluted net loss per share attributable to common stockholders during the periods presented (in thousands, except per share data):

	Three Months Ended December 31,
	2020		2019
Numerator
Basic and diluted
Net loss attributable to common stockholders	$	(5,153)	$	(2,998)
Denominator
Basic and diluted
Weighted average shares used in computing net loss per share attributable to common stockholders	34,936		33,145
Net loss per share attributable to common stockholders:
Basic and diluted	$	(0.15)	$	(0.09)

Potentially dilutive securities that were not included in the calculation of diluted net loss per share because their effect would have been anti-dilutive are as follows (in thousands):

	As of December 31,
	2020	2019
Stock options	30	97
Performance-based RSUs and RSUs	2,265	2,773
Shares issuable pursuant to the employee stock purchase plan	66	86
Convertible senior notes	5,176	—

Since the Company expects to settle the principal amount of its Notes in cash and any excess in cash or shares of the Company’s common stock, the Company uses the treasury stock method for calculating any potential dilutive effect of the conversion spread on diluted net income per share, if applicable. The conversion spread will have a dilutive impact on diluted net income per share of common stock when the average market price of the Company’s common stock for a given period exceeds the conversion price of $33.33 per share for the Notes.

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Litigation and Contingencies

3 Months Ended

Dec. 31, 2020

Commitments and Contingencies Disclosure [Abstract]

Litigation and Contingencies

Litigation and Contingencies

Legal Proceedings

The Company is not currently a party to any pending material legal proceedings. From time to time, the Company may become involved in legal proceedings arising in the ordinary course of business. Regardless of outcome, litigation can have an adverse impact on the Company due to defense and settlement costs, diversion of management resources, negative publicity and reputational harm and other factors.

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Geographic Information

3 Months Ended

Dec. 31, 2020

Segment Reporting [Abstract]

Geographic Information

Geographic Information

The Company has one operating segment with one business activity — developing and monetizing revenue management solutions.

Revenues

The Company disaggregates the revenues by geographic regions based on the bill to location of its customers. Revenues from customers outside of the United States were 9% of total revenues for both the three months ended December 31, 2020 and 2019.

Long-Lived Assets

The following table sets forth the Company’s property and equipment, net, by geographic region (in thousands):

	As of December 31, 2020		As of September 30, 2020
United States	$	1,144	$	562
India	424		472
Total property and equipment, net	$	1,568	$	1,034

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The Company and Significant Accounting Policies and Estimates (Policies)

3 Months Ended

Dec. 31, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis for Presentation

Basis for Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. The unaudited condensed consolidated balance sheet as of September 30, 2020 has been derived from the audited financial statements which are included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2020 (“the Annual Report”) on file with the SEC. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Annual Report.

In the opinion of management, the unaudited interim consolidated financial statements include all the normal recurring adjustments necessary to present fairly our condensed consolidated financial statements. The results of operations for the three months ended December 31, 2020 are not necessarily indicative of the operating results for the full fiscal year 2021 or any future periods.

The condensed consolidated financial statements include the accounts of Model N and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation.

Use of Estimates

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities and reported amounts of revenues and expenses during the reporting periods. Significant items subject to such estimates include revenue recognition, liability and equity allocation of convertible senior notes, legal contingencies, income taxes, stock-based compensation and valuation of goodwill and intangibles. These estimates and assumptions are based on management’s best estimates and judgment. Management regularly evaluates its estimates and assumptions using historical experience and other factors. However, actual results could differ significantly from these estimates.

New Accounting Pronouncements

New Accounting Pronouncements

Recently Adopted Accounting Guidance

In August 2018, the FASB issued ASU 2018-15, Intangibles (Topic 350), Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This standard also requires customers to amortize the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. ASU 2018-15 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019, with early adoption permitted. The Company adopted this guidance beginning in the first quarter of fiscal year 2021 and it did not have a material impact on the condensed consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model which requires the use of forward-looking information to calculate credit loss estimates. ASU 2016-13 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019, with early adoption permitted. ASU 2016-13 requires a cumulative effect adjustment to the balance sheet as of the beginning of the first reporting period in which the guidance is effective. The Company adopted this guidance beginning in the first quarter of fiscal year 2021 and it did not have a material impact on the condensed consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes, which simplifies the accounting for incomes taxes by removing certain exceptions to the general principles in Topic 740 and amending existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact this standard will have on its condensed consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40), Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, the new guidance modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation. ASU 2020-06 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2021, with early adoption permitted. The Company is currently evaluating the impact this standard will have on its condensed consolidated financial statements.

Significant Accounting Policies

There have been no changes in the significant accounting policies from those that were disclosed in the audited consolidated financial statements for the fiscal year ended September 30, 2020 included in the Annual Report on Form 10-K.

Revenues from Contract with Customer

Accounts Receivable

Accounts receivable represents the Company’s right to consideration that is unconditional, net of allowances for doubtful accounts. The allowance for doubtful accounts is based on management’s assessment of the collectability of accounts receivable amounts.

Contract Asset

Contract asset represents revenue that has been recognized for satisfied performance obligations for which the Company does not have an unconditional right to consideration.

Deferred Revenue

Deferred revenue, which is a contract liability, consists of amounts that have been invoiced and for which the Company has the right to bill, but that have not been recognized as revenue because the related goods or services have not been transferred.

Capitalized Contract Acquisition Costs

The Company capitalizes incremental costs incurred to acquire contracts with customers, primarily sales commissions, for which the associated revenue is expected to be recognized in future periods. The Company incurs these costs in connection with both initial contracts and renewals. Such costs for renewals are not considered commensurate with those for initial contracts given the substantive difference in commission rates in proportion to their respective contract values. The costs in connection with initial contracts and renewals are deferred and amortized over an expected customer life of five years and over the renewal term, respectively, which corresponds to the period of benefit to the customer. The Company determined the period of benefit by considering the Company’s history of customer relationships, length of customer contracts, technological development and obsolescence, and other factors. The current and non-current portion of capitalized contract acquisition costs are included in other current assets and other assets on the condensed consolidated balance sheets. Amortization expense is included in sales and marketing expenses on the condensed consolidated statements of operations.

Customer Deposits

Customer deposits primarily relate to payments received from customers which could be refundable pursuant to the terms of the arrangement. These amounts are included in accrued liabilities on the condensed consolidated balance sheets. Customer deposits were immaterial as of December 31, 2020 and September 30, 2020.

Standard payment terms to customers generally range from thirty to ninety days; however, payment terms and conditions in our customer contracts may vary. In some cases, customers prepay for subscription and services in advance of the delivery; in other cases, payment is due as services are performed or in arrears following the delivery.

Performance Obligations

Remaining performance obligations represent non-cancelable contracted revenue that has not yet been recognized, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods.

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Revenues from Contracts with Customers (Tables)

3 Months Ended

Dec. 31, 2020

Revenue from Contract with Customer [Abstract]

Schedule of customer contract balances

The following table reflects contract balances related to contracts with customers (in thousands):

	As of December 31, 2020		As of September 30, 2020
Accounts receivable, net	$	39,807	$	35,796
Contract asset	3,432		4,482
Deferred revenue	56,369		51,786
Capitalized contract acquisition costs	8,580		7,506

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Leases (Tables)

3 Months Ended

Dec. 31, 2020

Leases [Abstract]

Schedule of operating lease cost and cash flow information

Cash flow information related to operating leases is as follows (in thousands):

	Three months ended December 31, 2020		Three months ended December 31, 2019
Cash paid for amounts included in the measurement of operating lease liabilities	$	692	$	899
Operating lease ROU assets obtained in exchange for new operating lease liabilities	12,592		—

Schedule of maturities of operating lease liabilities

Maturities of operating lease liabilities as of December 31, 2020 are as follows (in thousands):

Fiscal Year
Remaining fiscal 2021	$	1,425
2022	3,756
2023	3,607
2024	3,321
2025	2,833
2026 and thereafter	1,867
Total operating lease payments	16,809
Less imputed interest	1,316
Total operating lease liabilities	$	15,493

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Fair Value of Financial Instruments (Tables)

3 Months Ended

Dec. 31, 2020

Fair Value Disclosures [Abstract]

Schedule of fair value measured on recurring basis

The table below sets forth the Company’s marketable securities which are measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

									Reported as:
	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value		Cash and Cash Equivalents
As of December 31, 2020
Level 1:
Money market funds	$	64,804	$	—	$	—	$	64,804	$	64,804
US Treasury securities	49,998		—		—		49,998		49,998
Total	$	114,802	$	—	$	—	$	114,802	$	114,802
As of September 30, 2020
Level 1:
Money market funds	$	31,915	$	—	$	—	$	31,915	$	31,915
US Treasury securities	149,982		—		—		149,982		149,982
Total	$	181,897	$	—	$	—	$	181,897	$	181,897

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Acquisition, Goodwill, and Intangible Assets (Tables)

3 Months Ended

Dec. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of allocation of purchase price

The following table sets forth the preliminary allocation of the purchase price in connection with the Acquisition (in thousands):

	Acquisition Date Fair Value
Accounts receivable	$	3,760
Prepaid expenses	794
Property and equipment, net	511
Operating lease right-of-use assets	2,764
Goodwill	27,577
Intangible assets	28,210
Total assets acquired	63,616
Operating lease liabilities, current portion	656
Deferred revenue, current portion	1,449
Operating lease liabilities, less current portion	1,657
Total liabilities assumed	3,762
Total purchase price	$	59,854

Schedule of goodwill

The following table summarizes the changes in the carrying amount of goodwill (in thousands):

Balance at September 30, 2020	$	39,283
Addition from Acquisition	27,577
Balance at December 31, 2020	$	66,860

Schedule of intangible assets

Intangible assets consisted of the following (in thousands):

	Estimated	As of December 31, 2020
	Useful Life (in Years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Intangible Assets:
Customer relationships	3-15	$	52,109	$	(15,648)	$	36,461
Developed technology	5-6	22,333		(9,826)		12,507
Non-compete	5	1,600		—		1,600
Trade name	3	850		—		850
Total		$	76,892	$	(25,474)	$	51,418

	Estimated	As of September 30, 2020
	Useful Life (in Years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Intangible Assets:
Customer relationships	3-10	$	36,599	$	(14,758)	$	21,841
Developed technology	5-6	12,083		(9,544)		2,539
Total		$	48,682	$	(24,302)	$	24,380

Schedule of estimated future amortization expenses

Estimated future amortization expense for the intangible assets as of December 31, 2020 is as follows (in thousands):

Fiscal Year
Remaining fiscal 2021	$	6,024
2022	8,032
2023	7,186
2024	6,691
2025	6,620
2026 and thereafter	16,865
Total future amortization	$	51,418

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Convertible Senior Notes (Tables)

3 Months Ended

Dec. 31, 2020

Debt Disclosure [Abstract]

Schedule of debt

The net carrying amounts of the liability and equity components for the Notes were as follows (in thousands):

	As of December 31, 2020		As of September 30, 2020
Liability component:
Principal amount	$	172,500	$	172,500
Unamortized discount	(51,908)		(54,147)
Unamortized issuance costs	(3,797)		(3,915)
Net carrying amount	$	116,795	$	114,438
Equity component, net of issuance costs	$	55,227	$	55,227

The following table sets forth the interest expense recognized related to the Notes (in thousands):

	Three months ended December 31, 2020
Coupon interest expense	$	1,132
Amortization of debt discount	2,239
Amortization of debt issuance costs	118
Total interest expense related to the Notes	$	3,489
Effective interest rate of the liability component	12.32		%

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Stockholders' Equity (Tables)

3 Months Ended

Dec. 31, 2020

Equity [Abstract]

Schedule of stockholder's equity

The following tables present the changes of the components of stockholders’ equity (in thousands):

	Three Months Ended December 31, 2020
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at September 30, 2020	34,821	$	5	$	351,952	$	(1,213)	$	(226,073)	$	124,671
Issuance of common stock upon exercise of stock options	4	—		26		—		—		26
Issuance of common stock upon release of restricted stock units	224	—		—		—		—		—
Stock-based compensation	—	—		5,128		—		—		5,128
Equity component of convertible senior notes, net of issuance costs	—	—		—		—		—		—
Other comprehensive income	—	—		—		182		—		182
Net loss	—	—		—		—		(5,153)		(5,153)
Balance at December 31, 2020	35,049	$	5	$	357,106	$	(1,031)	$	(231,226)	$	124,854

	Three Months Ended December 31, 2019
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at September 30, 2019	32,995	$	5	$	266,295	$	(1,169)	$	(212,409)	$	52,722
Issuance of common stock upon exercise of stock options	3	—		18		—		—		18
Issuance of common stock upon release of restricted stock units	336	—		—		—		—		—
Stock-based compensation	—	—		9,553		—		—		9,553
Other comprehensive income	—	—		—		43		—		43
Net loss	—	—		—		—		(2,998)		(2,998)
Balance at December 31, 2019	33,334	$	5	$	275,866	$	(1,126)	$	(215,407)	$	59,338

For the three months ended December 31, 2019, the additional paid-in capital included $3.7 million related to restricted stock unit grants for the portion of the bonus recorded as stock-based compensation for the year ended September 30, 2019.

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Stock-Based Compensation (Tables)

3 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [Abstract]

Summary of restricted stock unit activity (including performance based restricted stock units) under all equity award plans

The following table summarizes our restricted stock unit (“RSU”) activity which includes performance-based RSUs under all equity plans for the three months ended December 31, 2020:

	Restricted  Stock Units Outstanding (in thousands)	Weighted Average Grant Date Fair Value
Balance at September 30, 2020	1,957	$	22.43
Granted	677	35.09
Released	(224)	22.15
Forfeited	(145)	23.12
Balance at December 31, 2020	2,265	$	26.20

Schedule of stock-based compensation

Stock-based compensation recorded in the condensed consolidated statements of operations is as follows (in thousands):

	Three Months Ended December 31,
	2020		2019
Cost of revenues
Subscription	$	523	$	522
Professional services	654		597
Total stock-based compensation in cost of revenues	1,177		1,119
Operating expenses
Research and development	1,131		1,426
Sales and marketing	1,553		1,406
General and administrative	1,267		1,872
Total stock-based compensation in operating expenses	3,951		4,704
Total stock-based compensation	$	5,128	$	5,823

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Net Loss Per Share (Tables)

3 Months Ended

Dec. 31, 2020

Earnings Per Share [Abstract]

Computation of basic and diluted net loss per share

The following table sets forth the computation of the basic and diluted net loss per share attributable to common stockholders during the periods presented (in thousands, except per share data):

	Three Months Ended December 31,
	2020		2019
Numerator
Basic and diluted
Net loss attributable to common stockholders	$	(5,153)	$	(2,998)
Denominator
Basic and diluted
Weighted average shares used in computing net loss per share attributable to common stockholders	34,936		33,145
Net loss per share attributable to common stockholders:
Basic and diluted	$	(0.15)	$	(0.09)

Summary of weighted average shares of common stock equivalents excluded from computation of diluted net loss per share attributable to common stockholders

Potentially dilutive securities that were not included in the calculation of diluted net loss per share because their effect would have been anti-dilutive are as follows (in thousands):

	As of December 31,
	2020	2019
Stock options	30	97
Performance-based RSUs and RSUs	2,265	2,773
Shares issuable pursuant to the employee stock purchase plan	66	86
Convertible senior notes	5,176	—

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Geographic Information (Tables)

3 Months Ended

Dec. 31, 2020

Segment Reporting [Abstract]

Schedule of company's property and equipment, net by geographic region

The following table sets forth the Company’s property and equipment, net, by geographic region (in thousands):

	As of December 31, 2020		As of September 30, 2020
United States	$	1,144	$	562
India	424		472
Total property and equipment, net	$	1,568	$	1,034

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Revenues from Contracts with Customers - Customer Contract Balances (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Sep. 30, 2020
Revenue from Contract with Customer [Abstract]
Accounts receivable, net	$ 39,807	$ 35,796
Contract asset	3,432	4,482
Deferred revenue	56,369	51,786
Capitalized contract acquisition costs	$ 8,580	$ 7,506

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Revenues from Contracts with Customers - Narrative (Details) - USD ($)	3 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Sep. 30, 2020
Revenue from Contract with Customer [Abstract]
Revenue recognized that was included in deferred revenue at beginning of period	$ 22,800,000	$ 19,800,000
Amortized over expected customer life (in years)	5 years
Capitalized contract acquisition costs, current portion	$ 2,700,000		$ 2,300,000
Capitalized contract acquisition costs, non-current portion	5,900,000		$ 5,200,000
Amortization of capitalized contract acquisition costs	651,000	$ 624,000
Impairment loss related to contract balances	$ 0

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Revenues from Contracts with Customers - Performance Obligation (Details) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2021-01-01 $ in Millions	Dec. 31, 2020 USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction
Performance obligations not satisfied or partially satisfied	$ 187.0
Remaining performance obligation, percentage	53.00%
Remaining performance obligation, expected timing of satisfaction (in months)	12 months

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Leases - Narrative (Details) - USD ($) $ in Thousands		3 Months Ended
	Dec. 01, 2020	Dec. 31, 2020	Dec. 31, 2019	Jan. 31, 2021
Lessee, Lease, Description
Operating lease cost for remaining term		$ 800	$ 800
Increase in right of use assets	$ 10,300
Weighted average remaining lease term (in years)		4 years 9 months 18 days
Weighted average discount rate percent		3.10%
Future payments over the five years lease term		$ 16,809
Office Space in India | Subsequent Event
Lessee, Lease, Description
Noncancelable operating leases term (in years)				5 years
Renewal option				5 years
Future payments over the five years lease term				$ 7,500
Minimum
Lessee, Lease, Description
Noncancelable operating leases term (in years)		3 years
Maximum
Lessee, Lease, Description
Noncancelable operating leases term (in years)		10 years

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Leases - Cash Flow Information (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Leases [Abstract]
Cash paid for amounts included in the measurement of operating lease liabilities	$ 692	$ 899
Operating lease ROU assets obtained in exchange for new operating lease liabilities	$ 12,592	$ 0

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Leases - Maturities of Operating Lease Liabilities (Details) $ in Thousands	Dec. 31, 2020 USD ($)
Fiscal Year
Remaining fiscal 2021	$ 1,425
2022	3,756
2023	3,607
2024	3,321
2025	2,833
2026 and thereafter	1,867
Total operating lease payments	16,809
Less imputed interest	1,316
Total operating lease liabilities	$ 15,493

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Fair Value of Financial Instruments - Schedule of Fair Value Measured on Recurring Basis (Detail) - Level 1 - Fair Value Measurement Recurring - USD ($) $ in Thousands	Dec. 31, 2020	Sep. 30, 2020
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Amortized Cost	$ 114,802	$ 181,897
Unrealized Gains	0	0
Unrealized Losses	0	0
Fair Value	114,802	181,897
Cash and Cash Equivalents	114,802	181,897
Money market funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Amortized Cost	64,804	31,915
Unrealized Gains	0	0
Unrealized Losses	0	0
Fair Value	64,804	31,915
Cash and Cash Equivalents	64,804	31,915
US Treasury securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Amortized Cost	49,998	149,982
Unrealized Gains	0	0
Unrealized Losses	0	0
Fair Value	49,998	149,982
Cash and Cash Equivalents	$ 49,998	$ 149,982

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Acquisition, Goodwill, and Intangible Assets - Schedule of allocation of purchase price (Details) - USD ($) $ in Thousands	Dec. 31, 2020	Sep. 30, 2020
Business Acquisition
Goodwill	$ 66,860	$ 39,283
Acquisition
Business Acquisition
Accounts receivable	3,760
Prepaid expenses	794
Property and equipment, net	511
Operating lease right-of-use assets	2,764
Goodwill	27,577
Intangible assets	28,210
Total assets acquired	63,616
Operating lease liabilities, current portion	656
Deferred revenue, current portion	1,449
Operating lease liabilities, less current portion	1,657
Total liabilities assumed	3,762
Total purchase price	$ 59,854

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Acquisition, Goodwill, and Intangible Assets - Schedule of Goodwill (Details) $ in Thousands	3 Months Ended
	Dec. 31, 2020 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
Beginning balance	$ 39,283
Addition from Acquisition	27,577
Ending balance	$ 66,860

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Acquisition, Goodwill, and Intangible Assets - Schedule of Intangible Assets (Detail) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Dec. 31, 2020	Sep. 30, 2020
Acquired Finite-Lived Intangible Assets
Gross Carrying Amount	$ 76,892	$ 48,682
Accumulated Amortization	(25,474)	(24,302)
Net Carrying Amount	51,418	24,380
Customer relationships
Acquired Finite-Lived Intangible Assets
Gross Carrying Amount	52,109	36,599
Accumulated Amortization	(15,648)	(14,758)
Net Carrying Amount	$ 36,461	$ 21,841
Customer relationships | Minimum
Acquired Finite-Lived Intangible Assets
Estimated Useful Life (in Years)	3 years	3 years
Customer relationships | Maximum
Acquired Finite-Lived Intangible Assets
Estimated Useful Life (in Years)	15 years	10 years
Developed technology
Acquired Finite-Lived Intangible Assets
Gross Carrying Amount	$ 22,333	$ 12,083
Accumulated Amortization	(9,826)	(9,544)
Net Carrying Amount	$ 12,507	$ 2,539
Developed technology | Minimum
Acquired Finite-Lived Intangible Assets
Estimated Useful Life (in Years)	5 years	5 years
Developed technology | Maximum
Acquired Finite-Lived Intangible Assets
Estimated Useful Life (in Years)	6 years	6 years
Non-compete
Acquired Finite-Lived Intangible Assets
Estimated Useful Life (in Years)	5 years
Gross Carrying Amount	$ 1,600
Accumulated Amortization	0
Net Carrying Amount	$ 1,600
Trade name
Acquired Finite-Lived Intangible Assets
Estimated Useful Life (in Years)	3 years
Gross Carrying Amount	$ 850
Accumulated Amortization	0
Net Carrying Amount	$ 850

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Acquisition, Goodwill, and Intangible Assets - Additional Information (Detail) - USD ($) $ in Thousands		3 Months Ended
	Dec. 31, 2020	Dec. 31, 2020	Dec. 31, 2019
Business Acquisition
Acquisition of business		$ 56,444	$ 0
Amortization expense of intangible assets		$ 1,200	$ 1,200
Non-compete
Business Acquisition
Intangible assets, Estimated useful lives		5 years
Trade name
Business Acquisition
Intangible assets, Estimated useful lives		3 years
Acquisition
Business Acquisition
Base purchase price	$ 60,000
Acquisition related cost		$ 2,400
Total purchase consideration	59,900
Estimated net working capital	100
Intangible assets	$ 28,210	28,210
Intangible assets, Weighted-average estimated useful lives	10 years 9 months 18 days
Acquisition | Customer relationships
Business Acquisition
Intangible assets	$ 15,500	15,500
Intangible assets, Estimated useful lives	15 years
Acquisition | Developed technology
Business Acquisition
Intangible assets	$ 10,200	10,200
Intangible assets, Estimated useful lives	6 years
Acquisition | Non-compete
Business Acquisition
Intangible assets	$ 1,600	1,600
Intangible assets, Estimated useful lives	5 years
Acquisition | Trade name
Business Acquisition
Intangible assets	$ 900	$ 900
Intangible assets, Estimated useful lives	3 years

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Acquisition, Goodwill, and Intangible Assets - Schedule of Estimated Future Amortization Expenses (Detail) - USD ($) $ in Thousands	Dec. 31, 2020	Sep. 30, 2020
Fiscal Year
Remaining fiscal 2021	$ 6,024
2022	8,032
2023	7,186
2024	6,691
2025	6,620
2026 and thereafter	16,865
Net Carrying Amount	$ 51,418	$ 24,380

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Derivative Instruments and Hedging (Details) - Cash flow hedging - Foreign currency exchange contracts - USD ($)	3 Months Ended
	Dec. 31, 2020	Sep. 30, 2020
Derivative
Foreign exchange contract terms	12 months
Notional amount	$ 5,600,000	$ 5,500,000

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Convertible Senior Notes - Narrative (Details)	1 Months Ended					3 Months Ended
	May 31, 2020 USD ($) $ / shares	May 31, 2020 USD ($) $ / shares	May 31, 2020 USD ($) $ / shares	May 31, 2020 USD ($) trading_day $ / shares	May 31, 2020 USD ($) d $ / shares	Dec. 31, 2020 USD ($) $ / shares
Debt Instrument
Initial conversion price (usd per share) | $ / shares						$ 33.33
Closing trading price (usd per share) | $ / shares						$ 100
Convertible Debt | Notes
Debt Instrument
Aggregate principal amount	$ 172,500,000	$ 172,500,000	$ 172,500,000	$ 172,500,000	$ 172,500,000
Debt instrument, interest rate (percent)	2.625%	2.625%	2.625%	2.625%	2.625%
Purchase option value	$ 22,500,000	$ 22,500,000	$ 22,500,000	$ 22,500,000	$ 22,500,000
Proceeds from issuance of debt			166,400,000
Debt issuance cost	$ 6,100,000	$ 6,100,000	$ 6,100,000	$ 6,100,000	$ 6,100,000
Conversion rate		0.0300044
Initial conversion price (usd per share) | $ / shares	$ 33.33	$ 33.33	$ 33.33	$ 33.33	$ 33.33
Common stock for trading days		20		20
Consecutive trading days				30	30
Conversion threshold for trigger price (percent)		130.00%
Measurement period (days)	5 days
Minimum percentage of conversion price in the event of trigger event (percent)	98.00%	98.00%	98.00%	98.00%	98.00%
Redemption price (percent)		100.00%
Sinking fund			$ 0
Carrying amount of equity component	$ 57,200,000	$ 57,200,000	57,200,000	$ 57,200,000	$ 57,200,000
Equity portion of debt issuance cost	2,000,000.0	2,000,000.0	2,000,000.0	2,000,000.0	2,000,000.0
Amortized over period						53 months
Convertible Debt | Notes | Estimate of Fair Value Measurement
Debt Instrument
Carrying amount of the liability component	115,300,000	115,300,000	115,300,000	115,300,000	115,300,000
Estimated fair value						$ 224,900,000
Convertible Debt | Notes | Interest Expense
Debt Instrument
Debt issuance cost	$ 4,100,000	$ 4,100,000	4,100,000	$ 4,100,000	$ 4,100,000
Convertible Debt | Notes | On or After June 6, 2023
Debt Instrument
Redemption price (percent)		100.00%
Convertible Debt | Notes | Maximum
Debt Instrument
Conversion rate		0.0382555
Term Loan | Credit Agreement
Debt Instrument
Repayments of debt			$ 40,000,000.0

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Convertible Senior Notes - Liability and Equity Components (Details) - Convertible Debt - Notes - USD ($) $ in Thousands	Dec. 31, 2020	Sep. 30, 2020
Liability component:
Principal amount	$ 172,500	$ 172,500
Unamortized discount	(51,908)	(54,147)
Unamortized issuance costs	(3,797)	(3,915)
Net carrying amount	116,795	114,438
Equity component, net of issuance costs	$ 55,227	$ 55,227

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Convertible Senior Notes - Interest Expense Recognized (Details) - Convertible Debt - Notes $ in Thousands	3 Months Ended
	Dec. 31, 2020 USD ($)
Debt Instrument
Coupon interest expense	$ 1,132
Amortization of debt discount	2,239
Amortization of debt issuance costs	118
Total interest expense related to the Notes	$ 3,489
Effective interest rate of the liability component	12.32%

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Stockholders' Equity - Component of Stockholders' Equity (Detail) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Increase (Decrease) in Stockholders' Equity
Balance at beginning of period	$ 124,671	$ 52,722
Issuance of common stock upon exercise of stock options	26	18
Issuance of common stock upon release of restricted stock units	0	0
Stock-based compensation	5,128	9,553
Equity component of convertible senior notes, net of issuance costs	0
Other comprehensive income	182	43
Net loss	(5,153)	(2,998)
Balance at end of period	124,854	59,338
Common Stock
Increase (Decrease) in Stockholders' Equity
Balance at beginning of period	$ 5	$ 5
Balance at beginning of period (in shares)	34,821	32,995
Issuance of common stock upon exercise of stock options (in shares)	4	3
Issuance of common stock upon release of restricted stock units (in shares)	224	336
Balance at end of period	$ 5	$ 5
Balance at end of period (in shares)	35,049	33,334
Additional Paid-In Capital
Increase (Decrease) in Stockholders' Equity
Balance at beginning of period	$ 351,952	$ 266,295
Issuance of common stock upon exercise of stock options	26	18
Stock-based compensation	5,128	9,553
Equity component of convertible senior notes, net of issuance costs	0
Balance at end of period	357,106	275,866
Accumulated Other Comprehensive Loss
Increase (Decrease) in Stockholders' Equity
Balance at beginning of period	(1,213)	(1,169)
Other comprehensive income	182	43
Balance at end of period	(1,031)	(1,126)
Accumulated Deficit
Increase (Decrease) in Stockholders' Equity
Balance at beginning of period	(226,073)	(212,409)
Net loss	(5,153)	(2,998)
Balance at end of period	$ (231,226)	$ (215,407)

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Stockholders' Equity - Narrative (Details) $ in Millions	3 Months Ended
	Dec. 31, 2019 USD ($)
Equity [Abstract]
Additional paid in capital, restricted stock unit grants, portion of bonus recorded as stock-based compensation	$ 3.7

XML

Stock-Based Compensation - Additional Information (Detail) shares in Millions	Dec. 31, 2020 shares
Share-based Payment Arrangement [Abstract]
Number of shares available for future stock awards (in shares)	2.2

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Stock-Based Compensation - Summary of Restricted Stock Unit Activity (Including Performance Based Restricted Stock Awards) Under All Equity Award Plans (Detail) - Restricted Stock Units shares in Thousands	3 Months Ended
	Dec. 31, 2020 $ / shares shares
Restricted Stock Units Outstanding
Balance at beginning of period (in shares) | shares	1,957
Granted (in shares) | shares	677
Released (in shares) | shares	(224)
Forfeited (in shares) | shares	(145)
Balance at end of period (in shares) | shares	2,265
Weighted Average Grant Date Fair Value
Balance at beginning of period (in dollars per share) | $ / shares	$ 22.43
Granted (in dollars per share) | $ / shares	35.09
Released (in dollars per share) | $ / shares	22.15
Forfeited (in dollars per share) | $ / shares	23.12
Balance at end of period (in dollars per share) | $ / shares	$ 26.20

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Stock-Based Compensation - Summary of Allocated Stock-based Compensation (Detail) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Share-based Compensation Arrangement by Share-based Payment Award
Stock-based compensation	$ 5,128	$ 5,823
Total stock-based compensation in cost of revenues
Share-based Compensation Arrangement by Share-based Payment Award
Stock-based compensation	1,177	1,119
Total stock-based compensation in operating expenses
Share-based Compensation Arrangement by Share-based Payment Award
Stock-based compensation	3,951	4,704
Research and development
Share-based Compensation Arrangement by Share-based Payment Award
Stock-based compensation	1,131	1,426
Sales and marketing
Share-based Compensation Arrangement by Share-based Payment Award
Stock-based compensation	1,553	1,406
General and administrative
Share-based Compensation Arrangement by Share-based Payment Award
Stock-based compensation	1,267	1,872
Subscription | Total stock-based compensation in cost of revenues
Share-based Compensation Arrangement by Share-based Payment Award
Stock-based compensation	523	522
Professional services | Total stock-based compensation in cost of revenues
Share-based Compensation Arrangement by Share-based Payment Award
Stock-based compensation	$ 654	$ 597

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Income Taxes - Narrative (Detail) - USD ($)	3 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Income Tax Disclosure [Abstract]
Income tax provision (benefit)	$ 239,000	$ (11,000)
Effective income tax (benefit) expense, rate	(4.90%)
Benefit realized for current period losses	$ 0

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Net Loss Per Share - Computation of Basic and Diluted Net Loss per Share (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Basic and diluted
Net loss attributable to common stockholders	$ (5,153)	$ (2,998)
Denominator
Weighted average shares used in computing net loss per share attributable to common stockholders (in shares)	34,936	33,145
Net loss per share attributable to common stockholders:
Basic and diluted (in dollars per share)	$ (0.15)	$ (0.09)

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Net Loss Per Share - Summary of Weighted Average Shares of Common Stock Equivalents Excluded from Computation of Diluted Net Loss per Share Attributable to Common Stockholders (Detail) - shares shares in Thousands	3 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share
Antidilutive securities excluded from computation of earnings per share amount (in shares)	30	97
Performance-based RSUs and RSUs
Antidilutive Securities Excluded from Computation of Earnings Per Share
Antidilutive securities excluded from computation of earnings per share amount (in shares)	2,265	2,773
Shares issuable pursuant to the employee stock purchase plan
Antidilutive Securities Excluded from Computation of Earnings Per Share
Shares issuable pursuant to the employee stock purchase plan (in shares)	66	86
Convertible senior notes
Antidilutive Securities Excluded from Computation of Earnings Per Share
Antidilutive securities excluded from computation of earnings per share amount (in shares)	5,176	0

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Net Loss Per Share - Narrative (Details)	Dec. 31, 2020 $ / shares
Earnings Per Share [Abstract]
Conversion price (usd per share)	$ 33.33

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Geographic Information - Narrative (Detail)	3 Months Ended
	Dec. 31, 2020 segment activity	Dec. 31, 2019
Segment Reporting Information
Number of operating segment | segment	1
Number of business activity | activity	1
Outside of United States | Revenue | Geographic concentration risk
Segment Reporting Information
Revenues from customers outside United States	9.00%	9.00%

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Geographic Information - Company's Property and Equipment, Net by Geographic Region (Detail) - USD ($) $ in Thousands	Dec. 31, 2020	Sep. 30, 2020
Property, Plant and Equipment
Total property and equipment, net	$ 1,568	$ 1,034
United States
Property, Plant and Equipment
Total property and equipment, net	1,144	562
India
Property, Plant and Equipment
Total property and equipment, net	$ 424	$ 472