aunrfc
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
or
For the transition period from ____________ to ____________
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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(The Nasdaq Global Select Market) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.
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Accelerated filer ☐ |
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Non-accelerated filer ☐ |
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Smaller reporting company |
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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
The number of shares of registrant’s common stock outstanding as of April 28, 2023 was:
Momentive Global Inc.
Quarterly Report on Form 10-Q
For the quarterly period ended March 31, 2023
TABLE OF CONTENTS
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Item 1. |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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35 |
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Item 4. |
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36 |
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Item 1. |
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37 |
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Item 1A. |
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37 |
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Item 2. |
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72 |
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Item 6. |
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73 |
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1
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “would,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
2
We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.
The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
3
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MOMENTIVE GLOBAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands, except par value) |
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March 31, 2023 |
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December 31, 2022 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net of allowance of $ |
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Deferred commissions, current |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use assets |
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Capitalized internal-use software, net |
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Acquisition intangible assets, net |
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Goodwill |
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Deferred commissions, non-current |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders’ equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Accrued compensation |
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Deferred revenue, current |
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Operating lease liabilities, current |
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Debt, current |
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Total current liabilities |
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Deferred revenue, non-current |
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Deferred tax liabilities |
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Debt, non-current |
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Operating lease liabilities, non-current |
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Other non-current liabilities |
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Total liabilities |
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Stockholders’ equity: |
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Preferred stock ($ |
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Common stock ($ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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Accumulated deficit |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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See accompanying Notes to Condensed Consolidated Financial Statements.
4
MOMENTIVE GLOBAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
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Three Months Ended March 31, |
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(in thousands, except per share amounts) |
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2023 |
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2022 |
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Revenue |
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$ |
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$ |
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Cost of revenue(1)(2)(3) |
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Gross profit |
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Operating expenses: |
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Research and development(1)(3) |
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Sales and marketing (1)(2)(3) |
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General and administrative(1)(3) |
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Restructuring(1)(2) |
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Total operating expenses |
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Loss from operations |
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Interest expense |
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Other non-operating income, net |
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Loss before income taxes |
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Provision for income taxes |
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Net loss |
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$ |
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$ |
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Net loss per share, basic and diluted |
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$ |
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$ |
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Weighted-average shares used in computing basic and diluted net loss per share |
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(1) Includes stock-based compensation, net of amounts capitalized as follows:
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Three Months Ended March 31, |
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(in thousands) |
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2023 |
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2022 |
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Cost of revenue |
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$ |
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$ |
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Research and development |
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Sales and marketing |
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General and administrative |
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Restructuring |
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Stock-based compensation, net of amounts capitalized |
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$ |
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$ |
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(2) Includes amortization of acquisition intangible assets as follows:
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Three Months Ended March 31, |
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(in thousands) |
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2023 |
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2022 |
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Cost of revenue |
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$ |
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$ |
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Sales and marketing |
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Restructuring |
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Amortization of acquisition intangible assets |
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$ |
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$ |
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(3) Includes transaction expenses associated with the pending merger with an investor consortium led by STG during the three months ended March 31, 2023. See Note 1 for additional information. Also includes transaction expenses associated with the terminated merger with Zendesk, Inc. (“Zendesk”) during the three months ended March 31, 2022:
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Three Months Ended March 31, |
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(in thousands) |
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2023 |
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2022 |
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Cost of revenue |
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$ |
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$ |
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Research and development |
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Sales and marketing |
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General and administrative |
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Acquisition-related transaction costs |
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$ |
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$ |
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See accompanying Notes to Condensed Consolidated Financial Statements.
5
MOMENTIVE GLOBAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (unaudited)
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Three Months Ended March 31, |
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(in thousands) |
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2023 |
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2022 |
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Net loss |
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$ |
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$ |
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Other comprehensive income (loss): |
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Foreign currency translation adjustment(1) |
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( |
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Total other comprehensive income (loss)(1) |
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( |
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Total comprehensive loss |
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$ |
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$ |
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(1)
See accompanying Notes to Condensed Consolidated Financial Statements.
6
MOMENTIVE GLOBAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)
For the three months ended March 31, 2023
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Common Stock |
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(in thousands) |
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Shares |
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Amount |
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Additional Paid-In Capital |
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Accumulated Other Comprehensive Income (Loss) |
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Accumulated Deficit |
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Total Stockholders’ Equity |
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December 31, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Common stock issued upon vesting of restricted stock units |
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Stock-based compensation expense |
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Comprehensive income |
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Net loss |
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— |
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March 31, 2023 |
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( |
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For the three months ended March 31, 2022
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Common Stock |
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(in thousands) |
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Shares |
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Amount |
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Additional Paid-In Capital |
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Accumulated Other Comprehensive Income (Loss) |
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Accumulated Deficit |
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Total Stockholders’ Equity |
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December 31, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Common stock issued upon vesting of restricted stock units |
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Common stock issued upon stock option exercise |
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Issuance of restricted stock awards |
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Issuance of performance stock awards |
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Repurchases of common stock |
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( |
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Stock-based compensation expense |
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— |
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Comprehensive loss |
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— |
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Net loss |
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— |
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( |
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( |
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March 31, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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See accompanying Notes to Condensed Consolidated Financial Statements.
7
MOMENTIVE GLOBAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
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Three Months Ended March 31, |
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(in thousands) |
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2023 |
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2022 |
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Cash flows from operating activities |
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Net loss |
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$ |
( |
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$ |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
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Non-cash leases expense |
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Stock-based compensation expense, net of amounts capitalized |
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Deferred income taxes |
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Bad debt expense |
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Unrealized foreign currency (gains) losses, net and other |
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Changes in assets and liabilities: |
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Accounts receivable |
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( |
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Prepaid expenses and other assets |
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( |
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( |
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Accounts payable and accrued liabilities |
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( |
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( |
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Accrued compensation |
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( |
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Deferred revenue |
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Operating lease liabilities |
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( |
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( |
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Net cash used in operating activities |
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( |
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( |
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Cash flows from investing activities |
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Purchases of property and equipment |
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( |
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( |
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Capitalized internal-use software |
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( |
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( |
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Proceeds from sale of a private company investment |
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Net cash provided by (used in) investing activities |
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Cash flows from financing activities |
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Proceeds from stock option exercises |
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Payments to repurchase common stock |
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( |
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Repayment of debt |
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( |
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Net cash used in financing activities |
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Effect of exchange rate changes on cash |
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Net decrease in cash, cash equivalents and restricted cash |
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Cash, cash equivalents and restricted cash at beginning of period |
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Cash, cash equivalents and restricted cash at end of period |
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$ |
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$ |
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Supplemental cash flow data: |
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Interest paid for term debt |
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$ |
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$ |
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Non-cash investing and financing transaction: |
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Stock compensation included in capitalized software costs |
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$ |
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$ |
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See accompanying Notes to Condensed Consolidated Financial Statements.
8
MOMENTIVE GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. Company Overview and Basis of Presentation
Business
Momentive Global Inc. (the “Company”) provides Software-as-a-Service (“SaaS”) solutions that enable organizations to collect and analyze market, customer and employee sentiment data quickly and at scale. The Company offers three product categories, Surveys, Customer Experience, and Insights Solutions, that address
Pending Merger with an investor consortium led by STG
On March 13, 2023, the Company entered into the Agreement and Plan of Merger (the “Merger Agreement”), by and among the Company, STG and Mercury Merger Sub, Inc. (“Merger Sub”). Pursuant to the Merger Agreement, and upon the terms and subject to the conditions therein, Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly owned subsidiary of STG. The Company’s board of directors and the board of directors of STG have approved the Merger Agreement and the transactions contemplated by the Merger Agreement.
Pursuant to the Merger Agreement, at the effective time of the Merger, each issued and outstanding share of the Company’s common stock (except for certain shares of the Company’s common stock specified in the Merger Agreement) will be canceled and automatically converted into the right to receive cash in an amount equal to $
Under the terms of the Merger Agreement, the completion of the Merger is subject to certain customary closing conditions, including, among others: (i) the adoption of the Merger Agreement by the holders of a majority of the outstanding shares of the Company’s common stock; (ii) the expiration or early termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the receipt of certain other specified regulatory approvals; and (iii) the absence of an order or law preventing the Merger.
Each of STG and the Company may terminate the Merger Agreement under certain specified circumstances, including but not limited to, (i) if the Merger is not consummated by 11:59 p.m. (California time) on September 13, 2023, (ii) a governmental authority of competent jurisdiction has issued a final non-appealable governmental order preventing, materially restraining, or materially impairing the consummation of the Merger, or (iii) if the required approval of the Company’s stockholders is not obtained. STG may also terminate the Merger Agreement in certain additional limited circumstances, including if the Company’s board of directors changes its recommendation to the Company’s stockholders to vote in favor of the adoption of the Merger Agreement. If the Merger Agreement is terminated, the Company may be required to pay STG a termination fee of up to $
The foregoing summary of the Merger Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Merger Agreement, which is filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission (“SEC”) on March 14, 2023.
Other than transaction expenses related to legal, accounting, financial advisory, employee retention and other costs associated with the pending Merger of $
9
MOMENTIVE GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Principles of Consolidation and Basis of Presentation
The accompanying interim condensed consolidated balance sheet as of March 31, 2023, the statements of operations, comprehensive loss, stockholders’ equity and cash flows for the three months ended March 31, 2023 and 2022 are unaudited. Such condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the SEC regarding interim financial reporting. These condensed consolidated financial statements include the results of operations of the Company and its wholly-owned subsidiaries. All significant intercompany transactions have been eliminated. Certain other prior year balances have been reclassified to conform to the current year presentation. Such reclassifications did not affect our results of operations or operating, investing and financing cash flows.
These condensed consolidated financial statements do not include all disclosures normally required in annual consolidated financial statements prepared in accordance with GAAP. In management’s opinion, the condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and include all normal recurring adjustments necessary for the fair presentation of the Company’s financial position as of March 31, 2023, the results of operations and cash flows for the three months ended March 31, 2023 and 2022. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the full year or any other future interim or annual periods.
These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Form 10-K filed with the SEC on February 17, 2023.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of revenue and expenses during the reporting periods covered by the condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates due to a variety of factors. The Company is not aware of any specific event or circumstances that would require an update to its estimates, judgments or assumptions or a revision to the carrying value of its assets or liabilities as of the date of issuance of its financial statements. These estimates, judgments and assumptions may change in the future, as new events occur or additional information is obtained. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable. The Company’s most significant estimates and use of judgment involve the determination of distinct performance obligations in enterprise customer contracts, the valuation of acquired goodwill and intangibles from acquisitions and the fair value of goodwill, right-of-use assets and other long-lived assets when evaluating for impairments.
Segment Information
The Company operates as a operating segment. The Company’s chief operating decision maker (“CODM”) is its Chief Executive Officer, who reviews the Company’s operating results on a consolidated basis in order to make decisions about allocating resources and assessing performance for the entire company. The CODM uses one measure of profitability and does not segment the Company’s business for internal reporting. See Note 4 for additional information regarding the Company’s revenue by geographic area.
Related Party Transactions
Certain members of the Company’s board of directors serve as board members, are executive officers of and/or (in some cases) are investors in companies that are customers and/or vendors of the Company. The Company incurred related party expenses of $
10
MOMENTIVE GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
2. Summary of Significant Accounting Policies
There have been no material changes in our significant accounting policies as described in our Annual Report on Form 10-K for the year ended December 31, 2022.
Other Non-Operating (Income) Expense
Other non-operating (income) expense, net consists primarily of interest income, net foreign currency exchange (gains) losses, net realized gains and losses related to investments, and other (income) expense.
|
|
Three Months Ended March 31, |
|
||||
(in thousands) |
|
2023 |
|
2022 |
|
||
Interest income |
|
$ |
( |
) |
$ |
( |
) |
Foreign currency (gains) losses, net |
|
|
|
|
|
||
Other income, net |
|
|
( |
) |
|
( |
) |
Other non-operating income, net |
|
$ |
( |
) |
$ |
( |
) |
Accounting Pronouncement Recently Adopted
Reference Rate Reform: In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 is intended to provide temporary optional expedients and exceptions to the GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. This guidance is effective beginning on March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2024. The Company adopted this guidance in the first quarter of fiscal 2023. On March 1, 2023, the Company amended the Refinancing Facility Agreement entered into in October 2018 (the “2018 Credit Facility”) by changing the reference rate from LIBOR to the Secured Overnight Financing Rate (“SOFR”) and elected to apply the practical expedient provided in Topic 848 to account for the modification as if it was not substantial. The adoption of this ASU did not have a material impact on the Company's condensed consolidated financial statements.
3. Revenue and Deferred Revenue
Disaggregated revenue
Revenue by sales channel was as follows:
|
|
Three Months Ended March 31, |
|
||||
(in thousands) |
|
2023 |
|
2022 |
|
||
Self-serve revenue |
|
$ |
|
$ |
|
||
Sales-assisted revenue |
|
|
|
|
|
||
Revenue |
|
$ |
|
$ |
|
Self-serve revenues are generated from products purchased independently through our website.
Sales-assisted revenues are generated from products sold to organizations through our sales team.
In addition, see Note 4 for information regarding the Company’s revenue by geographic area.
Deferred revenue
The Company recognized into revenue $
11
MOMENTIVE GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Transaction price allocated to the remaining performance obligations
As of March 31, 2023, future estimated revenue related to non-cancelable performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period was $
4. Geographical Information
Revenue by geography is generally based on the billing address of the customer. For purposes of its geographic revenue disclosure, the Company defines a customer as an organization. An organization may consist of an individual paying user, multiple paying users within an organization or the organization itself.
|
|
Three Months Ended March 31, |
|
||||
|
|
2023 |
|
2022 |
|
||
United States |
|
|
% |
|
% |
||
Rest of world |
|
|
% |
|
% |
No other country outside of the United States comprised 10% or greater of the Company’s revenue for each of the three months ended March 31, 2023 and 2022, respectively.
5. Cash and Cash Equivalents
As of March 31, 2023 and December 31, 2022, the following table provides a reconciliation of the amount of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets to the total of such amounts shown in the condensed consolidated statements of cash flows:
(in thousands) |
|
March 31, 2023 |
|
December 31, 2022 |
|
||
Cash and cash equivalents |
|
$ |
|
$ |
|
||
|
|
|
|
|
|||
Total cash, cash equivalents and restricted cash |
|
$ |
|
$ |
|
Included in cash and cash equivalents are cash in transit from payment processors for credit and debit card transactions of $
6. Fair Value Measurements
Assets and liabilities recorded at fair value in the condensed consolidated financial statements are categorized based on the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels which directly relate to the amount of subjectivity associated with the inputs to the valuation of these assets or liabilities are as follows:
Level 1 – Observable inputs, such as quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs, other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
12
MOMENTIVE GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
The carrying amounts of the Company’s financial instruments, which generally include cash equivalents, accounts receivable and accounts payable, approximate their fair values due to their short maturities. Based on borrowing rates currently available to the Company for debt with similar terms and consideration of default and credit risk, the fair value of the Company’s debt was approximately $
As of March 31, 2023 and December 31, 2022, respectively, the Company did not have any significant financial instruments accounted for pursuant to ASC 820, Fair Value Measurement.
7. Property and Equipment
As of March 31, 2023 and December 31, 2022, property and equipment consisted of the following:
(in thousands) |
|
March 31, 2023 |
|
December 31, 2022 |
|
||
Computer equipment |
|
$ |
|
$ |
|
||
Leasehold improvements |
|
|
|
|
|
||
Furniture, fixtures and other assets |
|
|
|
|
|
||
Gross property and equipment |
|
|
|
|
|
||
Less: Accumulated depreciation |
|
|
( |
) |
|
( |
) |
Property and equipment, net |
|
$ |
|
$ |
|
Depreciation expense was $
8. Intangible Assets and Goodwill
Acquisition intangible assets, net
As of March 31, 2023 and December 31, 2022, intangible assets, net consisted of the following:
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||||||||||||||
(in thousands) |
|
Gross |
|
Accumulated |
|
Net |
|
|
Gross |
|
Accumulated |
|
Net |
|
||||||
Customer relationships |
|
$ |
|
$ |
( |
) |
$ |
|
|
$ |
|
$ |
( |
) |
$ |
|
||||
Trade name |
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
||||
Acquisition intangible assets, net |
|
$ |
|
$ |
( |
) |
$ |
|
|
$ |
|
$ |
( |
) |
$ |
|
Amortization expense was $
Goodwill
The changes in the carrying amount of goodwill were as follows (in thousands):
Balance as of December 31, 2022 |
$ |
|
|
Foreign currency translation |
|
|
|
Balance as of March 31, 2023 |
$ |
|
Capitalized internal-use software
13
MOMENTIVE GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
As of March 31, 2023 and December 31, 2022, capitalized internal-use software consisted of the following:
(in thousands) |
|
March 31, 2023 |
|
December 31, 2022 |
|
||
Gross capitalized internal-use software |
|
$ |
|
$ |
|
||
Less: Accumulated amortization |
|
|
( |
) |
|
( |
) |
Capitalized internal-use software, net |
|
$ |
|
$ |
|
Amortization expense related to capitalized internal-use software was $
The decrease in gross capitalized internal-use software is due to the removal of $
Future amortization expense
As of March 31, 2023, future amortization expense by year is expected to be as follows:
(in thousands) |
|
Capitalized |
|
|
Acquisition |
|
||
Remainder of 2023 |
|
$ |
|
|
$ |
|
||
2024 |
|
|
|
|
|
|
||
2025 |
|
|
|
|
|
|
||
2026 |
|
|
|
|
|
|
||
Total amortization expense |
|
$ |
|
|
$ |
|
Future capitalized internal-use software amortization excludes $
9. Stockholders' Equity and Employee Benefit Plans
Common Stock Repurchases
On February 26, 2022, the Company's board of directors authorized a share repurchase program to repurchase up to $
There were
As of March 31, 2023, the Company’s remaining share repurchase authorization was approximately $
Equity Incentive Plans
The Company sponsors the 2018 Equity Incentive Plan (the “2018 Plan”), which was approved by stockholders on September 5, 2018. The purpose of the 2018 Plan is to promote the long-term growth and profitability of the Company by (i) providing employees with incentives to improve stockholder value and to contribute to the growth and financial success of the Company through their future services, and (ii) enabling the Company to attract, retain
14
MOMENTIVE GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
and reward the best available persons. The options granted under the 2018 Plan, may be granted at a price not less than the fair market value on the grant date.
The board of directors, or a committee of the board of directors, has granted options with an exercise price at fair value on the grant date. Grants of time-based awards generally vest over a
As of March 31, 2023,
The following is a summary of restricted stock units for the current year period:
|
Restricted Stock Units |
|
|||||||
|
Number of |
|
Weighted Average |
|
Weighted Average |
|
|||
Unvested at December 31, 2022 |
|
|
$ |
|
|
|
|||
Granted |
|
|
$ |
|
|
|
|||
Vested |
|
( |
) |
$ |
|
|
|
||
Forfeited/cancelled |
|
( |
) |
$ |
|
|
|
||
Unvested at March 31, 2023 |
|
|
$ |
|
|
|
The following is a summary of stock option activity for the current year period:
|
Stock Options |
|
||||||||||
|
Number of |
|
Weighted Average |
|
Aggregate |
|
Weighted Average |
|
||||
Outstanding at December 31, 2022 |
|
|
$ |
|
$ |
|
|
|
||||
Granted |
|
|
$ |
|
|
|
|
|
||||
Exercised |
|
|
$ |
|
|
|
|
|
||||
Forfeited |
|
( |
) |
$ |
|
|
|
|
|
|||
Expired |
|
( |
) |
$ |
|
|
|
|
|
|||
Outstanding, vested and expected to vest at March 31, 2023 |
|
|
$ |
|
$ |
|
|
|
||||
Vested and exercisable at March 31, 2023 |
|
|
$ |
|
$ |
|
|
|
The following is a summary of restricted stock awards for the current year period:
|
Restricted Stock Awards |
|
|||||||
|
Number of |
|
Weighted Average |
|
Weighted Average |
|
|||
Unvested at December 31, 2022 |
|
|
$ |
|
|
|
|||
Granted |
|
|
$ |
|
|
|
|||
Vested |
|
( |
) |
$ |
|
|
|
||
Forfeited/cancelled |
|
|
$ |
|
|
|
|||
Unvested at March 31, 2023 |
|
|
$ |
|
|
|
15
MOMENTIVE GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
2018 Employee Stock Purchase Plan, As Amended
The Company sponsors the 2018 Employee Stock Purchase Plan, as amended (the “ESPP”), which was approved by stockholders on September 5, 2018. The ESPP provides for
As of March 31, 2023,
Stock-Based Compensation Expense
Stock-based compensation expense recognized in the condensed consolidated financial statements is as follows:
|
|
Three Months Ended March 31, |
|
||||
(in thousands) |
|
2023 |
|
2022 |
|
||
Cost of revenue |
|
$ |
|
$ |
|
||
Research and development |
|
|
|
|
|
||
Sales and marketing |
|
|
|
|
|
||
General and administrative |
|
|
|
|
|
||
Restructuring |
|
|
|
|
|
||
Stock-based compensation expense, net of amounts capitalized |
|
|
|
|
|
||
Capitalized stock-based compensation expense |
|
|
|
|
|
||
Stock-based compensation expense |
|
$ |
|
$ |
|
As of March 31, 2023, unamortized stock-based compensation was as follows:
|
Unrecognized |
|
Weighted |
|
||
Restricted stock units |
$ |
|
|
|
||
Stock options |
|
|
|
|
||
Restricted stock awards |
|
|
|
|
||
ESPP |
|
|
|
|
||
Total unrecognized stock-based compensation |
$ |
|
|
|
401(k) Plan
In the United States, the Company offers its employees a defined contribution plan that qualifies as a deferred salary arrangement under Section 401 of the U.S. Internal Revenue Code (“401(k) Plan”). Under the 401(k) Plan, participating employees may defer a portion of their pretax earnings not to exceed the maximum amount allowed by the Internal Revenue Service. The Company currently provides a matching contribution of
10. Leases
The Company leases certain equipment and facilities under operating leases which expire at various dates through
16
MOMENTIVE GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
|
|
Three Months Ended March 31, |
|
||||
(in thousands) |
|
2023 |
|
2022 |
|
||
Operating lease cost (gross lease expense) |
|
$ |
|
$ |
|
||
Variable lease costs |
|
|
|
|
|
||
Sublease income (including reimbursed expenses) |
|
|
|
|
|
During each of the three months ended March 31, 2023 and 2022, the Company’s short-term lease costs were nominal.
The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The weighted average remaining operating lease term was
The weighted average discount rate used to estimate operating lease liabilities was
As of March 31, 2023, maturities of operating lease liabilities and sublease income, by year are as follows:
(in thousands) |
|
Operating Lease Payments |
|
|
Sublease |
|
||
Remainder of 2023 |
|
$ |
|
|
$ |
( |
) |
|
2024 |
|
|
|
|
|
( |
) |
|
2025 |
|
|
|
|
|
|
||
2026 |
|
|
|
|
|
|
||
2027 |
|
|
|
|
|
|
||
Thereafter |
|
|
|
|
|
|
||
Gross lease payments (income) |
|
$ |
|
|
$ |
( |
) |
|
Less: Imputed interest |
|
|
|
|
|
|
||
Less: Tenant improvement receivables |
|
|
|
|
|
|
||
Total operating lease liabilities |
|
$ |
|
|
|
|
11. Commitments and Contingencies
Non-Cancelable Purchase Commitments
The Company enters into commitments under non-cancelable purchase orders for the procurement of goods and services in the ordinary course of business. As of March 31, 2023, expected payments under such commitments are as follows (in thousands):
Remainder of 2023 |
$ |
|
|
2024 |
|
|
|
2025 |
|
|
|
2026 |
|
|
|
2027 |
|
|
|
Total purchase commitments |
$ |
|
Letters of Credit
As of March 31, 2023, the Company had a standby letter of credit for $
Legal Matters
17
MOMENTIVE GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
The Company is party to lawsuits filed in connection with the Merger, and more may be filed. On April 21, 2023, a purported Momentive stockholder filed a complaint in the U.S. District Court for the Southern District of New York against Momentive and the Momentive board of directors, captioned O’Dell v. Momentive Global, Inc., et al. Case No. 23-cv-3360 (S.D.N.Y.) (the “O’Dell Complaint”), and a purported Momentive stockholder filed a complaint in the U.S. District Court for the Northern District of California against Momentive and the Momentive board of directors, captioned Renfer v. Momentive Global, Inc., et al. Case No. 3:23-cv-01936-TLT (N.D. Cal.) (the “Renfer Complaint”). On April 24, 2023, a purported Momentive stockholder filed a complaint in the U.S. District Court for the Southern District of New York against Momentive and the Momentive board of directors, captioned Wang v. Momentive Global, Inc., et al. Case No. 1:23-cv-03408 (S.D.N.Y.) (the “Wang Complaint”). On April 26, 2023, a purported Momentive stockholder filed a complaint in the U.S. District Court for the Northern District of California against Momentive and the Momentive board of directors, captioned DeVay v. Momentive Global, Inc., et al. Case No. 3:23-cv-02032 (N.D. Cal.) (the “DeVey Complaint”). On April 28, 2023, a purported Momentive stockholder filed a complaint in the U.S. District Court for the Northern District of California against Momentive and the Momentive board of directors, captioned Bushansky v. Momentive Global, Inc., et al. Case No. 3:23-cv-02068 (N.D. Cal.) (the “Bushansky Complaint”), and together with the O’Dell Complaint, the Renfer Complaint, the Wang Complaint and the DeVey Complaint, the “Momentive Complaints”). The Momentive Complaints assert claims against certain defendants under Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder for allegedly false and misleading statements in the proxy statement and against certain defendants under Section 20(a) of the Exchange Act for alleged “control person” liability with respect to such allegedly false and misleading statements. Each complaint seeks, among other relief, an order enjoining the Merger and an award for plaintiffs’ fees and costs. The Company believes the allegations in the Momentive Complaints are without merit.
Momentive stockholders may file additional lawsuits challenging the Merger, which may name the Company, members of the Company’s board of directors and/or other defendants. No assurance can be made as to the outcome of such lawsuits or the Momentive Complaints, including the amount of costs associated with defending against, or any other liabilities that may be incurred in connection with the litigation of, such claims.
In addition, from time to time, the Company is subject to legal proceedings, claims and litigation arising in the ordinary course of business, which may include, but are not limited to, patent and privacy matters, labor and employment claims, class action lawsuits, as well as inquiries, investigations, audits and other regulatory proceedings. Periodically, the Company evaluates developments in its legal matters and records a liability when it believes that it is both probable that a loss has been incurred and the amount can be reasonably estimated. Significant judgment is required to determine both the likelihood of there being, and the estimated amount of, a loss related to such matters, and the Company's judgment may be incorrect.
There are currently no legal matters or claims that have arisen from the normal course of business that the Company believes would have a material impact on the Company’s financial position, results of operations or cash flows.
Warranties and Indemnification
The Company’s subscription services are generally warranted to perform materially in accordance with the Company’s online help documentation under normal use and circumstances. Additionally, the Company’s arrangements generally include provisions for indemnifying customers against liabilities if its subscription services infringe a third party’s intellectual property rights. Furthermore, the Company may also incur liabilities if it breaches the security or confidentiality obligations in its arrangements. To date, the Company has not incurred significant costs and has not accrued a liability in the accompanying condensed consolidated financial statements as a result of these obligations.
18
MOMENTIVE GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
12. Debt
As of March 31, 2023 and December 31, 2022 the carrying values of debt were as follows:
|
|
|
|
|
March 31, 2023 |
|
December 31, 2022 |
||||||
|
|
Issuance |
Maturity |
|
Amount |
|
Effective |
|
Amount |
|
Effective |
||
2018 Credit Facility |
|
|
$ |
|
|
$ |
|
||||||
Less: Unamortized issuance discount and issuance costs, net |
|
|
|
|
|
|
|
|
|
|
|
||
Less: Debt, current |
|
|
|
|
|
|
|
|
|
|
|
||
Debt, non-current |
|
|
|
|
$ |
|
|
|
$ |
|
|
In October 2018, the Company entered into the 2018 Credit Facility, comprising a $
As of March 31, 2023, the Company had $
The Company’s obligations under the 2018 Credit Facility are guaranteed by certain of its subsidiaries and secured by liens on substantially all of the assets of the Company and such subsidiaries. The 2018 Credit Facility contains financial, affirmative and negative covenants that, if violated, may require the Company to pay down the loans earlier than the stated maturity dates with higher interest rates. As of March 31, 2023, the Company was compliant with all of its debt covenant requirements in the 2018 Credit Facility. The Company believes that it will continue to comply with the terms of the loan agreements through the stated maturity dates. However, if the Company’s projections do not materialize, the Company may require additional equity or debt financing. There can be no assurance that additional financing, if required, will be available on terms satisfactory to the Company.
As of March 31, 2023, future minimum payment obligations of principal amounts due by year under the 2018 Credit Facility were as follows (in thousands):
Remainder of 2023 |
$ |
|
|
2024 |
|
|
|
2025 |
|
|
|
Total principal outstanding |
$ |
|
13. Income Taxes
The Company recorded an income tax provision of $
The Company regularly evaluates the realizability of its net deferred tax assets based on all available evidence, both positive and negative. The realization of net deferred tax assets is dependent on several factors, including the
19
MOMENTIVE GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
likelihood and amount, if any, of future taxable income in relevant jurisdictions during periods in which those temporary differences become deductible. As of March 31, 2023, the Company continues to maintain a valuation allowance on certain deferred tax assets in the United States and certain foreign jurisdictions that are not realizable on a more likely than not basis.
The Company believes that it has provided adequate reserves for its income tax uncertainties in all open tax years. As the outcome of the audits cannot be predicted with certainty, if any issues addressed in the Company's tax audits are resolved in a manner inconsistent with management's expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs. There were no material changes in gross unrecognized tax benefits during each of the three months ended March 31, 2023 and 2022.
14. Net Loss Per Share
Basic earnings per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net loss for the period by the weighted-average number of common shares outstanding during the period which includes potential dilutive common shares assuming the dilutive effect of outstanding restricted stock units, stock options, restricted stock awards, and shares issuable under the ESPP calculated using the treasury stock method.
The following table sets forth the computation of basic and diluted earnings per share:
|
|
Three Months Ended March 31, |
|
||||
(in thousands, except per share amounts) |
|
2023 |
|
2022 |
|
||
Numerator: |
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
$ |
( |
) |
Denominator: |
|
|
|
|
|
||
Weighted-average shares outstanding - basic and diluted |
|
|
|
|
|
||
Net loss per common share - basic and diluted: |
|
$ |
( |
) |
$ |
( |
) |
The Company was in a loss position for the periods presented. Accordingly, basic net loss per share is the same as diluted net loss per share as the inclusion of all potential common shares outstanding would have been anti-dilutive. Prior to application of the treasury stock method, share equivalents (comprising of restricted stock units, stock options, restricted stock awards, and shares issuable under the ESPP) excluded from the calculations of diluted net loss per share were
15. Restructuring Costs
A description of the Company's restructuring and other activities and their related costs is provided below.
February 2023 Restructuring Plan
In February 2023, the Company committed to a restructuring plan (the "February 2023 Restructuring Plan") that is designed to improve operating margin. The February 2023 Restructuring plan resulted in a reduction of the Company's workforce by approximately
October 2022 Restructuring Plan
In October 2022, the Company committed to a plan designed to improve operating margin and create efficiencies in its go-to-market motion and in other areas throughout the Company (the “October 2022 Restructuring Plan”). The October 2022 Restructuring Plan resulted in a reduction of the Company’s workforce by approximately
20
MOMENTIVE GLOBAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
severance, employee benefits, and related facilitation costs, and was substantially recognized during the fourth quarter of 2022.
March 2022 Restructuring Plan
In March 2022, the Company implemented a restructuring plan (the “March 2022 Restructuring Plan”) to streamline its business, increase operating efficiency, and reduce costs over the long-term after the termination of its proposed merger with Zendesk. In connection with the March 2022 Restructuring Plan, the Company incurred total charges of approximately $
The restructuring plans were subject to applicable laws and consultation processes as part of the Company's strategic plan to reduce costs and improve efficiencies. In connection with these actions, the Company incurred the following pre-tax costs for the three months ended March 31, 2023 and 2022:
|
|
Three Months Ended March 31, |
|
||||
(in thousands) |
|
2023 |
|
2022 |
|
||
Employee severance |
|
$ |
|
$ |
|
||
Stock-based compensation |
|
|
|
|
|
||
Contract termination and other costs |
|
|
|
|
|
||
Amortization of intangible assets |
|
|
|
|
|
||
Total restructuring costs |
|
$ |
|
$ |
|
Restructuring costs included $
21
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. As discussed in the section titled “Forward-Looking Statements,”, the following discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Additionally, our unaudited results for the interim periods presented may not be indicative of the results to be expected for any full year period. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” under Part II, Item 1A in this Quarterly Report on Form 10-Q.
Overview
We were founded under the name “SurveyMonkey” in 1999 and provide SaaS solutions that help businesses collect and analyze stakeholder sentiment at scale. We believe the business insights our solutions deliver enable more than 330,000 organizations worldwide to build market leadership, delight their customers, and engage their employees. Our solutions are powered by a platform that combines audience panels, artificial intelligence, and advanced analytics capabilities that help make our products easy-to-use, yet powerful, to deliver speed-to-insights for our customers.
We offer products that address three major business use cases: (i) building market leadership, (ii) delighting customers, and (iii) engaging employees.
We believe our products are competitively differentiated through their ease-of-use, speed to insight, price relative to alternatives, and ability to share insights across an organization through integrations with leading business intelligence, collaboration, and customer relationship management platforms. Our solutions are powered by a technology stack that simplifies the processes for creating surveys, collecting high quality data, and surfacing and sharing insights across an organization to drive action. We have transformed from our roots as a provider of digital survey tools sold through the Internet to an enterprise SaaS company that leverages both product-led and sales-led go-to-market motions. To help us engage more deeply with enterprise customers, we rebranded ourselves as “Momentive” in June 2021, and changed our legal name from “SVMK Inc.” to “Momentive Global Inc.” In February 2022, we announced plans to consolidate our product portfolio under the Momentive and SurveyMonkey brands and web surfaces. The Momentive brand represents our suite of upmarket solutions sold primarily through our sales force, while the SurveyMonkey brand represents our forms and survey products sold primarily through our website.
We are executing on a two-part growth strategy. First, we are delivering new features and product tiers that capitalize on the virality of our core platform and the scale of business to drive overall platform usage and increase the conversion of free users to paid subscribers in our self-serve channel. Second, we are investing further in product innovation and go-to-market initiatives to expand the percentage of our revenue generated through our sales-assisted channel. Specifically, our sales-assisted go-to-market motion focuses on converting existing self-serve subscribers to sales-assisted customers, selling directly to new customers, and expanding our relationships with existing customers. As we execute on this strategy and sell more of our products into enterprises directly, we believe we can accelerate our revenue growth profile and increase our customer retention rates over time. We believe our existing user base represents a significant opportunity to expand our business and increase our revenue. During the first quarter of 2023, approximately 39% of our total revenue was generated from customers who purchased software through our sales-assisted channel, up from 35% in the first quarter of 2022.
Our core survey platform is inherently viral, as existing users send surveys and share survey results that introduce potential new users and customers to our products. This virality, combined with the ease-of-use and price-disruptive nature of our products and the strength of our brands, has enabled us to build an efficient, online self-serve channel for selling versions of our survey products, which we are enhancing with our sales-assisted go-to-market motion. We have a broad and diverse customer base and no customer represented more than 10% of our revenue in any of the periods presented.
We operate as a single operating segment. Our CODM is our Chief Executive Officer, who reviews our operating results on a consolidated basis in order to make decisions about allocating resources and assessing performance for
22
the entire company. Our CODM uses one measure of profitability and does not segment our business for internal reporting.
Pending Merger with an investor consortium led by STG
On March 13, 2023, we entered into the Merger Agreement with STG and Merger Sub. Pursuant to the Merger Agreement, and upon the terms and subject to the conditions therein, Merger Sub will merge with and into us, with our company surviving the merger as a wholly owned subsidiary of STG. Our board of directors and the board of directors of STG have each approved the Merger Agreement and the Merger.
Under the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each issued and outstanding share of our common stock (except for certain shares of our common stock specified in the Merger Agreement) will be canceled and automatically converted into the right to receive cash in an amount equal to $9.46 per share, without interest.
The completion of the Merger is subject to customary closing conditions, including the approval of our stockholders. For further information on the Merger and the Merger Agreement, see Note 1 of the Notes to Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q, as well as the definitive proxy statement filed by us on April 27, 2023 and first mailed to our stockholders on the same date.
Upon consummation of the Merger, we will cease to be a publicly traded company and our common stock will be delisted from the Nasdaq Global Select Market.
Impact of COVID-19 and other Macroeconomic Factors on our Business
The COVID-19 pandemic has caused economic instability and global uncertainty. As a result of the COVID-19 pandemic, we transitioned to a hybrid work model where most of our employees have the flexibility to determine the amount of time they work from home and in our offices. We continue to actively monitor and evaluate the situation and may take further actions that alter our business operations as may be required by federal, state, or local authorities or that we determine are in the best interests of our employees, customers, partners, and stockholders. The effects of these operational modifications are unknown and may not be realized until further reporting periods as we continue to evaluate and refine our hybrid work model and real estate needs.
In addition, our overall performance depends in part on worldwide economic and geopolitical conditions and their impact on consumer and customer behavior. Worsening economic conditions, including inflation, higher interest rates, volatility in the global financial markets, slower growth, the stronger dollar versus foreign currencies, particularly the Euro, the British Pound Sterling, the Australian dollar, and the Canadian dollar, and other changes in economic conditions, may adversely affect our results of operations and financial performance.
Our Products
We offer products that address three major business use cases, (i) building market leadership, (ii) delighting customers, and (iii) engaging employees. We generate revenue either on a subscription or transactional basis, depending on the product.
23
Revenue from professional services engagements is generated primarily on a transactional basis.
24
We offer certain tiers of our Survey and Insights Solutions product categories on a self-serve basis through our website, and we offer a suite of enterprise-grade experience management solutions from all three primary product categories through our direct sales force.
As of December 31, 2022, we had over 14 million active users. As of March 31, 2023 and 2022, we had approximately 878,600 and 894,400 paying users, respectively, which we define as an individual customer of our survey platform or form-based application, a seat within a SurveyMonkey Enterprise deployment or a subscription to one of our purpose-built solutions. Of our paying users as of March 31, 2023 and 2022, we had approximately 13,200 and 13,700 customers, respectively, who purchased our software through our sales-assisted channel. Our average revenue per paying user (“ARPU”) was $546 and $535 for the three months ended March 31, 2023 and 2022, respectively. We calculate ARPU as revenue during a given period divided by the average number of paying users during that period. We calculate the average number of paying users by adding the number of paying users as of the end of the prior period to the number of paying users as of the end of the current period, and then dividing by two. For interim periods, we use annualized revenue which is calculated by dividing the revenue for the period by the number of days in that period and multiplying this value by 365 days.
As of March 31, 2023, over 90% of our trailing 12-month bookings were from organizational domain-based customers, which are customers who register with us using an email account with an organizational domain name, such as @momentive.ai, but excludes customers with email addresses hosted on widely used domains such as @gmail, @outlook or @yahoo. As of March 31, 2023, our dollar-based net retention rate for organizational domain-based customers was over 90%. We calculate bookings as the sum of the monthly and annual contract values for contracts sold during a period for our monthly and annual customers, respectively. We calculate organizational dollar-based net retention rate as of a period end by starting with the trailing 12 months of bookings from the cohort of all domain-based customers as of the 12 months prior to such period end (“Prior Period Bookings”). We then calculate the trailing 12 months of bookings from these same customers as of the current period end (“Current Period Bookings”). Current Period Bookings includes any upsells and is net of contraction or attrition, but excludes bookings from new domain-based customers in the current period. We then divide the total Current Period Bookings by the total Prior Period Bookings to arrive at the organizational dollar-based net retention rate.
25
Key Business Metrics
We review a number of operating and financial metrics, including the following key metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate our business plan and make strategic decisions. As our business continues to evolve, we may choose to report new or additional metrics that are more closely tied to key business drivers or stop reporting metrics that are no longer relevant.
Remaining Performance Obligation
|
|
As of March 31, |
|
||||
(in thousands) |
|
2023 |
|
2022 |
|
||
Remaining performance obligation (“RPO”) |
|
$ |
245,500 |
|
$ |
245,394 |
|
RPO is the amount of consideration allocated to unsatisfied performance obligations related to non-cancelable contracts, which include both the deferred revenue balance and amounts that will be invoiced and recognized as revenue in future periods, as of the end of the reporting period. For subscription products, we provide customers with the option of monthly, annual or multi-year contractual terms. In general, our customers elect annual contractual terms and we generally invoice 1 year in advance. Our contracts are generally non-cancelable and without refund rights. Billed contractual amounts are reported as deferred revenue in our condensed consolidated financial statements. Unbilled contractual amounts are part of RPO and are not included in our condensed consolidated financial statements.
RPO is intended to provide visibility into future revenue streams. Several factors may contribute to the fluctuation of RPO including timing and frequency of invoicing, number of multi-year non-cancelable contracts, and dollar amount of customer contracts.
Non-GAAP Financial Measures
We believe that, in addition to our results determined in accordance with GAAP, non-GAAP measures, specifically free cash flow and non-GAAP (loss) income from operations, are useful in evaluating our business, results of operations and financial condition. We use these non-GAAP measures to compare and evaluate our operating results across periods in order to manage our business, for purposes of determining executive and senior management incentive compensation, and for budgeting and developing our strategic operating plans. We believe that these non-GAAP measures provide useful information about our operating results, enhance the overall understanding of our past financial performance and future prospects, and allow for greater transparency with respect to key metrics used by our management in evaluating our financial performance and for operational decision making, but they are not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunction with our condensed consolidated financial statements prepared in accordance with GAAP. Our definitions for free cash flow and non-GAAP (loss) income from operations used are provided below; however, a limitation of non-GAAP financial measures is that they do not have uniform definitions. Accordingly, our definitions below will likely differ from similarly titled non-GAAP measures used by other companies thereby limiting comparability.
Free cash flow
We define free cash flow as GAAP net cash provided by operating activities less purchases of property and equipment, and capitalized internal-use software. We consider free cash flow to be an important measure because it measures our liquidity after deducting capital expenditures for purchases of property and equipment and capitalized software development costs, which we believe provides a more accurate view of our cash generation and cash available to grow our business. We expect to generate positive free cash flow over the long term. Free cash flow has limitations as an analytical tool, and it should not be considered in isolation or as a substitute for analysis of other GAAP financial measures, such as net cash provided by or used in operating activities. Some of the limitations of free cash flow are that free cash flow does not reflect our future contractual commitments and may be calculated differently by other companies in our industry, limiting its usefulness as a comparative measure.
The following is a reconciliation of free cash flow to the most comparable GAAP measure, net cash provided by or used in operating activities:
26
|
|
Three Months Ended March 31, |
|
||||
(in thousands) |
|
2023 |
|
2022 |
|
||
Net cash used in operating activities |
|
$ |
(7,927 |
) |
$ |
(4,900 |
) |
Purchases of property and equipment |
|
|
(15 |
) |
|
(441 |
) |
Capitalized internal-use software |
|
|
(2,079 |
) |
|
(2,565 |
) |
Free cash flow |
|
$ |
(10,021 |
) |
$ |
(7,906 |
) |
Free cash flow is presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP.
Non-GAAP (loss) income from operations
We define non-GAAP (loss) income from operations as GAAP loss from operations excluding stock-based compensation, net, amortization of acquisition intangible assets, acquisition-related transaction costs, and restructuring.
The following is a reconciliation of our GAAP loss from operations to non-GAAP (loss) income from operations:
|
|
Three Months Ended March 31, |
|
||||
(in thousands) |
|
2023 |
|
2022 |
|
||
GAAP loss from operations |
|
$ |
(21,254 |
) |
$ |
(35,069 |
) |
Stock-based compensation, net |
|
|
20,402 |
|
|
26,254 |
|
Acquisition-related transaction costs(1) |
|
|
7,461 |
|
|
6,500 |
|
Restructuring(2) |
|
|
7,197 |
|
|
2,077 |
|
Amortization of acquisition intangible assets |
|
|
371 |
|
|
2,911 |
|
Non-GAAP income from operations |
|
$ |
14,177 |
|
$ |
2,673 |
|
(1) Includes transaction expenses associated with the pending merger with an investor consortium led by STG during the three months ended March 31, 2023. See Note 1 of the Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q for additional information. Also includes transaction expenses associated with the terminated merger with Zendesk during the three months ended March 31, 2022.
(2) For the three months ended March 31, 2022, restructuring-related charges for stock-based compensation expense of $2.8 million and amortization of acquisition intangibles of $45,000 were included in the respective line items.
Components of Results of Operations
Revenue
We derive a majority of our revenue from sales of subscriptions to our software products in the survey and customer experience categories. We also generate a small portion of our revenue from sales of insight/market research solutions.
We recognize subscription revenue ratably over the subscription term, generally one year, as long as all other revenue recognition criteria have been met. Our contracts are generally non-cancellable and do not contain refund provisions. Subscriptions sold through our self-serve channel are collected primarily from credit cards through our website at the beginning of the subscription period. Subscriptions sold through our sales-assisted channel are generally billed annually in advance.
Cost of Revenue and Operating Expenses
We allocate shared costs, such as depreciation on equipment shared by all departments, facilities (including rent and utilities), employee benefit costs and information technology costs to all departments based on headcount. As such, allocated shared costs are reflected in each cost of revenue and operating expense category, other than restructuring.
Cost of Revenue. Our cost of revenue consists primarily of expenses associated with the delivery and distribution of our products to our users. These expenses generally consist of infrastructure costs, personnel costs and other related costs. Infrastructure costs generally include expenses related to website hosting costs, amortization of capitalized software, payment processing fees, external sample costs and charitable donations associated with SurveyMonkey
27
Audience, our market research panel solution. Personnel costs include salaries, bonuses, stock-based compensation, other employee benefits and travel-related expenses for employees whose primary responsibilities relate to supporting our infrastructure and delivering user support. Other related costs include amortization of acquired developed technology intangible assets and allocated overhead. We plan to continue investing in additional resources to enhance the capability and reliability of our infrastructure to support user growth and increased use of our products. We expect that cost of revenue will increase in absolute dollars in future periods and vary from period to period as a percentage of revenue in the near term. We expect that cost of revenue will decrease as a percentage of revenue in the long term.
Research and Development. Research and development expenses primarily include personnel costs, costs for third-party consultants, depreciation of equipment used in research and development activities and allocated overhead. Personnel costs for our research and development organization include salaries, bonuses, stock-based compensation, other employee benefits and travel-related expenses. Our research and development efforts focus on maintaining and enhancing existing products and adding new products. Except for costs associated with the application development phase of internal-use software, research and development costs are expensed as incurred. We expect that research and development expenses will increase in absolute dollars in future periods and vary from period to period as a percentage of revenue in the near term. We expect that research and development expenses will remain relatively constant as a percentage of revenue in the long term.
Sales and Marketing. Sales and marketing expenses primarily include personnel costs, costs related to brand campaigns, paid marketing, amortization of acquired trade name and customer relationship intangible assets and allocated overhead. Personnel costs for our sales and marketing organization include salaries, bonuses, sales commissions, stock-based compensation, other employee benefits and travel-related expenses. Sales commissions earned by our sales personnel, including any related payroll taxes, that are considered to be incremental and recoverable costs of obtaining a customer contract are deferred and amortized over an estimated period of benefit of generally four years. We expect that sales and marketing expenses will increase in absolute dollars in future periods and increase as a percentage of revenue in the near term. We expect that sales and marketing expenses will vary from period to period in the long term.
General and Administrative. General and administrative expenses primarily include personnel costs for legal, finance, human resources and other administrative functions, as well as certain executives. Personnel costs for our general and administrative staff include salaries, bonuses, stock-based compensation, other employee benefits and travel-related expenses. In addition, general and administrative expenses include outside legal, accounting and other professional fees, non-income-based taxes and allocated overhead. We expect that general and administrative expenses will increase in absolute dollars in future periods and vary from period to period as a percentage of revenue in the near term. We expect that general and administrative expenses will decrease as a percentage of revenue in the long term.
Restructuring. Restructuring expenses primarily include personnel costs, other contract termination costs, and impairment of certain assets. Personnel costs include severance payments, stock-based compensation and other benefits. Other contract termination expenses related to restructuring include amortization of intangibles without future economic benefit, infrastructure write-offs and lease modifications associated with vacated facilities.
Interest Expense
Interest expense consists of interest on our credit facilities. For additional information regarding our credit facilities, see Note 12 of the Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.
Other Non-Operating (Income) Expense, Net
Other non-operating (income) expense, net consists primarily of interest income, net foreign currency exchange gains and losses, net realized gains and losses related to investments, and other (income) expense.
Provision for (Benefit from) Income Taxes
Provision for (benefit from) income taxes consists of U.S. federal and state income taxes and income taxes in certain foreign jurisdictions in which we conduct business. We maintain a valuation allowance against deferred tax assets in the United States and certain foreign jurisdictions that we have determined are not realizable on a more likely than
28
not basis. For additional information regarding our income taxes, see Note 13 of the Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.
Results of Operations
The following tables set forth our results of operations for the periods presented and as a percentage of our revenue for those periods. Percentages presented in the following tables may not sum due to rounding.
|
|
Three Months Ended March 31, |
|
||||||||||
(in thousands) |
|
2023 |
|
% of Revenue |
|
2022 |
|
% of Revenue |
|
||||
Revenue |
|
$ |
118,821 |
|
|
100 |
% |
$ |
116,986 |
|
|
100 |
% |
Cost of revenue(1)(2)(3) |
|
|
20,557 |
|
|
17 |
% |
|
22,903 |
|
|
20 |
% |
Gross profit |
|
|
98,264 |
|
|
83 |
% |
|
94,083 |
|
|
80 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
||||
Research and development(1)(3) |
|
|
32,665 |
|
|
27 |
% |
|
36,716 |
|
|
31 |
% |
Sales and marketing (1)(2)(3) |
|
|
47,919 |
|
|
40 |
% |
|
59,636 |
|
|
51 |
% |
General and administrative(1)(3) |
|
|
31,737 |
|
|
27 |
% |
|
27,917 |
|
|
24 |
% |
Restructuring(1)(2) |
|
|
7,197 |
|
|
6 |
% |
|
4,883 |
|
|
4 |
% |
Total operating expenses |
|
|
119,518 |
|
|
101 |
% |
|
129,152 |
|
|
110 |
% |
Loss from operations |
|
|
(21,254 |
) |
|
(18 |
)% |
|
(35,069 |
) |
|
(30 |
)% |
Interest expense |
|
|
4,148 |
|
|
3 |
% |
|
2,226 |
|
|
2 |
% |
Other non-operating income, net |
|
|
(2,038 |
) |
|
(2 |
)% |
|
(134 |
) |
|
— |
% |
Loss before income taxes |
|
|
(23,364 |
) |
|
(20 |
)% |
|
(37,161 |
) |
|
(32 |
)% |
Provision for income taxes |
|
|
451 |
|
|
— |
% |
|
216 |
|
|
— |
% |
Net loss |
|
$ |
(23,815 |
) |
|
(20 |
)% |
$ |
(37,377 |
) |
|
(32 |
)% |
(1) Includes stock-based compensation, net of amounts capitalized as follows:
|
|
Three Months Ended March 31, |
|
||||||||||
(in thousands) |
|
2023 |
|
% of Revenue |
|
2022 |
|
% of Revenue |
|
||||
Cost of revenue |
|
$ |
1,241 |
|
|
1 |
% |
$ |
1,409 |
|
|
1 |
% |
Research and development |
|
|
7,734 |
|
|
7 |
% |
|
8,644 |
|
|
7 |
% |
Sales and marketing |
|
|
4,075 |
|
|
3 |
% |
|
6,065 |
|
|
5 |
% |
General and administrative |
|
|
7,352 |
|
|
6 |
% |
|
7,375 |
|
|
6 |
% |
Restructuring |
|
|
— |
|
|
— |
% |
|
2,761 |
|
|
2 |
% |
Stock-based compensation, net of amounts capitalized |
|
$ |
20,402 |
|
|
17 |
% |
$ |
26,254 |
|
|
22 |
% |
(2) Includes amortization of acquisition intangible assets as follows:
|
|
Three Months Ended March 31, |
|
||||||||||
(in thousands) |
|
2023 |
|
% of Revenue |
|
2022 |
|
% of Revenue |
|
||||
Cost of revenue |
|
$ |
— |
|
|
— |
% |
$ |
1,414 |
|
|
1 |
% |
Sales and marketing |
|
|
371 |
|
|
— |
% |
|
1,452 |
|
|
1 |
% |
Restructuring |
|
|
— |
|
|
— |
% |
|
45 |
|
|
— |
% |
Amortization of acquisition intangible assets |
|
$ |
371 |
|
|
— |
% |
$ |
2,911 |
|
|
2 |
% |
(3) Includes transaction expenses associated with the pending merger with an investor consortium led by STG during the three months ended March 31, 2023 and with the terminated merger with Zendesk during the three months ended March 31, 2022:
|
|
Three Months Ended March 31, |
|
||||||||||
(in thousands) |
|
2023 |
|
% of Revenue |
|
2022 |
|
% of Revenue |
|
||||
Cost of revenue |
|
$ |
10 |
|
|
— |
% |
$ |
318 |
|
|
— |
% |
Research and development |
|
|
47 |
|
|
— |
% |
|
1,770 |
|
|
2 |
% |
Sales and marketing |
|
|
23 |
|
|
— |
% |
|
1,679 |
|
|
1 |
% |
General and administrative |
|
|
7,381 |
|
|
6 |
% |
|
2,733 |
|
|
2 |
% |
Acquisition-related transaction costs |
|
$ |
7,461 |
|
|
6 |
% |
$ |
6,500 |
|
|
6 |
% |
Comparison of the Three Months Ended March 31, 2023 and 2022
29
Revenue and cost of revenue
|
|
Three Months Ended March 31, |
|
|
|
|
|
||||||
(dollars in thousands) |
|
2023 |
|
2022 |
|
$ Change |
|
% Change |
|
||||
Revenue |
|
$ |
118,821 |
|
$ |
116,986 |
|
$ |
1,835 |
|
|
2 |
% |
Cost of revenue |
|
|
20,557 |
|
|
22,903 |
|
|
(2,346 |
) |
|
(10 |
)% |
Gross profit |
|
$ |
98,264 |
|
$ |
94,083 |
|
$ |
4,181 |
|
|
4 |
% |
Gross margin |
|
|
83 |
% |
|
80 |
% |
|
|
|
|
Revenue increased for the three months ended March 31, 2023 compared to the three months ended March 31, 2022. Our ARPU increased 2% from $535 for the three months ended March 31, 2022 to $546 for the three months ended March 31, 2023, while our number of paying users slightly decreased 2% from approximately 894,400 as of March 31, 2022 to approximately 878,600 as of March 31, 2023.
Revenue growth was driven by an increase of $5.5 million, or 13%, in our sales-assisted channel, as a result of the ongoing refinement of our pricing and packaging that has driven an increase in customer upgrades and expansion, which was slightly offset by a decrease of $3.7 million, or (5%), in our self-serve channel. Revenue from our sales-assisted channel accounted for 39% and 35% of revenue for the three months ended March 31, 2023 and 2022, respectively.
Cost of revenue decreased for the three months ended March 31, 2023 compared to the three months ended March 31, 2022, primarily due to a $2.1 million decrease in the amortization of capitalized software and intangible assets related to our prior acquisitions, and a $0.9 million decrease in personnel costs due to headcount reduction from our restructuring activities, offset by a $0.7 million increase in web hosting costs and payment processing fees.
Our gross margin increased for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, due to the slight increase in revenue, combined with the decrease in our cost of revenue.
Research and development
|
|
Three Months Ended March 31, |
|
|
|
|
|
||||||
(dollars in thousands) |
|
2023 |
|
2022 |
|
$ Change |
|
% Change |
|
||||
Research and development |
|
$ |
32,665 |
|
$ |
36,716 |
|
$ |
(4,051 |
) |
|
(11 |
)% |
Research and development expenses decreased for the three months ended March 31, 2023 compared to the three months ended March 31, 2022, primarily due to a $4.7 million decrease in personnel related costs due to headcount reduction from our restructuring activities, offset by a decrease in software development costs that qualified for capitalization.
Sales and marketing
|
|
Three Months Ended March 31, |
|
|
|
|
|
||||||
(dollars in thousands) |
|
2023 |
|
2022 |
|
$ Change |
|
% Change |
|
||||
Sales and marketing |
|
$ |
47,919 |
|
$ |
59,636 |
|
$ |
(11,717 |
) |
|
(20 |
)% |
Sales and marketing expenses decreased for the three months ended March 31, 2023 compared to the three months ended March 31, 2022, primarily due to a $9.2 million decrease in personnel related costs due to headcount reduction from our restructuring activities, as well as a decrease of $1.1 million in amortization of intangible assets related to our prior acquisitions.
General and administrative
|
|
Three Months Ended March 31, |
|
|
|
|
|
||||||
(dollars in thousands) |
|
2023 |
|
2022 |
|
$ Change |
|
% Change |
|
||||
General and administrative |
|
$ |
31,737 |
|
$ |
27,917 |
|
$ |
3,820 |
|
|
14 |
% |
30
General and administrative expenses increased for the three months ended March 31, 2023 compared to the three months ended March 31, 2022, primarily due to a $4.6 million increase in transaction costs associated with the pending merger with STG compared to the terminated merger in the prior period, offset by a decrease in personnel related costs due to headcount reduction from our restructuring activities.
Restructuring
|
|
Three Months Ended March 31, |
|
|
|
|
|
||||||
(dollars in thousands) |
|
2023 |
|
2022 |
|
$ Change |
|
% Change |
|
||||
Restructuring |
|
$ |
7,197 |
|
$ |
4,883 |
|
$ |
2,314 |
|
|
47 |
% |
Restructuring expenses recorded for the three months ended March 31, 2023 were primarily due to employee severance, employee benefits, and related facilitation costs as a result of our February 2023 restructuring plan. Restructuring expenses recorded for the three months ended March 31, 2022 were primarily due to employee severance, stock-based compensation expense, and contract termination costs as a result of our March 2022 restructuring plan. For additional information regarding our restructuring activities, see Note 15 of the Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.
Interest expense
|
|
Three Months Ended March 31, |
|
|
|
|
|
||||||
(dollars in thousands) |
|
2023 |
|
2022 |
|
$ Change |
|
% Change |
|
||||
Interest expense |
|
$ |
4,148 |
|
$ |
2,226 |
|
$ |
1,922 |
|
|
86 |
% |
Interest expense increased for the three months ended March 31, 2023 compared to the three months ended March 31, 2022, primarily due to a significantly higher average interest rate offset by a decrease in average debt balances as a result of our repayment of principal under the Term Loan. For additional information regarding our credit facilities, see Note 12 of the Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.
Other non-operating income, net
|
|
Three Months Ended March 31, |
|
|
|
|
|
||||||
(dollars in thousands) |
|
2023 |
|
2022 |
|
$ Change |
|
% Change |
|
||||
Other non-operating income, net |
|
$ |
(2,038 |
) |
$ |
(134 |
) |
$ |
(1,904 |
) |
|
1421 |
% |
Other non-operating income, net for the three months ended March 31, 2023 increased compared to the three months ended March 31, 2022, primarily due to an increase in interest income due to a higher average interest rate.
Provision for income taxes
|
|
Three Months Ended March 31, |
|
|
|
|
|
||||||
(dollars in thousands) |
|
2023 |
|
2022 |
|
$ Change |
|
% Change |
|
||||
Provision for income taxes |
|
$ |
451 |
|
$ |
216 |
|
$ |
235 |
|
|
109 |
% |
Effective tax rate |
|
|
(2 |
)% |
|
(1 |
)% |
|
|
|
|
The provision for income taxes increased for the three months ended March 31, 2023 compared to the three months ended March 31, 2022, primarily due to an estimated increase in U.S. state income taxes resulting from capitalization of certain expenses under Section 174.
31
Liquidity and Capital Resources
As of March 31, 2023 and December 31, 2022, our principal sources of liquidity were cash and cash equivalents totaling $199.1 million and $202.8 million, respectively, all of which were bank deposits as well as cash to be received from customers and cash available under our credit facilities.
We have historically financed our operations primarily through payments received from our customers and borrowings under credit facilities and lines of credit.
On February 26, 2022, our board of directors authorized a share repurchase program to repurchase up to $200.0 million of our common stock in the open market or in privately negotiated transactions (through 10b5-1 trading plans or otherwise). The share repurchase program does not obligate us to acquire any particular amount of common stock and may be suspended at any time at our discretion, and the repurchase program does not have an expiration date. The actual timing, number and value of shares repurchased is determined by our management at its discretion and depends on a number of factors, including the market price of our stock, general business and market conditions, and other investment opportunities. There were no share repurchases for the three months ended March 31, 2023. During the three months ended March 31, 2022, we repurchased approximately 2.4 million shares of common stock for approximately $36.4 million. As of March 31, 2023, our remaining share repurchase authorization was approximately $116.5 million.
We believe our existing cash and cash equivalents, our credit facilities and cash provided by sales of our products will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months. Our long-term future capital requirements will depend on many factors, including the timing and amount of cash received from customers, the timing and extent of spending to support research and development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced product offerings and the continuing market adoption of our products. We may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies, including intellectual property rights. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in new technologies, this could reduce our ability to compete successfully and harm our results of operations. Ongoing worldwide business and economic disruptions could materially affect our future access to our sources of liquidity, particularly our cash flows from operations, financial condition, capitalization, and capital investments. In the event of a sustained market deterioration, we may need additional liquidity, which would require us to evaluate available alternatives and take appropriate actions.
A significant majority of our customers pay in advance for annual subscriptions, which is a substantial source of cash. Deferred revenue consists of the unearned portion of billed fees for our subscriptions, which we recognized as revenue in accordance with our revenue recognition policy. As of March 31, 2023 and December 31, 2022, we had deferred revenue of $216.5 million and $207.4 million, respectively, a substantial majority of which we expect to record as revenue in the next 12 months, provided all other revenue recognition criteria have been met.
Under the terms of the Merger Agreement, we have agreed to various covenants and agreements, including, among others, agreements to conduct our business in the ordinary course during the period between the execution of the Merger Agreement and the Effective Time of the Merger or the valid termination of the Merger Agreement pursuant to its terms. Outside of certain limited exceptions, we may not take or agree to take certain actions without STG’s consent, including: acquiring businesses, entering into certain specified contracts, making capital expenditures in excess of those as set forth in a capital budget provided to STG in connection with the execution of the Merger Agreement or in excess of certain specified amounts, issuing additional capital stock or securities convertible into capital stock, or incurring additional indebtedness. We do not believe these restrictions will prevent us from meeting our ongoing operating expenses, working capital needs, or capital expenditure requirements.
32
Cash Flows
The following table summarizes our cash flows for the periods indicated:
|
|
Three Months Ended March 31, |
|
||||
(in thousands) |
|
2023 |
|
2022 |
|
||
Net cash used in operating activities |
|
$ |
(7,927 |
) |
$ |
(4,900 |
) |
Net cash provided by (used in) investing activities |
|
|
4,659 |
|
|
(3,006 |
) |
Net cash used in financing activities |
|
|
(550 |
) |
|
(59,653 |
) |
Effects of exchange rate changes on cash |
|
|
213 |
|
|
393 |
|
Net decrease in cash, cash equivalents and restricted cash |
|
$ |
(3,605 |
) |
$ |
(67,166 |
) |
Cash Flows from Operating Activities
Our largest source of operating cash is cash collections from our customers for subscriptions to our products. Our primary uses of cash in operating activities are for employee-related expenditures, marketing expenses and third-party hosting costs. Historically, we have generated positive cash flows from operating activities. Net cash provided by operating activities is impacted by our net loss adjusted for certain non-cash items, including depreciation and amortization expenses, stock-based compensation, non-cash lease expense, bad debt expense, deferred income taxes and other non-cash adjustments, as well as the effect of changes in operating assets and liabilities.
During the three months ended March 31, 2023, cash used in operating activities was $7.9 million, primarily due to our net loss of $23.8 million, adjusted for non-cash charges of $28.9 million and net cash outflows of $13.0 million provided by changes in our operating assets and liabilities. Non-cash charges primarily consisted of depreciation and amortization, stock-based compensation, non-cash lease expense, bad debt expense, deferred income taxes and net unrealized foreign currency (gains) losses. The primary drivers of the changes in operating assets and liabilities are a $7.1 million increase in prepaid expenses and other assets, a $5.0 million decrease in accounts payable and accrued liabilities, a $8.3 million decrease in accrued compensation, and cash used for operating lease liabilities of $2.9 million, offset by cash inflows from a $9.0 million increase in deferred revenue and a $1.3 million decrease in accounts receivable.
During the three months ended March 31, 2022, cash used in operating activities was $4.9 million, primarily due to our net loss of $37.4 million, adjusted for non-cash charges of $40.4 million and net cash outflows of $7.9 million provided by changes in our operating assets and liabilities. Non-cash charges primarily consisted of depreciation and amortization, stock-based compensation, non-cash lease expense, bad debt expense and deferred income taxes. The primary drivers of the changes in operating assets and liabilities are an increase in prepaid expenses and other assets of $8.2 million, a $6.9 million decrease in accrued compensation, a $2.3 million decrease in accounts payable and accrued liabilities, a $1.0 million increase in accounts receivable, and cash used for operating lease liabilities of $3.8 million, offset by cash inflows from a $14.3 million increase in deferred revenue.
Cash Flows from Investing Activities
Our primary investing activities have consisted of capital expenditures to purchase equipment necessary to support our network and other operations and capitalization of internal-use software necessary to deliver significant new features and functionality in our survey platform which provides value to our customers. As our business expands, we expect our capital expenditures to continue to increase.
Net cash provided by investing activities during the three months ended March 31, 2023 of $4.7 million was primarily attributable to cash received from the sale of a private company investment of $6.8 million, offset by cash used for the development of internal-use software of $2.1 million that is capitalized.
Net cash used in investing activities during the three months ended March 31, 2022 of $3.0 million was primarily attributable to cash used for the development of internal-use software of $2.6 million that is capitalized and purchases of property and equipment of $0.4 million.
Cash Flows from Financing Activities
Net cash used in financing activities during the three months ended March 31, 2023 of $0.6 million was due to principal payments made on our credit facilities.
33
Net cash provided by financing activities during the three months ended March 31, 2022 of $59.7 million was primarily attributable to payments for share repurchases of $36.4 million and principal payments made on our credit facilities of $25.6 million, partially offset by proceeds from the exercise of stock options of $2.3 million.
Contractual Obligations
Our material cash requirements and principal commitments consist of obligations under our credit facilities and leases for office space. As of March 31, 2023, the future non-cancelable minimum payments under these commitments were as follows:
|
|
Payments Due by Period |
|
|||||||||||||||||||
(in thousands) |
|
Total |
|
Remainder of 2023 |
|
2024 |
|
2025 |
|
2026 |
|
2027 |
|
Thereafter |
|
|||||||
Credit facilities(1) |
|
$ |
185,100 |
|
$ |
1,650 |
|
$ |
2,200 |
|
$ |
181,250 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
Interest payments on credit facilities(1) |
|
|
40,639 |
|
|
12,136 |
|
|
16,188 |
|
|
12,315 |
|
|
— |
|
|
— |
|
|
— |
|
Operating leases(2) |
|
|
56,127 |
|
|
8,400 |
|
|
9,753 |
|
|
9,307 |
|
|
9,516 |
|
|
9,788 |
|
|
9,363 |
|
Purchase commitments(3) |
|
|
22,609 |
|
|
12,531 |
|
|
8,082 |
|
|
1,946 |
|
|
49 |
|
|
1 |
|
|
— |
|
Total contractual obligations |
|
$ |
304,475 |
|
$ |
34,717 |
|
$ |
36,223 |
|
$ |
204,818 |
|
$ |
9,565 |
|
$ |
9,789 |
|
$ |
9,363 |
|
Off-Balance Sheet Arrangements
As of March 31, 2023, we did not have any relationships with unconsolidated organizations or financial partnerships, such 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.
Critical Accounting Policies and Estimates
We prepare our condensed consolidated financial statements in accordance with GAAP. In the preparation of these condensed consolidated financial statements, we are required to make judgements, estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. To the extent that there are material differences between these judgements, estimates and actual results, our financial condition or results of operations would be affected. We base our judgements and estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We refer to accounting judgements and estimates of this type as critical accounting policies and estimates. There have been no material changes to our critical accounting policies and estimates for the three months ended March 31, 2023, as compared to those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.
Recent Accounting Pronouncements
See Note 2 of the Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q for discussion of recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted.
34
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
We have operations both within the United States and internationally, and we are exposed to market risks in the ordinary course of our business. These risks include primarily interest rate, inflation and foreign currency exchange risks.
Foreign Currency Exchange Risk
Where the functional currency of our subsidiaries is the U.S. dollar, monetary assets and liabilities are remeasured using foreign currency exchange rates at the end of the period, and non-monetary assets are remeasured based on historical exchange rates. Gains and losses due to foreign currency are the result of remeasurements of transactions denominated in foreign currencies and are included in other non-operating (income) expense, net in the condensed consolidated statements of operations.
Where the functional currency of our foreign subsidiaries is the local currency, the assets and liabilities of those foreign subsidiaries are translated from their respective functional currencies into U.S. dollars at the rates in effect at the balance sheet date and revenue and expense amounts are translated at a rate approximating the average exchange rate for the period. Foreign currency translation gains and losses are recorded to accumulated other comprehensive income (loss).
We have foreign currency exchange risks related to our revenue and operating expenses denominated in currencies other than the U.S. dollar, principally the Euro, the British Pound Sterling, the Australian dollar, and the Canadian dollar. The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy. We have experienced and will continue to experience fluctuations in foreign exchange gains (losses) related to changes in foreign currency exchange rates. In the event our foreign currency denominated assets, liabilities, sales or expenses increase, our operating results may be more greatly affected by fluctuations in the exchange rates of the currencies in which we do business.
From time to time, we may enter into foreign currency derivative contracts to reduce the risk that our cash flows and earnings will be adversely affected by foreign currency exchange rate fluctuations. During the three months ended March 31, 2023 and 2022, we did not have any material amount of derivative financial instruments. A hypothetical 10% change in foreign currency exchange rates for the three months ended March 31, 2023 applicable to our business would not have had a material impact on our condensed consolidated financial statements.
Interest Rate Risk
As of March 31, 2023 and December 31, 2022, we had cash and cash equivalents of $199.1 million and $202.8 million, respectively, which consisted primarily of bank deposits. Interest-earning instruments carry a degree of interest rate risk. However, our historical interest income has not fluctuated significantly. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. For the three months ended March 31, 2023, a hypothetical 10% change in interest rates would not have had a material impact on our condensed consolidated financial statements.
As of March 31, 2023 and December 31, 2022, we had borrowings under our credit facilities comprising of $185.1 million and $185.7 million aggregate principal value, respectively. Loans under the credit facilities accrue interest based upon variable rates of interest, which exposes us to interest rate risk. Our future interest obligations may increase and adversely impact our results of operations. As of March 31, 2023, a hypothetical 10% increase in the reference interest rates would result in an increase in future interest payments on our debt of $2.3 million.
Inflation Risk
While the historical impact of inflation is difficult to accurately measure due to the imprecise nature of the estimates required, we do not believe the effects of inflation on our results of operations and financial condition have been material. However, there can be no assurance that our results of operations and financial condition will not be materially impacted by inflation in the future, including by heightened levels of inflation currently experienced globally. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs. Our inability or failure to do so could harm our business, results of operations or financial condition.
35
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of such date, our disclosure controls and procedures were effective at a reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting (as defined in Rules 13a-15(d) and 15d-15(d) under 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. In addition, our ability to maintain an effective internal control environment has not been impacted by our shift to a hybrid work model brought about by the COVID-19 pandemic. We continue to monitor the design and operating effectiveness of our controls and, despite our employees working remotely, have not experienced any changes that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Disclosure Controls and Procedures
Our management, including our principal executive officer and principal financial officer, 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 designed 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 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. Due to inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
36
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we are subject to legal proceedings, claims and litigation arising in the ordinary course of business, which may include, but are not limited to, patent and privacy matters, labor and employment claims, class action lawsuits, as well as inquiries, investigations, audits and other regulatory proceedings. Periodically, we evaluate developments in our legal matters and record a liability when we believe that it is both probable that a loss has been incurred and the amount can be reasonably estimated. Significant judgment is required to determine both likelihood of there being, and the estimated amount of, a loss related to such matters, and our judgment may be incorrect.
We are party to lawsuits filed in connection with the Merger, and more may be filed. As of the date of this Quarterly Report on Form 10-Q, 5 complaints have been filed by purported Momentive stockholders, each of which seeks to enjoin the Merger and other relief. The complaints assert claims against certain defendants under Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder for allegedly false and misleading statements in the proxy statement and against certain defendants under Section 20(a) of the Exchange Act for alleged “control person” liability with respect to such allegedly false and misleading statements. We believe the allegations in the complaints are without merit. See “Legal Matters” under “Commitments and Contingencies” in Note 11 of the Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q. We will defend against the lawsuits filed, but might not be successful in doing so. An adverse outcome in such matters, as well as the costs and efforts of a defense even if successful, could have a material adverse effect on the business, results of operation or financial position of Momentive or the combined company, including through the possible diversion of our resources or distraction of key personnel.
Furthermore, one of the conditions to the completion of the Merger is that no injunction by any governmental body of competent jurisdiction will be in effect that prevents the consummation of the Merger. As such, if any of the plaintiffs are successful in obtaining an injunction preventing the consummation of the Merger, that injunction may prevent the Merger from becoming effective or from becoming effective within the expected timeframe.
There are currently no legal matters or claims that have arisen from the normal course of business that we believe would have a material impact on our financial position, results of operations or cash flows.
Future litigation may be necessary, among other things, to defend ourselves or our users by determining the scope, enforceability and validity of third-party proprietary rights or to establish our proprietary rights. The results of any litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
ITEM 1A. RISK FACTORS
Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this Quarterly Report on Form 10-Q, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our unaudited condensed consolidated financial statements and related notes, before making a decision to invest in our common stock. Our business, results of operations, financial condition or prospects could also be harmed by risks and uncertainties that are not presently known to us or that we currently believe are not material. If any of the risks actually occur, our business, results of operations and financial condition could be adversely affected. In that event, the market price of our common stock could decline, and you could lose all or part of your investment. In addition, the ongoing impacts of COVID-19 and any worsening of the economic environment may exacerbate the risks described below, any of which could have a material impact on us. This situation is changing rapidly, and additional impacts may arise that we are not currently aware of.
Summary Risk Factors
The following summarizes the most material risks that make an investment in our securities risky or speculative. If any of the following risks occur or persist, our business, financial condition, results of operations and prospects could be materially harmed and the market price of our common stock could significantly decline:
Pending Merger with an investor consortium led by STG
37
Business and Operations
Information Technology and Cybersecurity
38
Financial or Operating Results
Regulatory and Tax Compliance
Risks Related to Our Pending Merger with an investor consortium led by STG
The announcement and pendency of the pending Merger may have an adverse effect on our business, results of operations, and financial condition, whether or not the Merger is completed and our failure to complete the Merger could have an adverse effect on our business, results of operation, financial condition, and stock price.
On March 14, 2023, we announced that we had entered into the Merger Agreement, by and among the Company, STG and Merger Sub. Pursuant to the Merger Agreement, and upon the terms and subject to the conditions therein, Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving the Merger as a
39
wholly owned subsidiary of STG. Uncertainty about the effect of the Merger on our customers, employees, partners, and other parties may adversely affect our business, results of operations, and financial condition. In response to the announcement of the Merger, our existing or prospective clients and business partners may:
Any such delays or changes to terms could materially harm our business. Losses of clients, business partners, employees or other important strategic relationships could have a material adverse effect on our business, results of operations, and financial condition. Such adverse effects could also be exacerbated by a delay in the completion of the Merger for any reason, including delays associated with obtaining requisite regulatory approvals or the approval of our stockholders.
If the Merger does not close, we may suffer other consequences that could adversely affect our business, results of operations, financial condition, and stock price, and our stockholders would be exposed to additional risks, including:
Even if successfully completed, there are certain risks to our stockholders from the Merger, including:
As a result of the Merger, our current and prospective employees could experience uncertainty about their future with us or the combined company. As a result, key employees may depart because of issues relating to such uncertainty or a desire not to remain with STG following the completion of the Merger.
As a result of the Merger, our current and prospective employees could experience uncertainty about their future with us or the combined company, or decide that they do not want to continue their employment with the combined company. As a result, key employees may depart because of issues relating to such uncertainty or a desire not to remain with STG following the completion of the Merger. Losses of officers, key employees or other employees could materially harm our business, results of operations, and financial condition. Such adverse effects could also be exacerbated by a delay in the completion of the Merger for any reason, including delays associated with obtaining
40
requisite regulatory approvals or the approval of our stockholders. We may also experience challenges in hiring new employees during the pendency of the Merger, or if the Merger Agreement is terminated, which could harm our ability to grow our business, execute on our business plans or enhance our operations.
The consummation of the Merger is contingent upon the satisfaction of a number of conditions, including stockholder and regulatory approvals, that may be outside of our or STG’s control and that we and STG may be unable to satisfy or obtain or which may delay the consummation of the Merger or result in the imposition of conditions that could reduce the anticipated benefits from the Merger or cause the parties to abandon the Merger.
Consummation of the Merger is contingent upon the satisfaction of a number of conditions, some of which are beyond our and STG's control, including, among others:
Each party's obligation to complete the Merger is also subject to certain additional customary conditions, including:
These conditions to the closing of the Merger may not be fulfilled in a timely manner or at all, and, accordingly, the Merger may not be completed. In addition, each of we and STG may terminate the Merger Agreement under certain specified circumstances, including but not limited to, (i) if the Merger is not consummated by 11:59 p.m. (California time) on September 13, 2023, (ii) a governmental authority of competent jurisdiction has issued a final non-appealable governmental order preventing, materially restraining or materially impairing the consummation of the Merger, or (iii) if the required approval of our stockholders is not obtained. STG may also terminate the Merger Agreement in certain additional limited circumstances, including if our board of directors changes its recommendation to our stockholders to vote in favor of the adoption of the Merger Agreement. If the Merger Agreement is terminated, we may be required to pay STG a termination fee of up to $52.0 million under certain circumstances.
We and STG may also be subject to lawsuits challenging the Merger, and adverse rulings in these lawsuits may delay or prevent the Merger from being completed or require us or STG to incur significant costs to defend or settle these lawsuits. Any delay in completing the Merger could cause us not to realize, or to be delayed in realizing, some or all of the benefits that we expect to achieve if the Merger is successfully completed within its expected time frame.
While the Merger is pending, we are subject to business uncertainties and contractual restrictions that could harm our business relationships, results of operations, financial condition, and business.
Pursuant to the terms of the Merger Agreement, we are subject to certain restrictions on the conduct of our business. These restrictions subject us to a variety of specified limitations, including limiting our ability, in certain cases, to enter into material contracts, acquire or dispose of assets, incur indebtedness, or incur capital expenditures, until the Merger becomes effective or the Merger Agreement is terminated. These restrictions may inhibit our ability to take actions that we may consider advantageous, and may limit our ability to respond to future business opportunities and industry developments that may arise. The pendency of the Merger has diverted, and may continue to divert, management’s attention and our resources from our ongoing business and operations. If any of these effects were to occur, it could materially and adversely impact our business, cash flow, financial condition, or results of operations, as well as the market price of our common stock and our perceived value, regardless of whether the Merger is completed. In addition, whether or not the Merger is completed, while the Merger Agreement is in effect we will continue to incur costs, fees, expenses and charges related to the Merger, which may adversely affect our financial condition.
The Merger Agreement contains provisions that could discourage or deter a potential competing acquirer that might be willing to pay more to effect a business combination with us.
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We are not permitted to solicit proposals for certain alternative business combination transactions and, subject to certain exceptions, we are not permitted to engage in discussions or negotiations regarding an alternative business combination transaction. We are required to hold a meeting of our stockholders to vote on the adoption of the Merger Agreement. In addition, if we terminate the Merger Agreement, we may be required to pay a termination fee. Such restrictions could discourage or deter a third party that may be willing to pay more than STG for our outstanding common stock from considering or proposing such an acquisition of our company.
Litigation has arisen, and more could arise, in connection with the Merger, which could be costly, prevent consummation of the Merger, divert management’s attention and otherwise materially harm our business.
As of the date of this Quarterly Report on Form 10-Q, 5 complaints have been filed by purported Momentive stockholders, each of which seeks to enjoin the Merger and other relief. The complaints assert claims against certain defendants under Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder for allegedly false and misleading statements in the proxy statement and against certain defendants under Section 20(a) of the Exchange Act for alleged “control person” liability with respect to such allegedly false and misleading statements. We believe the allegations in the complaints are without merit. See “Legal Matters” under “Commitments and Contingencies” in Note 11 of the Notes to the Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.
Regardless of the outcome of any litigation related to the Merger, such litigation may be time-consuming and expensive and may distract our management from running the day-to-day operations of our business. The litigation costs and diversion of management’s attention and resources to address the claims and counterclaims in any litigation related to the Merger may materially adversely affect our business, results of operations, prospects, and financial condition. If the Merger is not consummated for any reason, litigation could be filed in connection with the failure to consummate the Merger. Any litigation related to the Merger may result in negative publicity or an unfavorable impression of us, which could adversely affect the price of our common stock, impair our ability to recruit or retain employees, damage our relationships with our customers, suppliers, and other business partners, or otherwise materially harm our operations and financial performance.
Risks Related to Our Business and Operations
Our business depends on our ability to retain, upsell and cross-sell customers, and any decline in renewals, upsells or cross-sells could adversely affect our business, results of operations and financial condition.
Our business depends upon our ability to maintain and expand our relationships with our users. Customers can choose between monthly or annual subscriptions, and customers are not obligated to and may not renew their paid subscriptions after their existing plans expire. As a result, we cannot assure that customers will renew their paid plans utilizing the same tier of our products and solutions or upgrade to our premium products or solutions. Renewals of paid plans may decline or fluctuate because of several factors, such as dissatisfaction with our products, solutions or support, a user no longer having a need for our products or reducing IT spending, such as in response to current or future economic and global market uncertainties or downturns, or the perception that competitive products are better or less expensive options. As our customer base continues to grow, even if our customer retention rates remain the same on a percentage basis, the absolute number of customers we lose each month will increase. We must continually add new customers to replace customers whose accounts are closed and to grow our business beyond our current user base, which may involve significantly higher marketing expenses than we currently anticipate.
We invest in new features and improvements to our product functionality as well as targeted marketing campaigns to drive conversion of unpaid users to paying users. Individual users often bring us into their organization for business purposes, and from there we seek to establish an organizational relationship through the deployment of our enterprise solutions. As we scale within organizations, we seek to further grow the business relationship by cross-selling purpose-built solutions. If our customers do not renew or cancel their subscriptions, or if we fail to upsell our customers to higher tier individual subscriptions or to enterprise solutions, or if we fail to cross-sell additional products and services to our customers, our business, results of operations and financial condition may be harmed.
Additionally, many of our users initially register to use our free basic survey product. We strive to demonstrate the value of our products to our registered users, thereby encouraging them to convert to paying users through
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end-of-survey marketing. As of December 31, 2022, we had over 14 million active users, of which approximately 887,400 were paying users. The actual number of unique users may be lower than we report as one person could count as multiple, active users or paying users. For example, if an individual paying user also had a designated seat in a SurveyMonkey Enterprise deployment, we would count that person as two paying users. As a result, we may have fewer unique users that we may be able to convert, upsell or cross-sell. Our inability to determine the number of our unique users is a limitation in the data that we measure and may adversely affect our understanding of certain aspects of our business and make it more challenging to manage our business. Most of our active users never convert to a paying user, and if we are unable to convert free users to paying users, our business, results of operations and financial condition could suffer.
Our revenue growth rate has fluctuated in recent periods and may slow in the future.
We have a history of delivering revenue growth and positive cash flow from operations. However, our rates of revenue growth have fluctuated, and may slow in the future. Many factors may contribute to declines in our growth rates, including higher market penetration, increased competition, slowing demand for our survey platform, a failure by us to continue capitalizing on growth opportunities, the maturation of our business, and impacts resulting from general macroeconomic conditions, including volatility in the global financial markets, or the COVID-19 pandemic, among others. It can be difficult to predict customer demand, especially as their priorities, resources and economic outlook change, along with other shifting market conditions. These shifts have occurred and may in the future occur more quickly than we anticipate. If we are unable to respond quickly to rapidly changing market conditions and shifts in customer behavior, our business and results of operation could be harmed, and the trading price of our common stock could be adversely affected. You should not rely on the revenue growth of any prior quarterly or annual period as an indication of our future performance. If our growth rates decline, investors’ perceptions of our business and the trading price of our common stock could be adversely affected.
Our business depends on a strong and trusted brand, and any failure to maintain, protect and enhance our brand would hurt our ability to retain or expand our customer and user base, our market share and our ability to attract and retain employees.
We have developed a strong and trusted brand of “SurveyMonkey” that we believe has contributed significantly to the success of our business. In June 2021, we rebranded and changed our name from SVMK Inc. to Momentive Global Inc. We may not be able to maintain or benefit from name recognition or status under the “Momentive” brand as we did using the “SurveyMonkey” brand, as investors may not understand or appreciate our rebranding efforts. We believe that enhancing and maintaining awareness of all of our brands, including “Momentive” and “SurveyMonkey”, in a cost-effective manner is critical to our goal of achieving widespread acceptance of our existing and future products, attracting new customers and attracting and retaining top talent. Furthermore, we receive a high degree of media coverage around the world, and we believe that the importance of brand recognition will increase as competition in our industry increases. Successful promotion of our brands will depend largely on the effectiveness of our marketing and media partnership efforts and the effectiveness and affordability of our products for our target customer demographic. Such brand promotion activities may not yield increased revenue and, even if they do, any revenue increases may not offset the expenses we incur to promote our brand. Unfavorable publicity regarding, for example, our privacy or data protection practices, terms of service, service quality, the launch of “Momentive” as our parent brand, litigation, regulatory activity or the perception of inaccurate poll data from properly or improperly drafted surveys by third parties using our survey platform, the actions of our partners and customers or the actions of other companies that provide similar products and solutions to ours, could adversely affect our reputation, brand, the size and engagement of our user base and our ability to attract and retain users. If we fail to promote and maintain our brands successfully, or if we incur substantial expenses in an unsuccessful attempt to promote and maintain our brands, we may lose our existing customers to our competitors or be unable to attract new customers or employees, which could harm our business, results of operations and financial condition.
As a substantial portion of our revenue-generating efforts are increasingly targeted at winning sales-assisted customers, our sales cycle has and may become lengthier and more expensive, we may encounter greater pricing pressure and our customers may be displeased with our customer support, all of which could harm our business and results of operations.
As a substantial portion of our revenue-generating efforts are increasingly targeted at prospective sales-assisted customers, we face greater costs, longer sales cycles and less predictability in the completion of some of our sales.
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In this market, the customer’s decision to use our products may be an enterprise-wide decision, in which case these types of sales require us to provide greater levels of customer education to familiarize these customers with the uses, features and benefits of our products and purpose-built solutions, as well as education regarding our security and governance practices and compliance with privacy and data protection laws and regulations, especially for those customers in more heavily-regulated industries. In addition, larger enterprises may demand more support services and features, which puts additional pressure on our support and success organizations to satisfy the increased support required for our customers. Further, as we continue to grow our operations and support our global user base, we need to be able to continue to provide efficient customer support that meets our customers’ needs globally at scale. As a result of these factors, these sales opportunities may require us to devote greater sales support and professional survey platform resources to paying users in order to familiarize these new customers with our value proposition, or require us to hire additional support personnel, which could increase our costs, further lengthen our sales cycle and divert our own sales and professional services resources to a smaller number of larger customers, while potentially requiring us to delay revenue recognition on some of these transactions. These significant expenditures in time and money may not result in a sale. If a customer is not satisfied with the quality or interoperability of our products and solutions with their own IT environment, we could incur additional costs to address the situation, which could adversely affect our margins. Moreover, any customer dissatisfaction with our products and solutions, or a failure to maintain high-quality customer support, or a market perception that we do not maintain high-quality customer support, could damage our ability to encourage broader adoption of our products by that customer and generate positive recommendations to other potential users. In addition, any negative publicity resulting from such situations, regardless of its accuracy, may further damage our business by affecting our ability to compete for new business with current and prospective customers.
We may not succeed in building an efficient and effective salesforce, and we may fail to manage our sales channels effectively.
While a growing portion of our revenue in recent periods has been derived from our sales efforts, we are investing in strategically developing an efficient, effective and robust salesforce, particularly internationally where our brand is less well known, but we may not be as successful as we anticipate. Our limited experience selling directly to small, medium and large organizations through our salesforce may impede our future growth. Further, our ability to manage a larger direct salesforce is uncertain and we have faced challenges, including reducing the size and adjusting the composition of our sales team in 2022. Identifying and recruiting additional qualified sales personnel and training them requires significant time, expense and attention. In addition, many organizations undertake a significant evaluation and negotiation process, which can lengthen our sales cycle, and some organizations demand more specialized features on our survey platform. We may spend substantial time, effort and money on sales efforts without any assurance that our efforts will produce any sales. As a result, our sales efforts may lead to greater unpredictability in our business, results of operations and financial condition.
Additionally, we have global partners who broaden the scope of our market research solutions by providing access to additional panelists around the world. Our partners are generally in nonexclusive agreements with us, are not subject to minimum obligations and may be terminated at any time without cause. If we fail to manage our sales efforts successfully or they otherwise fail to perform as we anticipate, it could reduce our sales and increase our expenses, as well as weaken our competitive position.
Our industry is intensely competitive, and competitors may succeed in reducing our sales.
Our products face intense competition from many different companies, including but not limited to:
These competitors vary in size, and many have significantly greater financial, marketing and product development resources than we have, larger sales and marketing budgets and resources, broader distribution or established relationships or lower labor and research and development costs. We also compete with offline methods of information collection, such as pen-and-paper surveys, telephone surveys, forms and applications and less-automated methods such as email. Our competitors may devote greater resources and time on developing and testing products and solutions, undertake more extensive marketing campaigns and partnerships, adopt more aggressive pricing policies or otherwise develop more commercially successful products and solutions than we do.
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Our competitors may have preexisting relationships which required significant upfront investment by the customer, and these customers may prefer to continue existing and established relationships rather than adopt our survey platform. We cannot assure that we will be able to increase or maintain the large user base that we currently enjoy.
There are relatively low barriers to entry into our business. As a result, we are likely to face additional and intense competition from new entrants into the market in the future. There can be no assurance that existing or future competitors will not develop or offer products that provide significant performance, price, speed, creative or other advantages over those offered by us, and this could have an adverse effect on our business. We also operate in a highly fragmented market, and consolidation of our competitors or customers may also adversely affect our business. In addition, historically, our business has enjoyed relatively high margins and growth, which may attract new competition into our markets, including competition from companies employing alternate business models. Loss of existing or future market share to current or new competitors and increased price competition could substantially harm our business, results of operations and financial condition.
Our corporate culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose the innovation, creativity and teamwork fostered by our culture and our business may be harmed.
We have worked to develop a strong culture around our team, which is built on four key pillars of celebrating curiosity, maintaining a diverse, collaborative and inclusive work environment, seeking to positively influence our industry and community, and delivering value to our customers. We believe that our culture has been and will continue to be a critical contributor to our success. We expect to continue to hire strategically as needed in alignment with our business strategy, and we believe our corporate culture has been crucial in our success and our ability to attract highly skilled personnel. If we do not continue to develop our corporate culture or maintain and preserve our core values as we grow and evolve both in the United States and internationally, we may be unable to foster the innovation, curiosity, creativity, focus on execution, teamwork and the facilitation of critical knowledge transfer and knowledge sharing we believe we need to support our growth. Preservation of our corporate culture is also made more difficult due to restructuring initiatives we have executed that have resulted in changes throughout our business, including the implementation of the workforce reduction from restructuring plans, and due to our shift to a hybrid work model, where most of our employees have the flexibility to determine the amount of time they work from home or in our offices, each of which may present operational challenges and risks, including negative employee morale and productivity, failure to attract and retain qualified employees, and increased compliance and tax obligations in a number of jurisdictions. If we fail to manage our anticipated growth or restructuring initiatives in a manner that preserves the key aspects of our corporate culture, our employee retention may suffer, which could harm our business.
We depend on our talent to develop, manage and operate our business, and if we are unable to hire, integrate, develop, motivate and retain our personnel, we may not be able to manage our business effectively.
Our future success depends, in part, on our ability to identify, hire, integrate, develop, motivate and retain top talent, including senior management, engineers, designers, product managers, sales representatives and customer support representatives. Our ability to execute efficiently is dependent upon contributions from all of our employees, in particular our senior management team. As our business continues to develop and evolve, we cannot guarantee we will continue to attract new employees or retain the personnel we need to maintain our competitive position, and this risk may be exacerbated by factors related to restructuring initiatives, the volatility of our stock price and increased recruiting efforts by other companies. Competition for these resources, particularly for engineers, is intense. We may need to invest significant amounts of cash and equity for new and existing employees and have invested heavily in our facilities to accommodate our employees, and we may never realize returns on these investments. In addition, our restructuring initiatives, including the implementation of the workforce reduction from restructuring plans, and any future restructuring initiatives could have an adverse effect on our business, including negative employee morale and the failure to meet operational targets due to the loss of employees. If we are not able to effectively increase and retain our talent, our ability to achieve our strategic objectives will be adversely impacted, and our business will be harmed. Employees may be more likely to resign if the shares they own or the shares underlying their equity incentive awards have significantly appreciated or significantly reduced in value, or the trading price of our common stock continues to be volatile, including the recent volatility in our trading price.
In addition, our future also depends on the continued contributions of our senior management team and other key personnel, each of whom would be difficult to replace. The loss of one or more of our key employees, and any failure
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to have in place and execute an effective succession plan for key executives, or to find a suitable replacement for key executives on a timely basis, on competitive terms, or at all, could seriously harm our business. Although we have entered into employment agreements or offer letters with our key employees, these agreements have no specific duration and constitute at-will employment, and we do not maintain key person life insurance for any employee. In addition, from time to time, there may be changes in our senior management team, including through restructuring initiatives, that may be disruptive to our business. If our senior management team, including any new hires that we may make, fails to work together effectively and to execute our plans and strategies on a timely basis, our business, results of operations and financial condition could be harmed.
Risks Related to Information Technology and Cybersecurity
Any significant disruption in service or security on our websites or in our systems could result in a loss of users, damage to our reputation and harm to our business.
Our brand, reputation and ability to attract and retain users and customers depend in part upon the reliable performance of our network infrastructure, websites, other systems and those of third-party service providers. We have experienced, and may in the future experience, interruptions in these systems, including server failures that temporarily impair or disable the performance of our websites due to a variety of factors, such as infrastructure changes, human or software errors, capacity constraints and denial of service or fraud or security attacks. In some instances, we may not be able to rectify or even identify the cause or causes of these site performance problems within an acceptable period of time. As our solutions become more complex and our user traffic increases, we expect that it will become increasingly challenging to maintain and improve the performance of our products and solutions, especially during peak usage times. If our products are unavailable to users or fail to function as quickly as users expect, it could result in reduced customer satisfaction and reduced attractiveness of our products to customers. This in turn could lead to decreased sales to new customers, harm our ability to retain existing customers and the issuance of service credits or refunds, any of which could hurt our business, results of operations and financial condition.
We expect to continue to make significant investments to build new products and enhance the features and functionality of our existing products and solutions. To the extent that we do not effectively address capacity constraints, upgrade our systems as needed and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology, our business and operating results may be harmed. Further, even if we are able to upgrade our systems, any such expansion will be expensive and complex, requiring management time and attention. Additionally, problems with the reliability or security of our systems, including unauthorized access to, or improper use of, the information of our users, could result in the loss of intellectual property, the introduction of malicious code to our applications, or harm to our reputation and negatively affect our business. Affected users could also initiate legal or regulatory action against us in connection with such incidents, which could cause us to incur significant expense and liability or result in orders or consent decrees forcing us to modify our business practices.
We may not timely and effectively scale and adapt our existing technology and network infrastructure to rapid technological changes, enhance our existing products and solutions or develop new products.
The industry in which we compete is characterized by rapid technological change and frequent introductions of new products and solutions, as well as changing customer needs, requirements and preferences. Our ability to grow our user base and increase revenue from existing customers will depend heavily on our ability to enhance the features and functionality of our products and solutions, introduce new products and solutions, anticipate and respond effectively to these changes on a timely basis and interoperate across an increasing range of devices, operating systems and third-party applications. The success of our products depends on our continued investment in our research and development organization to increase the accessibility, ease-of-use and interoperability of our existing solutions and the development of features and functionality that users may require.
The introduction of new products and solutions by competitors or the development of entirely new technologies to replace existing offerings could make our survey platform and other solutions obsolete or adversely affect our business, results of operations and financial condition. We may experience difficulties with software development, design or marketing that could delay or prevent our development, introduction or implementation of our product
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experiences, features or capabilities. We have in the past experienced delays in our internally planned release dates of new features and capabilities, and we cannot assure you that new product experiences, features or capabilities will be released according to schedule. If users do not widely adopt our survey platform or purchase our products and services, we may not be able to realize a return on our investment. If we do not accurately anticipate user demand or we are unable to develop, license or acquire new features and capabilities on a timely and cost-effective basis, or if such enhancements do not achieve market acceptance, it could result in adverse publicity, loss of revenue or market acceptance or claims by users brought against us, each of which could have a material and adverse effect on our reputation, business, results of operations and financial condition.
If our security measures are compromised, or if our websites are subject to attacks that degrade or deny the ability of users and respondents to access our products, or if our customer or respondent data are compromised, users may curtail or stop use of our survey platform.
Our products collect, process, store, share, disclose and use customers’ and respondents’ information and communications, some of which may be private. We also work with third-party vendors to process credit card payments by our customers and are thus subject to payment card association operating rules, and rely on the availability and certain security measures of our third-party payment processors. We also process and retain sensitive information and other data relating to our business, such as employees’ personal information and our confidential information. We anticipate continuing to expend significant amounts in an effort to reduce the risk of security breaches and other security incidents. We are vulnerable to software bugs, computer viruses, break-ins, ransomware or phishing attacks, employee errors or malfeasance, attempts to overload our servers with denial-of-service or other attacks and similar disruptions from unauthorized use of our computer systems, any of which could lead to interruptions, delays or website shutdowns, causing loss of critical data or the unauthorized disclosure or use of personally identifiable or confidential information. It is virtually impossible for us to entirely mitigate the risk of breaches of our survey platform or other security incidents affecting our products, internal systems, networks or data. In addition, the functionality of our products may be disrupted by third parties, including disgruntled employees, former employees or contractors. The security measures we use internally, and have integrated into our products, which are designed to detect unauthorized activity and prevent or minimize security breaches, may not function as expected or may not be sufficient to protect against certain attacks. Additionally, we may face delays in identifying or responding to security breaches or other security incidents. With the increase in personnel working remotely during the COVID-19 pandemic, we and our service providers are at increased risk for security breaches. We are taking steps to monitor and enhance the security of our platform, systems, IT infrastructure, networks, and data; however, the unprecedented scale of remote work may require additional personnel and resources, which nevertheless cannot be guaranteed to fully safeguard our platform or any systems, IT infrastructure, networks, or data upon which we rely. If we or any of our vendors experience or are believed to have experienced any compromises to security that result in site performance or availability problems, the complete shutdown of our websites or the actual or perceived loss or unauthorized disclosure or use of confidential information, such as credit card information, personal health information, trade secrets or other proprietary information, our users may be harmed or lose trust and confidence in us and choose to decrease the use of our products, which would cause us to suffer reputational and financial harm.
An increasing number of organizations, including large online and off-line merchants and businesses, other large Internet companies, financial institutions, and government institutions, have disclosed breaches of their information security systems and other information security incidents, some of which have involved sophisticated and highly targeted attacks. In addition, these incidents can originate on our vendors’ websites, which can then be leveraged to access our website, further preventing our ability to successfully identify and mitigate the attack. For example, in December 2021, the Apache Software Foundation publicly disclosed a remote code execution vulnerability in its Log4j2 product, an open-source component widely used in Java-based software applications to log and track error messages, that resulted in potential opportunities for unauthorized disclosure or use of personally identifiable or confidential information, installation of malware, or unauthorized control of the target's system. To date, we have not detected any successful exploit attempts on our systems, and this incident has not resulted in a material loss of revenue or the incurrence of material expenses. We are actively monitoring the situation and have established an inventory of all applications and systems running Log4j, and patched, upgraded, or configured them to prevent and detect any malicious activity related to the vulnerability. We are also working closely with third parties and vendors to ensure that they are addressing this vulnerability. We cannot assure you that all potential causes of the incident have been identified and remediated and we expect the risk of additional vulnerabilities and potential attacks to
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continue given the complexity and widespread nature of the incident. While we maintain cyber insurance that may help provide coverage for these types of incidents, we cannot assure you that our insurance will be adequate to cover costs and liabilities related to this incident.
In addition, we may be subject to regulatory investigations or litigation in connection with a security breach or related issues, and we could also be liable to third parties for these types of breaches. Such litigation, regulatory investigations and our technical activities intended to prevent future security breaches are likely to require additional management resources and expenditures. If our security measures fail to protect this information adequately or we fail to comply with other rules and regulations, such as the Health Insurance Portability and Accountability Act, the GDPR, California Consumer Privacy Act 2018 (“CCPA”), the EU-U.S. and Swiss-U.S. Privacy Shield Framework and Principles or applicable credit card association operating rules, we could be liable to both our users for their losses, as well as the vendors under our agreements with them, we could be subject to fines and higher transaction fees, we could face regulatory action, and our users and vendors could end their relationships with us, any of which could harm our business, results of operations and financial condition.
Our internal systems are exposed to the same cybersecurity risks and consequences of a breach as our customers and other enterprises. However, since our business is focused on providing reliably secure products to our customers, we believe that an actual or perceived breach of, or security incident affecting, our internal networks, systems or data could be especially detrimental to our reputation, customer confidence in our products and solutions and our business.
While our insurance policies include liability coverage for certain of these matters, if we experienced a widespread security breach or other incident that impacted a significant number of our customers to whom we owe indemnity obligations, we could be subject to indemnity claims or other damages that exceed our insurance coverage. We also cannot be certain that our insurance coverage will be adequate for data handling or data security liabilities actually incurred, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, including our financial condition, operating results, and reputation.
Our products and solutions and internal systems rely on software that is highly technical, and if it contains undetected errors, our business could be adversely affected.
Our products and solutions and internal systems rely on software that is highly technical and complex. In addition, our products and solutions and internal systems depend on the ability of our software to store, retrieve, process and manage immense amounts of data. Our software has contained, and may now or in the future contain, undetected errors, bugs or vulnerabilities. Some errors in our software may only be discovered after the code has been released for external or internal use. Errors or other design defects within our software may result in a negative experience for our users, delay product introductions or enhancements or result in measurement or other errors. We also rely on third-party software that may contain errors or bugs. Any actual or perceived errors, failures, vulnerabilities, bugs or defects discovered in our software or third-party software we use could result in damage to our reputation, cause a reduction in revenue or delay in market acceptance of our products, require us to issue refunds to our customers or expose us to claims for damages, cause us to lose existing users or make it more difficult to attract new users, divert our development resources or require us to make extensive changes to our survey platform, any of which could adversely affect our business, results of operations and financial condition. The costs incurred in correcting such defects or errors may be substantial and could harm our results of operations and financial condition. Moreover, the harm to our reputation and legal liability related to such errors or defects may be substantial and could harm our business.
We depend on third-party data centers and any disruption in the operation of these facilities or failure to renew the services could impair the delivery of our products and solutions and adversely affect our business.
We currently deploy our products and solutions and serve all of our users using third-party data center services such as Amazon Web Services. We have no physical access or control over the services provided by Amazon Web Services. Consequently, we may be subject to misconduct or unauthorized data access by such third-party service providers
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or service disruptions, including those that are directly or indirectly attributable to the COVID-19 pandemic, as well as failures to provide adequate services for reasons that are outside our direct control.
Data center leases and agreements with the providers of data center services expire at various times. The owners of these data centers and providers of these data center services may have no obligation to renew their agreements with us on commercially reasonable terms or at all. Problems faced by data centers, with our third-party data center service providers, with the telecommunications network providers with whom we or they contract, or with the systems by which our telecommunications providers allocate capacity among their users, including us, could adversely affect the experience of our users. Our third-party data center operators could decide to close their facilities or cease providing services without adequate notice. In addition, any financial difficulties, such as bankruptcy, faced by our third-party data centers operators or any of the service providers with whom we or they contract may have negative effects on our business, the nature and extent of which are difficult to predict. In addition, these facilities may be located in areas prone to natural disasters, the effects of climate change and pandemics, and may experience events such as earthquakes, floods, fires, power loss, telecommunication failures and similar events. They may also be subject to break-ins, sabotage, intentional acts of vandalism and similar misconduct. Any damage to, or failure of, our systems generally, or those of the third-party providers, could result in interruptions in use of our products that may reduce our revenue, cause us to issue credits or pay penalties, cause customers to terminate their services with us and adversely affect our ability to attract new customers and retain existing customers.
If the data centers and service providers that we use are unable to keep up with our growing needs for capacity, or if we are unable to renew our agreements with data centers and service providers on commercially reasonable terms, we may be required to transfer servers or content to new data centers or engage new service providers, and we may incur significant costs and possible service interruption in connection with doing so. In addition, if we do not accurately plan for our data center capacity requirements and we experience significant strains on our data center capacity, we may experience delays and additional expenses in arranging new data centers, and our users could experience service outages that may subject us to financial liabilities, result in customer losses and harm our business. Any changes in third-party service levels at data centers or any real or perceived errors, defects, disruptions or other performance problems with our products and solutions could harm our reputation and may result in damage to, or loss or compromise of, our users’ content. Interruptions in our products and solutions might, among other things, reduce our revenue, cause us to issue refunds to users, subject us to potential liability, harm our reputation or our ability to retain customers.
Risks Related to Financial or Operating Results
Our business, results of operations and financial condition may fluctuate on a quarterly and annual basis, which may result in a decline in our stock price if such fluctuations result in a failure to meet the expectations of securities analysts or investors.
Our operating results have in the past and could in the future vary significantly from quarter-to-quarter and year-to-year and may fail to match our past performance, our projections or the expectations of securities analysts because of a variety of factors, many of which are outside of our control. Any of these events could cause the market price of our common stock to fluctuate. Factors that may contribute to the variability of our operating results include:
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Our historical operating results may not be indicative of our future operating results. In addition, global economic concerns, including those caused by the COVID-19 pandemic, inflationary pressures, rising interest rates, volatility in the global financial markets, general economic uncertainty and the Russian invasion of Ukraine, continue to create uncertainty and unpredictability and add risk to our future outlook. If banks and financial institutions enter receivership or become insolvent in response to financial conditions affecting the banking system and financial markets, our ability to access our existing cash, cash equivalents and investments may be threatened, and it could have an adverse impact on our customers’ ability to pay their current and/or future debts to the Company, which could have a material adverse effect on our business and financial condition.
An economic downturn in any particular region in which we do business or globally could result in reductions in sales of our products, decreased renewals of existing arrangements and other adverse effects that could harm our business, results of operations and financial condition. In addition, borrowings under our credit facilities are at variable rates of interest and expose us to interest rate risk.
We have substantial indebtedness and lease obligations, which reduce our capability to withstand adverse developments or business conditions.
We have incurred substantial indebtedness, and as of March 31, 2023, our total aggregate indebtedness was approximately $185.1 million of principal outstanding. We also have, and will continue to have, significant lease obligations. As of March 31, 2023, our total aggregate obligations under our long-term leases was $56.1 million. Our payments on our outstanding indebtedness and lease obligations are significant in relation to our revenue and cash flow, which exposes us to significant risk in the event of downturns in our businesses (whether through competitive pressures or otherwise), our industry or the economy generally, including the global economic uncertainties and downturns as a result of the COVID-19 pandemic, inflationary pressures, rising interest rates or the Russian invasion
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of Ukraine, since our cash flows would decrease but our required payments under our indebtedness and lease obligations would not. Economic downturns may impact our ability to comply with the covenants and restrictions in our credit facilities and agreements governing our other indebtedness and lease obligations and may impact our ability to pay or refinance our indebtedness or lease obligations as they come due, which would adversely affect our business, results of operations and financial condition.
Our overall leverage and the terms of our financing arrangements could also:
We may be required to delay recognition of some of our revenue, which may harm our financial results in any given period.
We may be required to delay recognition of revenue for a significant period of time after entering into an agreement due to a variety of factors, including, among other things, whether:
Because of these factors and other specific revenue recognition requirements under US GAAP, we must have very precise terms in our contracts to recognize revenue when we initially provide access to our survey platform or other products. Although we strive to enter into agreements that meet the criteria under GAAP for current revenue recognition on delivered performance obligations, our agreements are often subject to negotiation and revision based on the demands of our customers. The final terms of our agreements sometimes result in delayed revenue recognition, which may adversely affect our financial results in any given period. In addition, more customers may require extended payment terms, shorter term contracts or alternative licensing arrangements that could reduce the amount of revenue we recognize upon delivery of our other products and could adversely affect our short-term financial results.
Furthermore, the presentation of our financial results requires us to make estimates and assumptions that may affect revenue recognition. In some instances, we could reasonably use different estimates and assumptions, and changes in estimates are likely to occur from period to period. Accordingly, actual results could differ significantly from our estimates.
Our results of operations may not immediately reflect downturns or upturns in sales because we recognize revenue from our users over the term of their paid subscriptions with us.
We recognize revenue from paid subscriptions to our products and solutions over the terms of the subscription period. Paying users can choose between monthly or annual subscriptions, and customers of SurveyMonkey Enterprise make a minimum one-year subscription commitment and are increasingly purchasing multi-year subscriptions. Amounts that have been billed are initially recorded as deferred revenue until the revenue is recognized. As a result, a large portion of our revenue for each quarter reflects deferred revenue from paid subscriptions entered into during previous quarters, and downturns or upturns in subscription sales, or renewals
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and potential changes in our pricing policies may not be reflected in our results of operations until later periods. Our paid subscription model also makes it difficult for us to rapidly increase our revenue through additional sales in any period, as paid subscription revenue from new users is recognized over the applicable subscription term.
If we fail to effectively manage our growth and evolution, our business and results of operations could be harmed.
The scope and complexity of our business have also increased significantly. The evolution of our business creates significant challenges for our management, operational and financial resources. In the event of continued expansion of our operations or in the number of our third-party relationships, our information technology systems and our internal controls and procedures may not be adequate to support our operations. To effectively manage our development and evolution, we must continue to improve our operational, financial and management processes and systems and to train and manage our employee base, and expand as needed, and do so in a hybrid work environment where some of our employees are working in the office and others are working remotely. This hybrid work model may present operational challenges and risks, including negative employee morale and productivity, low employee retention, and increased compliance and tax obligations in a number of jurisdictions. As our organization continues to evolve and we are required to implement more complex organizational management structures, we may find it increasingly difficult to maintain the benefits of our corporate culture, including our ability to quickly develop and launch new and innovative products and solutions. This could negatively affect our business performance.
Changes in growth in our headcount and operations will continue to place significant demands on our management and our operational and financial infrastructure. As of March 31, 2023, 16% of our employees had been with us for less than one year and 28% for more than one year but less than two years. As we continue to grow and evolve, we must effectively integrate, develop and motivate our current employees and new employees, and we must maintain the beneficial aspects of our corporate culture. To attract top talent, we have had to offer, and believe we will need to continue to offer, highly competitive compensation packages before we can validate the productivity of those employees. In addition, fluctuations in the price of our common stock may make it more difficult or costly to use equity compensation to motivate, incentivize and retain our employees. We face significant competition for talent from other internet, software and high-growth companies, which include both publicly traded and privately-held companies. The risks of over-compensating employees and the challenges of integrating a growing employee base into our corporate culture are exacerbated by our international expansion. Additionally, during periods of growth, we expanded our operating and financing lease obligations and purchase commitments, which have increased our expenses. If we fail to effectively manage our hiring needs, including in connection with the Merger, successfully integrate our new hires and retain current employees in a hybrid work environment, our efficiency and ability to meet our forecasts and our employee morale, productivity and retention could suffer, and our business, results of operations and financial condition could be adversely affected.
Additionally, if we do not effectively manage the development and evolution of our business and operations, including in connection with the Merger and the implementation of restructuring initiatives, the quality of our products and solutions could suffer, which could negatively affect our brand, results of operations and overall business. Actions we have taken (including the implementation of restructuring plans) or that we may decide to take in the future in our attempt to achieve profitability, may not be successful in yielding our intended results and may not appropriately address either or both of the short-term and long-term strategy of our business. Implementation of a go-forward plan and any other cost-saving initiatives, including possible future restructuring efforts, may be costly and disruptive to our business, have adverse impacts on employee morale and retention, result in expected costs and charges that are greater than forecasted, and result in estimated cost savings that are lower than forecasted. Further, we have made changes in the past, and will likely make changes in the future, to our products that our customers may not like, find useful or agree with. We may also decide to discontinue certain features, products or solutions or charge for certain features, products or solutions that are currently free or increase fees for any of our features, products or solutions. If users are unhappy with these changes, they may decrease their usage of our products or stop using them generally, and in the past we have experienced a decrease in our number of paying users as a result of pricing changes. In addition, they may choose to take other types of action against us, such as organizing petitions or boycotts focused on our company, our website or our products and services, filing claims with the government or other regulatory bodies or filing lawsuits against us. Any of these actions could negatively impact our growth and brand, which would harm our business.
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We are exposed to fluctuations in currency exchange rates, which could adversely affect our operating results or financial position.
We conduct our business around the world and a significant portion of our transactions outside of the United States are denominated in foreign currencies. As we continue to invest in our international operations, we become more exposed to the effects of fluctuations in currency exchange rates. We incur expenses for employee compensation and other operating expenses at our non-U.S. locations in the local currency, and accept payment from customers in currencies other than the U.S. dollar. Since we conduct business in currencies other than U.S. dollars but report our financial results in U.S. dollars, we have faced, and may face in the future, exposure to fluctuations in currency exchange rates and remeasurement exposure, and any increase in the value of the U.S. dollar against these foreign currencies could cause our revenue to decline relative to our costs, which could lead to a decrease in our operating margins. Exchange rate fluctuations between the U.S. dollar and other currencies could have a material impact on our profitability and hinder our ability to predict our future results and earnings. For example, because we recognize revenue over time, exchange rate fluctuations at one point in time may have a negative impact in future quarters. There can be no assurance that we will be successful in managing our exposure to currency exchange rate risks, which may adversely affect our business, results of operations and financial condition. From time to time, we may enter into foreign currency derivative contracts to reduce the risk that our cash flows and earnings will be adversely affected by foreign currency exchange rate fluctuations. During the three months ended March 31, 2023 and 2022, we did not have any material amount of derivative financial instruments.
Strategic investments in international markets is important for our growth, and as we continue to invest internationally, we will face additional business, political, regulatory, operational, financial and economic risks, any of which could increase our costs and hinder such growth.
Continuing to invest in our business to attract users in countries other than the United States is a critical element of our business strategy. An important part of targeting international markets is increasing our brand awareness and developing offerings that are localized and customized for the users in those markets. We have a limited operating history as a company outside of the United States. We expect to continue to strategically invest resources to our international expansion efforts through acquisitions and partnerships, the establishment of additional offices and increasing our foreign language offerings. Our ability to grow our business and to attract talented employees and users in an increasing number of international markets will require considerable management attention and resources and is subject to the particular challenges of supporting a rapidly growing business in an environment of multiple languages, cultures, customs, legal systems, alternative dispute resolution systems, regulatory systems and commercial infrastructures. Expanding our international focus may subject us to risks that we have not faced before or increase risks that we currently face, including but not limited to risks associated with recruiting and retaining talented and capable management and employees in foreign countries; challenges caused by distance, time zone, language and cultural differences; developing and customizing products and solutions that appeal to the tastes and preferences of users in international markets; competition from local survey providers with significant market share in those markets and with a better understanding of user preferences; reliance on third parties and partnerships to provide product support and services that we do not resource directly outside of the United States, such as panelists for our SurveyMonkey Audience solution; protecting and enforcing our intellectual property rights; the inability to extend proprietary rights in our brand, content or technology into new jurisdictions; compliance with applicable foreign laws and regulations, including privacy and data protection laws and laws relating to content; credit risk and higher levels of payment fraud; currency exchange rate fluctuations; protectionist laws and business practices that favor local businesses in some countries; foreign tax consequences; foreign exchange controls or U.S. tax restrictions that might restrict or prevent us from repatriating income earned in countries outside of the United States; political, economic and social instability (including Russia's invasion of Ukraine); higher costs associated with doing business internationally; export or import regulations; and trade and tariff restrictions.
Entering new international markets will be expensive, our ability to successfully gain market acceptance in any particular market is uncertain and the distraction of our senior management team could harm our business, results of operations and financial condition.
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We derive, and expect to continue to derive, a substantial majority of our revenue from a limited number of software products.
We derive, and expect to continue to derive, a substantial majority of our revenue from our paid individual and enterprise subscription offerings to our survey platform. As such, the market acceptance of our survey platform is critical to our success. Demand for subscription access to our survey platform and for our other products and solutions is affected by a number of factors, many of which are beyond our control, such as continued market acceptance of our survey platform by customers for existing and new use cases, the timing of development and release of new products, solutions, features and functionality that are lower cost alternatives introduced by us or our competitors, technological changes and developments within the markets we serve, growth or contraction in our addressable markets, and general macroeconomic conditions, including the effects of a general slowdown in the global economy and inflationary pressures. If we are unable to continue to meet customer demands or to achieve more widespread market acceptance of our survey platform, our business, results of operations and financial condition could be harmed.
Risks Related to Regulatory and Tax Compliance
We collect, process, store, share, disclose and use personal information and other data, which subjects us to governmental regulations and other legal obligations related to privacy and security, and our actual or perceived failure to comply with such obligations could harm our business.
We collect, process, store, share, disclose and use information from and about our customers, respondents, users, sales leads and prospects, including personal information and other data. There are numerous laws around the world regarding privacy, data protection and security, including laws regarding the collection, processing, storage, sharing, disclosure, use and security of personal information and other data from and about our customers, respondents, users, sales leads and prospects. The scope of these laws is changing, subject to differing interpretations, may be costly to comply with, and may be inconsistent among countries and jurisdictions or conflict with other rules.
We strive to comply with applicable laws, policies and legal obligations relating to privacy, data protection and security and are subject to the terms of our privacy notices and privacy-related obligations to third parties. However, these obligations may be interpreted and applied in new ways and/or in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. Data privacy, data protection and security are active areas, and new laws and regulations are likely to be enacted.
Any failure or perceived failure by us to comply with our privacy or data protection policies, our privacy- or data protection-related obligations to customers, respondents, users or other third parties, our data disclosure and consent obligations or our privacy-, data protection- or security-related legal and regulatory obligations, or any compromise of security that results in the unauthorized disclosure, transfer or use of personal or other information, which may include personally identifiable information or other data, may result in governmental enforcement actions, litigation or public statements critical of us by consumer advocacy groups, competitors, the media or others and could cause our users to lose trust in us, which could have an adverse effect on our business. Additionally, if third parties we work with, such as customers, partners, vendors or developers, violate applicable laws, our policies or other privacy-, data protection- or security-related obligations, such violations may also put our users’ information at risk and could in turn have an adverse effect on our business. Governmental agencies may also request or take user or customer data for national security or informational purposes, and can also make data requests in connection with criminal or civil investigations or other matters, which could harm our reputation and our business or be in contravention of our contractual obligations. Additionally, our compliance with the laws of one jurisdiction may be in contravention to laws or regulations that we are subject to in other jurisdictions.
In addition, there has been increased uncertainty around the legality of various mechanisms for personal data transfers from the European Union to the United States, the United Kingdom, and other countries outside the European Union, which may have a significant impact on the transfer of data from the European Union to companies in the United States or other jurisdictions, including us. For example, we may have to require some of our vendors who process personal data to take on additional privacy, data protection and security obligations, and some may refuse, causing us to incur potential disruption and expense related to our business processes. We may also have to substantially reorganize our infrastructure to meet local requirements regarding data storage, access and transfer
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which also has the potential to adversely impact our business and cause significant additional expense. If our policies and practices, or those of our vendors, are, or are perceived to be, insufficient or if our users and customers have concerns regarding the transfer of data from the European Union to the United States, we could be subject to orders to suspend our services, enforcement actions or investigations by the Federal Trade Commission, Attorney General of California or other states, individual EU Data Protection Authorities or lawsuits by private parties, use of our products could decline and our business could be negatively impacted. There is also uncertainty as to whether certain legal mechanisms for the lawful transfer of data from the European Union to the United States or other jurisdictions will withstand legal challenges, and such legal mechanisms may be modified or replaced. If the mechanisms on which we rely for the transfer of data are found to be invalid or are modified or replaced, our business would be substantially impacted, as key agreements may need to be renegotiated, customers may lose confidence in our ability to transfer data legally from the European Union to the United States or other jurisdictions and we may be subject to orders to suspend our services, enforcement actions or investigations by the Federal Trade Commission, Attorney General of California or other states, or EU Data Protection Authorities or other regulatory authorities in other jurisdictions.
Public scrutiny of internet privacy and security issues may result in increased regulation and different industry standards, which could deter or prevent us from providing our products to our customers, thereby harming our business.
The regulatory framework for privacy and security issues worldwide is evolving and is likely to remain in flux for the foreseeable future. Various government and consumer agencies have also called for new regulation and changes in industry practices. Practices regarding the registration, collection, processing, storage, sharing, disclosure, use and security of personal and other information by companies offering an online service like our survey platform and other solutions have recently come under increased public scrutiny.
For example, the European Union has enacted the GDPR, which became effective in May 2018 and the State of California has enacted the CCPA which became effective on January 1, 2020. The California Privacy Rights Act 2020 (“CPRA”), was also passed in November 2020 and became effective on January 1, 2023. Similar laws have been proposed in other states and at the federal level, reflecting a trend toward more stringent privacy legislation in the United States. Additionally, the current data protection legislation in the United Kingdom substantially mirrors the GDPR, but there is uncertainty with regard to how the United Kingdom data protection regime will evolve now that it has left the European Union. These laws require greater compliance efforts for companies with users or operations in the European Union, United Kingdom and/or California and provides for fines of: in the case of the GDPR, up to the greater of €20,000,000 or 4% of global annual revenue for noncompliance; or in the case of the CCPA, up to $2,500 per violation or $7,500 for each intentional violation, as well as a private right of action for certain failures to implement and maintain reasonable security measures.
In the United States, the federal government and many state governments have reviewed and are reviewing the need for greater regulation of the collection, processing, storage, sharing, disclosure, use and security of information concerning consumer behavior with respect to online services, including regulations aimed at restricting certain targeted advertising practices and collection and use of data from mobile devices. This review may result in new laws or the promulgation of new regulations or guidelines. For example, the State of California and other states have passed laws relating to disclosure of companies’ practices with regard to Do-Not-Track signals from internet browsers, the ability to delete information of minors and new data breach notification requirements. California has also adopted privacy guidelines with respect to mobile applications and in 2018 enacted the CCPA. The CCPA requires covered companies to provide new disclosures to California consumers, and affords such consumers rights to access and delete personal information and new abilities to opt-out of certain sales of personal information, among other things. The CCPA became enforceable on July 1, 2020. Laws similar to the CCPA have also been proposed in other states, and some states, including Nevada, Virginia, Colorado, Utah and Connecticut have implemented laws imposing obligations similar to the CCPA. Additionally, the CPRA, as currently drafted, would significantly modify the CCPA, potentially resulting in further uncertainty and requiring us to incur additional costs and expenses. We cannot yet predict the full impact of the CCPA, CPRA, or other similar laws or regulations on our business or operations, but they may require us to modify our data processing practices and policies and to incur substantial costs and expenses in an effort to comply.
In June 2016, the United Kingdom voted to leave the European Union, commonly referred to as “Brexit,” which could also lead to further legislative and regulatory changes. The United Kingdom left the European Union on January 31,
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2020 with a transition period through December 31, 2021. Certain risks continue to exist depending on the outcomes of any re-negotiation of the Brexit Withdrawal Agreement. A Data Protection Act has been enacted that substantially implements GDPR, which became law in May 2018. It remains unclear, however, how United Kingdom data protection laws or regulations and enforcement strategies will develop in the medium to longer term. The European Union and the United Kingdom have reached agreement on transfers of personal data between the regions which provides that the United Kingdom has adequate measures in place to protect data subjects, however, future changes to UK privacy laws could place this adequacy in jeopardy and there is some uncertainty about the sustainability of that agreement. The United Kingdom has also introduced its own contractual data transfer mechanisms for transfers of personal data to other regions outside the United Kingdom (the “IDTA”). The effectiveness of this new contractual data transfer mechanism has not been legally tested as yet and accordingly, there is still uncertainty about the legality of personal data transfers to some jurisdictions utilizing the new IDTA and in general, UK customers continue to favor data storage in the United Kingdom or European Union.
Additionally, we historically have participated in the EU-U.S. Privacy Shield and a related program, the Swiss-U.S. Privacy Shield, and made use of certain model clauses approved by the European Commission (the “SCCs”), with regard to certain transfers of personal data from the European Economic Area (“EEA”) to the United States. Both the EU-U.S. Privacy Shield Framework and SCCs have been subject to legal challenge, however, and on July 16, 2020, the Court of Justice of the European Union (“CJEU”) issued a decision that invalidated the EU-U.S. Privacy Shield and imposed additional obligations on companies when relying on the SCCs. On September 8, 2020, the Swiss Federal Data Protection and Information Commissioner also issued an opinion concluding that the Swiss-U.S. Privacy Shield Framework does not provide an adequate level of protection for data transfers from Switzerland to the United States. These decisions are resulting in European data protection regulators applying differing standards for, and requiring ad hoc verification of, transfers of personal data from Europe to the United States. This results in those transfers being deemed unlawful. We may be required to take additional steps to legitimize any personal data transfers impacted by these developments and be subject to increasing costs of compliance and limitations on our customers and us. We have analyzed the impact of the decisions, applicable guidance, recommendations, updated SCCs and new IDTA and have implemented a program for compliance. Because the interpretation and application of these laws and regulations relating to privacy, data protection and information security, along with industry standards, are uncertain, it is possible that relevant laws, regulations, or standards may be interpreted and applied in manners that are, or are alleged to be, inconsistent with our data management practices or the features of our products. We may find it necessary or appropriate to take different or additional steps with respect to transfers of personal data, which may result in significant increased costs of compliance and limitations on our customers and us. We may be unsuccessful in maintaining legitimate means for our transfer and receipt of personal data from the EEA, the United Kingdom or Switzerland. We may experience reluctance or refusal by current or prospective customers in the European Union, the United Kingdom, Iceland, Liechtenstein, Norway and Switzerland (the “impacted jurisdictions”) to use our survey platform or other solutions, and we and our customers may face a risk of orders to suspend our services or enforcement actions by data protection authorities in these impacted jurisdictions or other countries relating to personal data transfers to us and by us from these locations. Any such actions could result in substantial costs and diversion of resources, distract management and technical personnel and negatively affect our business, operating results and financial condition.
Outside the European Union and the United States, a number of countries have adopted or are considering privacy laws and regulations, including laws and regulations requiring local storage and processing of data, that may result in greater compliance efforts. In addition, government agencies and regulators have reviewed, are reviewing and will continue to review the personal data practices of certain online companies. If we are unable to comply with any such reviews or decrees that result in recommendations or binding changes, or if the recommended changes result in degradation of our products, our business could be harmed.
Our business, including our ability to operate and expand internationally, could be adversely affected if legislation or regulations are adopted, interpreted or implemented in a manner that is inconsistent with our current business practices and that require changes to these practices, the design of our websites, mobile applications, survey platform, solutions, features or our privacy policies. In particular, the success of our business has been, and we expect will continue to be, driven by our ability to responsibly gather and use data from data subjects and help our customers collect and analyze data from survey respondents. Therefore, our business could be harmed by any significant change to applicable laws, regulations or industry standards or practices regarding the storage, use or disclosure of data our customers or respondents share with us, or regarding the manner in which the express or
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implied consent of consumers for such collection, analysis and disclosure is obtained. Such changes may require us to modify our survey platform, features and other products, possibly in a material manner, and may limit our ability to develop new products, solutions and features that make use of the data that we collect.
Our business is subject to a variety of U.S. and foreign laws, many of which are unsettled and still developing and which could subject us to claims or otherwise harm our business.
We are subject to a variety of laws in the United States, Europe and elsewhere, including laws regarding privacy, data protection, data security, data retention and consumer protection, accessibility, sending and storing of electronic messages (and related traffic data where applicable), human resource services, employment and labor laws, workplace safety, intellectual property and the provision of online payment services, including credit card processing, consumer protection laws, anti-bribery and anti-corruption laws, import and export controls, federal securities laws and tax regulations, which are continuously evolving and developing. The scope and interpretation of the laws and other obligations that are or may be applicable to us, our vendors or partners or certain groups of our users are often uncertain and may be conflicting, particularly laws and other obligations outside of the United States. For example, laws relating to the liability of providers of online services for activities of their users and other third parties are currently being tested by a number of claims, including actions based on invasion of privacy and other torts, unfair competition, copyright and trademark infringement and other theories based on the nature and content of the materials searched, the advertisements posted or the content provided by users.
In addition, regulatory authorities around the world are considering a number of legislative and regulatory proposals concerning privacy, spam, data storage, data protection, local storage or processing of data, content regulation, cybersecurity, artificial intelligence, intellectual property infringement, consumer rights, government access to personal information and other matters that may be applicable to our business. For example, the European Union has recently been developing new requirements related to the use of data, artificial intelligence, and consumer protection, including the Digital Services Act, the Digital Markets Act, the Data Governance Act, the Data Act, the Artificial Intelligence Act, and the Omnibus Directive. These new regulations will add additional rules and restrictions on the use of data in our products and services and may reduce demand for and sales of our offerings, which would adversely impact our financial results. In addition, compliance with these laws may require substantial investment, provide technical challenges for our business, or divert engineering resources from other projects. More countries are enacting and enforcing laws related to the appropriateness of content and enforcing those and other laws by blocking access to services that are found to be out of compliance. It is also likely that as our business grows, evolves and an increasing portion of our business shifts to mobile and our solutions are used in a greater number of countries and additional groups, we will become subject to laws and regulations in additional jurisdictions. Users of our site and our solutions could also abuse or misuse our survey platform and other products in ways that violate laws or cause damage to our business. It is difficult to predict how existing laws will be applied to our business and whether we will become subject to new laws or legal obligations that will impact our business.
If we are not able to comply with these laws or other legal obligations, or if we or our vendors or users become liable under these laws or legal obligations, or if our products or services are suspended or blocked, we could be directly harmed, and we may be forced to implement new measures to reduce exposure to this liability. This may require us to expend substantial resources or to discontinue certain solutions, which would negatively affect our business, results of operations and financial condition. We could also be subject to investigations, enforcement actions and sanctions, mandatory changes to our products and solutions, disgorgement of profits, fines and damages, civil and criminal penalties or injunctions, claims for damages, termination of contracts and loss of intellectual property rights. In addition, the increased attention focused upon liability issues as a result of lawsuits and legislative proposals could harm our reputation or otherwise impact the growth of our business. Any costs incurred as a result of this potential liability could harm our business, results of operations and financial condition.
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We are subject to export and import control laws and regulations that could impair our ability to compete in international markets or subject us to liability if we violate such laws and regulations.
We are subject to U.S. export controls and sanctions regulations that prohibit the shipment or provision of certain products and solutions to certain countries, governments and persons targeted by U.S. sanctions. While we take precautions to prevent our products and services from being exported or used in violation of these laws, including implementing IP address blocking, we cannot guarantee that the precautions we take will prevent violations of export control and sanctions regulations. If we are found to be in violation of U.S. sanctions or export control laws, it could result in substantial fines and penalties for us and for the individuals working for us.
For example, following Russia’s invasion of Ukraine, the United States and other countries imposed economic sanctions and severe export control restrictions against Russia and Belarus and could impose wider sanctions and export restrictions and take other actions should the conflict continue to escalate. While we currently do not have any significant exposure, any exports or sales of our software or services into Russia and Belarus may be impacted by these restrictions. Monitoring and ensuring compliance with these complex U.S. export control laws is particularly challenging because our offerings are widely distributed throughout the world. Even though we take precautions to ensure that we and our partners comply with all relevant export control laws and regulations, any failure by us or our partners to comply with such laws and regulations could have negative consequences for us, including reputational harm, government investigations, and penalties.
In addition, various countries regulate the import and export of certain encryption and other technology, including import and export permitting and licensing requirements, and have enacted laws that could limit our ability to distribute our products or could limit our users’ ability to access our survey platform in those countries. Changes in our products, or future changes in export and import regulations, may prevent our users with international operations from deploying our products globally or, in some cases, prevent the export or import of our products to certain countries, governments or persons altogether. Any change in export or import regulations, economic sanctions or related legislation or change in the countries, governments, persons or technologies targeted by such regulations, could result in decreased use of our products by, or in our decreased ability to export or sell subscriptions to our products to, existing or potential users with international operations. Any decreased use of our survey platform or limitation on our ability to export or sell our products would likely adversely affect our business, results of operations and financial condition.
Failure to comply with anti-bribery, anti-corruption and anti-money laundering laws could subject us to penalties and other adverse consequences.
We are subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), the U.K. Bribery Act and other anti-corruption, anti-bribery and anti-money laundering laws in various jurisdictions both domestic and abroad. These laws generally prohibit us and our employees from improperly influencing government officials or commercial parties in order to obtain or retain business, direct business to any person or gain any advantage. The FCPA, U.K. Bribery Act and similar applicable anti-bribery and anti-corruption laws also prohibit our third-party business partners, representatives and agents from engaging in corruption and bribery. We may be held liable for the acts of recently acquired companies, our third-party business partners, representatives and agents. To that end, in addition to our own salesforce, we leverage third parties to sell our products and conduct our business abroad. We and our third-party business partners, representatives and agents may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities and may be held liable for the corrupt or other illegal activities of these third-party business partners and intermediaries, our employees, representatives, contractors, channel partners and agents, even if we do not explicitly authorize such activities. While we have policies and procedures to address compliance with such laws, we cannot assure you that our employees and agents will not take actions in violation of our policies or applicable law, for which we may be ultimately held responsible. Any violation of the FCPA or other applicable anti-bribery, anti-corruption laws and anti-money laundering laws could result in whistleblower complaints, adverse media coverage, investigations, imposition of significant legal fees, loss of export privileges, severe criminal or civil sanctions or suspension or debarment from U.S. government contracts, substantial diversion of management’s attention, drop in stock price or overall adverse consequences to our business, all of which may have an adverse effect on our reputation, business, results of operations and financial condition.
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Our international operations involve risks that could increase our expenses, adversely affect our operating results and require increased time and attention of our management.
We derive a portion of our revenue from customers located outside of the United States and we have significant operations outside of the United States, including engineering, sales and customer support. We plan to strategically invest in our international operations, but such investment is contingent upon the financial performance of our existing international operations as well as our identification of growth opportunities.
Our international operations are subject to risks in addition to those our domestic operations face, including:
The level of corporate tax from sales to our non-U.S. customers is generally less than the level of tax from sales to our U.S. customers. This benefit is contingent upon existing tax regulations in the U.S and in the countries in which our international operations are located. Future changes in domestic or international tax regulations could adversely affect our ability to continue to realize these tax benefits.
The intended tax efficiency of our corporate structure and intercompany arrangements depends on the interpretation and application of the tax laws of various jurisdictions and on how we operate our business; changes to our effective tax rate could adversely impact our results.
Our corporate structure and intercompany arrangements, including the manner in which we develop and use our intellectual property and the transfer pricing of our intercompany transactions, are intended to optimize business efficiency as well as reduce our worldwide effective tax rate. The tax laws of various jurisdictions, including the United States and the other jurisdictions in which we operate, are subject to change, and their application to our international business activities is subject to interpretation and depends on our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements. The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for valuing developed technology or for transfer pricing on intercompany arrangements, or they may make a determination that the manner in which we operate results in our business not achieving the intended tax consequences. This could increase our worldwide effective tax rate and harm our results of operations and financial condition. Our effective tax rate could be adversely affected by several other factors, many of which are outside of our control, such as: increases in expenses that are not
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deductible for tax purposes, the tax effects of restructuring charges or purchase accounting for acquisitions, increases in withholding taxes, changes related to our ability to ultimately realize future benefits attributed to our deferred tax assets, including those related to other-than-temporary impairment, and a change in our decision to indefinitely reinvest foreign earnings. Further, we periodically undergo review and audit by both domestic and foreign tax authorities and expect such actions to continue in the future. Any adverse outcome of such a review or audit could have a negative effect on our results of operations and financial condition.
The enactment of legislation implementing changes in the U.S. taxation of international business activities, the adoption of other tax reform policies or changes in tax legislation or policies in jurisdictions outside of the United States could materially impact our results of operations and financial condition.
Changes to U.S. tax laws, including limitations on the ability of taxpayers to claim and utilize foreign tax credits and the deferral of certain tax deductions until earnings outside of the United States are repatriated to the United States, as well as changes to U.S. tax laws that may be enacted in the future, could impact the tax treatment of our domestic and foreign earnings and adversely impact our effective tax rate. For example, in August 2022, the United States enacted the Inflation Reduction Act of 2022 which imposes a 15% minimum tax on the adjusted financial statement income of certain large corporations, as well as a one percent excise tax on corporate stock repurchases by publicly traded companies. This act, as well as any other changes to tax laws that are enacted, could adversely affect our tax liability. The same is true for changes to tax laws in the other countries in which we operate. Due to the expanding scale of our international business activities, any changes in the U.S. or international taxation of such activities may increase our worldwide effective tax rate and harm our business, results of operations and financial condition.
Our operating results may be harmed if we are required to collect sales or other related taxes on subscriptions to our products in jurisdictions where we have not historically done so.
We collect sales, use, value-added and other transaction taxes as part of our subscription agreements in a number of jurisdictions. One or more states or countries may seek to impose incremental or new sales, use, value added or other tax collection obligations on us, including for past sales by us or our resellers and other partners. A successful assertion by a state, country or other jurisdiction that we should have been or should be collecting additional sales, use, value added or other taxes on our products could, among other things, result in substantial tax liabilities, discourage users from utilizing our products or otherwise harm our business, results of operations and financial condition.
We have a history of net losses and we may not be able to achieve or maintain profitability.
We have incurred net losses on an annual basis since our reincorporation. We incurred net losses of approximately $23.8 million and $37.4 million during the three months ended March 31, 2023 and 2022, respectively, and we had an accumulated deficit of approximately $731.3 million as of March 31, 2023. These losses reflect, among other things, significant investments we made to grow our business, particularly to scale our business. We expect to continue to make future investments and expenditures related to the growth of our business, including strategic investments in our sales and marketing activities, hiring employees necessary to meet our needs, investments in technical infrastructure to continue to satisfy the needs of our user base, and continued investments in research and development to support these efforts. In addition, we will continue to incur additional general and administrative expenses to support both our growth as well as our operations as a publicly traded company. These investments may not result in increased revenue or growth in our business. We may encounter unforeseen or unpredictable factors, including unforeseen operating expenses, complications or delays, which may result in increased costs. Furthermore, it is difficult to predict the size and growth rate of our market, user demand for our survey platform, the entry of competitive survey platforms or other products or the success of existing competitive products and solutions. As a result, we may not achieve or maintain profitability in future periods. If we fail to grow our revenue sufficiently to keep pace with our investments and other expenses, our business, results of operations and financial condition would be adversely affected.
Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
As of December 31, 2022, we had $353.1 million of federal and $215.7 million of state net operating loss carryforwards available to reduce future taxable income, some of which will expire during 2023. As of December 31, 2022, we had federal research and development credits of $27.5 million which will begin to expire in 2034; state research and development credits of $23.6 million which will carryforward indefinitely; and foreign research and
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development credits of $2.1 million which will begin to expire in 2039. Under Sections 382 and 383 of the Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change attributes, such as research tax credits, to offset its post-change income may be limited. In general, an “ownership change” will occur if there is a cumulative change in our ownership by “5-percent shareholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. Based on analysis performed, we have concluded that approximately $45.1 million of net operating loss carryforwards from companies we have previously acquired are subject to limitation under Section 382 of the Code. At this time, for our non-acquired net operating losses, we have not completed a study to assess whether an ownership change under Section 382 of the Code has occurred, or whether there have been multiple ownership changes since our formation. We may have experienced various ownership changes, as defined by the Code, as a result of past financing transactions (or other activities), and we may experience ownership changes in the future as a result of subsequent changes in our stock ownership, some of which may be outside of our control. Accordingly, our ability to utilize the aforementioned carryforwards may be limited.
General Risks
If internet search engines’ methodologies are modified or our search result page rankings decline for other reasons, use and engagement by users could decline.
We depend in part on various internet search engines to direct a significant portion of our traffic to our websites. Similarly, we depend on providers of mobile application “store fronts” to allow users to locate and download our mobile applications that enable our product. Our ability to maintain the number of visitors directed to our websites and users of our survey platform is not entirely within our control. Our competitors’ search engine optimization (“SEO”) efforts may result in their websites receiving a higher search engine results page ranking than ours, or internet search engines could revise their methodologies in an attempt to improve their search results, which could adversely affect the placement of our search result page ranking. If search engine companies modify their search algorithms in ways that are detrimental to our new user growth or in ways that make it harder for our users to use our website, if we fail to successfully manage changes in SEO and social media traffic or if our competitors’ SEO efforts are more successful than ours, overall growth in our user base could slow, user engagement could decrease and we could lose existing users. These modifications may be prompted by search engine companies entering the online survey market or aligning with competitors. Additionally, our competitors may adopt search engine marketing tactics such as bidding on our terms in order to drive up our costs. This could make it more expensive to acquire new customers using our current marketing methods. Our websites have experienced fluctuations in search engine results page rankings in the past, and we anticipate similar fluctuations in the future. Any reduction in the number of users directed to our websites would harm our business, results of operations and financial condition.
Our business depends on continued and unimpeded access to the internet and mobile networks by us and our users on personal computers and mobile devices.
Our survey platform and solutions depend on the ability of our customers, respondents and users to access our products through their personal computers and mobile devices. Currently, this access is provided by companies that have significant market power in the broadband and internet access marketplace, including incumbent telephone companies, cable companies, mobile communications companies and government-owned service providers, any of whom could take actions that degrade, disrupt or increase the cost of user access to our products, which would, in turn, negatively impact our business. In addition, internet or network access could be disrupted by other third parties. Further, the adoption of any laws or regulations that adversely affect the growth, popularity or use of the internet and mobile networks, including laws limiting internet neutrality, could decrease the demand for our paid subscription offerings or the usage of our survey platform and increase our cost of doing business.
If we are unable to effectively operate on mobile devices, our business could be adversely affected.
Our customers and respondents are increasingly accessing our products on mobile devices. We are devoting valuable resources to solutions related to monetization of mobile usage, and cannot assure you that these solutions will be successful. If the mobile solutions we have developed do not meet the needs of current prospective customers or respondents, or if our solutions are difficult to access, they may reduce their usage of our products or cease using our products altogether and our business could suffer. Additionally, we are dependent on the interoperability of our
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products with popular mobile operating systems, networks and standards that we do not control, such as Android and iOS operating systems, and any changes in such systems and terms of service that degrade our solutions’ functionality or give preferential treatment to competitive products could adversely affect traffic and monetization on mobile devices. We may not be successful in maintaining and developing relationships with key participants in the mobile industry or in developing products that operate effectively with these technologies, systems, networks or standards. Each manufacturer or distributor may establish unique technical standards for its devices, and our products may not work or be easily accessible or viewable on these devices as a result. Some manufacturers may also elect not to include our products on their devices, or we may have difficulty preparing or loading our applications in app stores. As new devices and products are continually being released, it is difficult to predict the challenges we may encounter in developing versions of our solutions for use on these alternative devices. If we are unable to successfully implement monetization strategies for our solutions on mobile devices, or if these strategies are not as successful as our offerings for personal computers or if we incur excessive expenses in this effort, our business, results of operations and financial condition would be negatively affected.
If we are unable to successfully implement monetization strategies for our solutions on mobile devices, or these strategies are not as successful as our offerings for personal computers, or if we incur excessive expenses in this effort, our financial performance and ability to grow revenue would be negatively affected.
Failure to protect or enforce our intellectual property rights could harm our business and results of operations.
We regard the protection of our trade secrets, copyrights, trademarks, trade dress, databases, domain names and patents as critical to our success. We strive to protect our intellectual property rights by relying on federal, state and common law rights and other rights provided under foreign laws. These laws are subject to change at any time and could further restrict our ability to protect our intellectual property rights. In addition, the existing laws of certain foreign countries in which we operate may not protect our intellectual property rights to the same extent as do the laws of the United States. We also have a practice of entering into confidentiality and invention assignment agreements with our employees and contractors, and often enter into confidentiality agreements with parties with whom we conduct business in order to limit access to, and disclosure and use of, our proprietary information. In addition, from time to time we make our technology available to others under license agreements, including open source license agreements. However, these contractual arrangements and the other steps we have taken to protect our intellectual property rights may not prevent the misappropriation of our proprietary information, infringement of our intellectual property rights or deter independent development of similar or competing technologies by others and may not provide an adequate remedy in the event of such misappropriation or infringement.
We believe it is important to maintain, protect and enhance our brands. Obtaining and maintaining effective intellectual property rights is expensive, including the costs of defending our rights. We are seeking to protect certain of our intellectual property rights through filing applications for copyrights, trademarks, service marks, patents and domain names in the United States and many locations outside of the United States, a process that is expensive and may not be successful in all jurisdictions. Even where we have such rights, they may later be found to be unenforceable or have a limited scope of enforceability. In addition, we may not seek to pursue such protection in every location. We have already and may, over time, increase our investment in protecting innovations through investments in patents and similar rights, and this process is expensive and time-consuming.
Litigation may be necessary to enforce our intellectual property rights, protect our proprietary rights or determine the validity and scope of proprietary rights claimed by others. Any litigation of this nature, regardless of outcome or merit, could result in substantial costs and diversion of management and technical resources, any of which could adversely affect our business and results of operations. We may also incur significant costs in enforcing our trademarks against those who attempt to imitate our “Momentive” and “SurveyMonkey” brands and other valuable trademarks and service marks.
In addition, we have chosen to make certain of our technology available under open source licenses that allow others to use the technology without payment to us. While we hope to benefit from these activities by having access to others’ useful technology under open source licenses, there is no assurance that we will receive the business benefits we expect.
If we fail to maintain, protect and enhance our intellectual property rights, our business, results of operations and financial condition may be harmed and the market price of our common stock could decline.
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We have relationships with third parties to provide, develop and create applications that integrate with our products, and our business could be harmed if we are not able to continue these relationships.
We use software and services licensed and procured from third parties to develop and offer our survey platform and other products. We may need to obtain future licenses and services from third parties to use intellectual property and technology associated with the development of our products, which might not be available to us on acceptable terms or at all. Any loss of the right to use any software or services required for the development and maintenance of our products could result in delays in the provision of our products until equivalent technology is either developed by us or, if available from others, is identified, obtained and integrated, which could harm our business. Any errors or defects in third-party software or services could result in errors or a failure of our products, which could harm our business, results of operations and financial condition.
We also depend on our ecosystem of developers to create applications that will integrate with our survey platform. We offer prebuilt integrations, data portability and single sign-on identity with applications, such as those offered by Salesforce, Marketo, Tableau, Microsoft, and Oracle, as well as open APIs and configurable integrations. Our competitors may be effective in providing incentives to third parties to favor their survey platform, or to prevent or reduce subscriptions to our survey platform. Our reliance on this ecosystem of developers creates certain business risks relating to the quality of the applications built using our application programming interface, including product interruptions of our survey platform from these applications, lack of product support for these applications, our reputation being harmed if the applications do not function as intended and possession of intellectual property rights associated with these applications. We may not have the ability to control or prevent these risks. As a result, issues relating to these applications could adversely affect our brand, reputation, business, results of operations and financial condition.
If we are unsuccessful in establishing or maintaining our relationships with third parties, our ability to compete in the marketplace or to grow our revenue could be impaired and our results of operations may suffer. Even if we are successful, we cannot assure you that these relationships will result in increased customer usage of our products or increased revenue.
Our use of open source software could negatively affect our ability to offer and sell subscriptions to our products and subject us to possible litigation.
A portion of the technologies we use incorporates open source software, and we may incorporate open source software in the future. Open source software is generally licensed by its authors or other third parties under open source licenses. The terms of many open source licenses have not been interpreted by U.S. or other courts, and these licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to commercialize our products. These licenses may require us to offer our products that incorporate such open source software for no cost, that we make publicly available source code for modifications or derivative works we create based upon, incorporating or using the open source software, and/or that we license such modifications or derivative works under the terms of the particular open source license. We may face claims from others claiming ownership of open source software or patents related to that software, rights to our intellectual property or breach of open source license terms, including a demand for release of material portions of our source code or otherwise seeking to enforce the terms of the applicable open source license. These claims could result in litigation, which could be costly to defend, require us to purchase a costly license, require us to establish additional specific open source compliance procedures, or require us to devote additional research and development resources to remove open source elements from or otherwise change our solutions, any of which would have a negative effect on our business and results of operations. In addition, if we were to combine our own software with open source software in a certain manner, we could, under certain open source licenses, be required to release the source code of some software that would be valuable to keep as a trade secret and/or not make available for use by others. Any of the foregoing could disrupt and harm our business, results of operations and financial condition.
We may be subject to legal proceedings and litigation, including intellectual property and privacy disputes, which are costly to defend and could materially harm our business and results of operations.
We may be party to lawsuits and legal proceedings in the normal course of business. These matters are often expensive and disruptive to normal business operations. We may face allegations, lawsuits and regulatory inquiries, audits and investigations regarding data privacy, security, labor and employment, consumer protection and intellectual property infringement, including claims related to privacy, patents, publicity, trademarks, copyrights and
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other rights. We may also face allegations, lawsuits and regulatory inquiries, audits and investigations related to our acquisitions, securities issuances or our business practices, including public disclosures about our business. Litigation and regulatory proceedings, and particularly the patent infringement and class action matters we could face, may be protracted and expensive, and the results are difficult to predict. Certain of these matters include speculative claims for substantial or indeterminate amounts of damages and include claims for injunctive relief. Additionally, our litigation costs could be significant. Adverse outcomes with respect to litigation or any of these legal proceedings may result in significant settlement costs or judgments, penalties and fines, or require us to modify our products or require us to stop offering certain features, all of which could negatively impact our user and revenue growth. We may also become subject to periodic audits, which would likely increase our regulatory compliance costs and may require us to change our business practices, which could negatively impact our revenue growth. Managing legal proceedings, litigation and audits, even if we achieve favorable outcomes, is time-consuming and diverts management’s attention from our business.
The results of regulatory proceedings, litigation, claims and audits cannot be predicted with certainty, and determining reserves for pending litigation and other legal, regulatory and audit matters requires significant judgment. There can be no assurance that our expectations will prove correct, and even if these matters are resolved in our favor or without significant cash settlements, these matters, and the time and resources necessary to litigate or resolve them, could harm our reputation, business, results of operations, financial condition and the market price of our common stock.
The COVID-19 pandemic has caused economic instability and global uncertainty, and the extent to which it will impact our business and results of operations is uncertain and difficult to predict.
The severity and spread of new or existing variants of the COVID-19 virus and changes in infection rates may impact the health and productivity of our workforce and may disrupt the operations of our customers, partners and other third-party providers for an indefinite period of time. As a result of the COVID-19 pandemic, we transitioned to a hybrid work environment where most of our employees have the flexibility to determine the amount of time they work from home and in our offices. We will continue to evaluate and refine our hybrid workforce and real estate needs. It is not possible at this time to estimate the impact that the COVID-19 pandemic could have on our business, as the impact will depend on future developments, which are highly uncertain and cannot be predicted.
Our business could be disrupted by catastrophic events and man-made problems, such as power disruptions, data security breaches, war and terrorism.
Our systems are vulnerable to damage or interruption from the occurrence of any catastrophic event, which could be exacerbated by climate change, including earthquake, fire, flood, tsunami or other weather event, power loss, telecommunications failure, software or hardware malfunction, cyberattack, war, terrorist attack, incident of mass violence or pandemics (including the COVID-19 pandemic), which could result in lengthy interruptions in the use of our products. In particular, our U.S. headquarters and certain of the facilities we lease to house our computer and telecommunications equipment are located in the San Francisco Bay Area, a region known for seismic activity and that has experienced and may continue to experience, climate-related events at an increasing rate, including drought and water scarcity, warmer temperatures, wildfires and air quality impacts and power shut-offs associated with wildfire prevention, and our insurance coverage may not compensate us for losses that may occur in the event of an earthquake, wildfire or other significant natural disaster. In addition, acts of terrorism, including malicious internet-based activity, could cause disruptions to the Internet or the economy as a whole. Our disaster recovery plan may not be sufficient to address all aspects or any unanticipated consequence or incident, and use of our products could be interrupted. If our systems were to fail or be negatively impacted as a result of a natural disaster, climate change, pandemic, or other event, our ability to deliver products and solutions to our users would be impaired or we could lose critical data. If we are unable to develop adequate plans to ensure that our business functions continue to operate during and after a disaster, and successfully execute on those plans in the event of a disaster or emergency, our business, results of operations, financial condition and reputation would be harmed.
We do not carry business interruption insurance sufficient to compensate us for the potentially significant losses, including the potential harm to our business, results of operations and financial condition that may result from interruptions in our product use as a result of system failures.
Our operations are subject to the effects of a rising rate of inflation.
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The United States has recently experienced historically high levels of inflation. According to the U.S. Department of Labor, the annual inflation rate for the United States was approximately 6.5% for 2022. If the inflation rate continues to increase, such as increases in the costs of labor, it will likely affect all of our expenses, especially employee compensation expenses. Additionally, the United States is experiencing an acute workforce shortage, which in turn, has created a hyper-competitive wage environment that may increase our operating costs. To the extent inflation results in rising interest rates and has other adverse effects on the market, it may adversely affect our consolidated financial condition and results of operations.
We may require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all.
We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges, including the need to develop new features, products and solutions, or enhance our existing survey platform, improve our operating infrastructure or acquire complementary businesses and technologies. Accordingly, we have engaged and may continue to engage in equity or debt financings to secure additional funds. If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing we secure in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. We may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired, and our business may be harmed.
Acquisitions and investments could result in operating difficulties, dilution and other harmful consequences that may adversely impact our business, results of operations and financial condition.
We have acquired a number of companies in the past and may make additional acquisitions in the future to add employees, complementary companies, products, solutions, technologies or revenue. Future acquisitions could be material to our results of operations and financial condition. We also expect to continue to evaluate and enter into discussions regarding a wide array of potential strategic transactions. The identification of suitable acquisition candidates and negotiations of these transactions can be difficult, time-consuming and costly, and we may not be able to complete acquisitions on favorable terms, if at all. The process of integrating an acquired company, business or technology has created, and will continue to create, unforeseen operating difficulties and expenditures. The areas where we face risks include:
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These risks or other problems encountered in connection with our acquisitions and investments could cause us to fail to realize the anticipated benefits of such acquisitions or investments, incur unanticipated liabilities and adversely affect our business generally.
Future acquisitions could also result in dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities, amortization expenses or write-offs of goodwill, any of which could harm our financial condition. In addition, any acquisitions we announce could be viewed negatively by users, marketers, developers, partners or investors.
If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our results of operations could be adversely affected.
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity and the amount of revenue and expenses that are not readily apparent from other sources. Significant assumptions and estimates used in preparing our Consolidated Financial Statements include those related to deferred commissions, stock-based compensation, business combination valuation of goodwill and acquired intangible assets, and incremental borrowing rate for leases. Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our common stock.
The tracking of certain of our user metrics is done with internal tools and is not independently verified. Certain of our user metrics are subject to inherent challenges in measurement, and real or perceived inaccuracies in such metrics may harm our reputation and negatively affect our business.
We track certain user metrics with internal tools, which are not independently verified by any third party. Our internal tools have a number of limitations and our methodologies for tracking these metrics may change over time, which could result in unexpected changes to our user metrics, including the metrics we report. If the internal tools we use to track these metrics undercount or overcount performance or contain algorithm or other technical errors, the data we report may not be accurate. For example, we track the number of individual users and organizational domains but cannot determine the number of unique users or unique organizations in which we have paying customers with certainty, and our inability to determine the number of our unique users and unique organizations in which we have paying customers may adversely affect our understanding of certain aspects of our business and make it more challenging to manage our business. In addition, limitations or errors with respect to how we measure data (or the data that we measure) may affect our understanding of certain details of our business, which could affect our longer-term strategies. Additionally, regulatory changes could affect requirements related to data we track related to our metrics, and those changes could impact how we continue to measure and compare data over time. If our performance metrics are not accurate representations of our business, if we discover material inaccuracies in our metrics or if the metrics we rely on to track our performance do not provide an accurate measurement of our business, our reputation may be harmed and our business, results of operations and financial condition could be adversely affected, causing our stock price to decline.
Certain of our growth expectations and key business metrics included in this Quarterly Report on Form 10-Q could prove to be inaccurate, and any real or perceived inaccuracies may harm our reputation and negatively affect our business.
Growth expectations are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. We also rely on assumptions and estimates to calculate certain of our key business metrics, such as paying users. We regularly review and may adjust our processes for calculating our key business metrics to improve their accuracy. Our key business metrics may differ from estimates published by third parties or from similarly titled metrics of our competitors due to differences in methodology. If investors or analysts do not perceive
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our metrics to be accurate representations of our business, or if we discover material inaccuracies in our metrics, our reputation, business, results of operations and financial condition would be harmed.
If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, 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 Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of the applicable listing standards of The Nasdaq Stock Market LLC. 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. In order to maintain 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 significant management oversight. If any of these new or improved controls and systems do not perform as expected, we may experience material weaknesses or significant deficiencies in our controls.
Our internal controls may become inadequate because of changes in conditions in our business. Further, weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future. Any failure to maintain effective controls could harm our results of operations or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. If we identify material weaknesses in our internal control over financial reporting or fail to meet the demands that will be placed upon us as a public company, including the requirements of the Sarbanes-Oxley Act, we may be unable to accurately report our financial results or report them within the timeframes required by law or stock exchange regulations. Failure to comply with Section 404 of the Sarbanes-Oxley Act could also potentially subject us to sanctions or investigations by the SEC or other regulatory authorities. If any material weaknesses exist or are discovered and we are unable to remediate any such material weakness, our reputation, business, results of operations and financial condition may be adversely affected. Any failure to implement and maintain effective internal control over financial reporting 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 that will be filed with the SEC. 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 addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on The Nasdaq Global Select Market.
Pursuant to Section 404 of the Sarbanes-Oxley Act, we are required to provide an annual management report on the effectiveness of our internal control over financial reporting and our independent registered public accounting firm is also required to formally attest to the effectiveness of our internal control over financial reporting annually. 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 internal control over financial reporting is documented, designed or operating. Any failure to maintain effective disclosure controls and internal control over financial reporting could have an adverse effect on our business and results of operations and could cause a decline in the price of our common stock.
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Our reported results of operations may be adversely affected by changes in accounting principles generally accepted in the United States.
Generally accepted accounting principles in the United States are subject to interpretation by the Financial Accounting Standards Board (the “FASB”), the SEC and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported results of operations and may even affect the reporting of transactions completed before the announcement or effectiveness of a change. It is difficult to predict the impact of future changes to accounting principles or our accounting policies any of which could negatively affect our results of operations.
Indemnity provisions in various agreements potentially expose us to liability for intellectual property infringement, data protection and other losses.
Our agreements with customers and other third parties may include indemnification provisions under which we agree to indemnify them for losses suffered or incurred as a result of claims of intellectual property infringement, privacy, data protection or information security issues, damages caused by us to property or persons or other liabilities relating to or arising from our products or other contractual obligations. Some of these indemnity agreements provide for uncapped liability for which we would be responsible, and some indemnity provisions survive termination or expiration of the applicable agreement. Large indemnity payments could harm our business, results of operations and financial condition. Although we normally contractually limit our liability with respect to such obligations, we may still incur substantial liability related to them and we may be required to cease use of certain functions of our products as a result of any such claims. Any dispute with a customer with respect to such obligations could have adverse effects on our relationship with that customer and other existing customers and new customers and harm our business, results of operations and financial condition.
Risks Related to Our Common Stock and Debt
The trading price of our common stock could be volatile, and you could lose all or part of your investment.
Technology stocks have historically experienced high levels of volatility. The trading price of our common stock may fluctuate substantially depending on a number of factors, including those described in this “Risk Factors” section, many of which are beyond our control and may not be related to our operating performance. These fluctuations could cause you to lose all or part of your investment in our common stock. Factors that could cause continuing fluctuations in the trading price of our common stock include the following:
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In addition, if the market for technology stocks or the stock market in general experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, results of operations or financial condition. The trading price of our common stock might also decline in reaction to events that affect other companies in our industry even if these events do not directly affect us. In the past, following periods of volatility in the trading price of a company’s securities, securities class action litigation has often been brought against that company. If our stock price is volatile, we may become the target of securities litigation. Securities litigation could result in substantial costs and divert our management’s attention and resources from our business. This could have an adverse effect on our business, results of operations and financial condition.
Shares of our common stock are subordinate in right of payment to our debts and other liabilities, resulting in a greater risk of loss for stockholders.
Shares of our common stock are subordinate in right of payment to all of our current and future debt. We cannot assure that there would be any remaining funds after the payment of all of our debts for any distribution to holders of the common stock.
Our debt service requirements and restrictive covenants limit our ability to borrow more money, to make distributions to our stockholders and to engage in other activities.
Our existing credit agreement, as amended, contains a number of covenants that limit our ability and our subsidiaries’ ability to, among other things, transfer or dispose of assets, pay dividends or make distributions, incur additional indebtedness, repurchase shares of common stock, create liens, make investments, loans and acquisitions, engage in transactions with affiliates, merge or consolidate with other companies or sell substantially all of our assets. Our credit agreement is guaranteed by us and certain of our subsidiaries and secured by substantially all of the assets of the borrower subsidiary, us and the guarantor subsidiaries. The terms of our credit agreement may restrict our current and future operations and could adversely affect our ability to finance our future operations or capital needs or to execute preferred business strategies, including our share repurchase program. In addition, complying with these covenants may make it more difficult for us to successfully execute our business strategy and compete against companies who are not subject to such restrictions. Additionally, our obligations to repay principal and interest on our indebtedness make us vulnerable to economic or market downturns.
If we are unable to comply with our payment requirements, our lenders may accelerate our obligations under our credit agreement and foreclose upon the collateral, or we may be forced to sell assets, restructure our indebtedness or seek additional equity capital, which would dilute our stockholders’ interests. If we fail to comply with any covenant or if we are subject to a change in control, it could result in an event of default under the agreement and the lenders (or any subsequent lender) could make the entire debt immediately due and payable. If this occurs, we might not be able to repay our debt or borrow sufficient funds to refinance it. Even if new financing is available, it may not be on terms that are acceptable to us. These events could cause us to cease operations.
Our failure to comply with our credit agreement and other indebtedness could require us to abandon our business.
Our indebtedness increases the risk that we will not be able to operate profitably because we will need to make principal and interest payments on our debt. Debt financing also exposes our stockholders to the risk that their holdings could be lost in the event of a default on the indebtedness and a foreclosure and sale of our assets for an amount that is less than the outstanding debt. Our ability to obtain additional debt financing, if required, will be subject to approval of our lenders, which may not be granted, or the interest rates and the credit environment as well as general economic factors and other factors over which we have no control may not be favorable. This may hinder our ability to service our existing debt or obtain additional debt financing.
69
We cannot guarantee that our share repurchase program will be fully consummated or that it will enhance long-term stockholder value. Share repurchases could also increase the volatility of the trading price of our stock and will diminish our cash reserves.
Our board of directors has authorized a share repurchase program that does not have an expiration date. The program does not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares of our common stock. We cannot guarantee that the program will be fully consummated or that it will enhance long-term stockholder value. The program will reduce the market liquidity for our stock and could affect the trading price of our stock and increase volatility. Any announcement of a termination of this program may result in a decrease in the trading price of our stock. In addition, this program will diminish our cash reserves, which could impact our ability to pursue possible strategic opportunities and could result in lower overall returns on our cash balances.
If securities or industry analysts publish reports that are interpreted negatively by the investment community or publish negative research reports about our business, our share price and trading volume could decline.
The trading market for our common stock depends, to some extent, on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts or the information contained in their reports. If one or more analysts publish research reports that are interpreted negatively by the investment community, or have a negative tone regarding our business, financial or operating performance, industry or end-markets, our share price could decline. In addition, if a majority of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.
Sales of substantial amounts of our common stock in the public markets, or the perception that such sales could occur, could reduce the price that our common stock might otherwise attain.
Sales of a substantial number of shares of our common stock in the public market, or the perception that such sales could occur, could adversely affect the market price of our common stock and may make it more difficult for you to sell your common stock at a time and price that you deem appropriate. Shares of our capital stock outstanding as of March 31, 2023 are freely tradable without restrictions or further registration under the Securities Act, except for any shares held by our insiders and subject to periodic “blackout” periods, or held by our “affiliates” as defined in Rule 144 under the Securities Act, and any unvested restricted stock awards.
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.
While we recently amended our charter documents to phase-out the classified structure of our board and to remove the provision providing that directors may only be removed for cause, other provisions in our amended and restated certificate of incorporation and amended and restated bylaws may have the effect of rendering more difficult, delaying or preventing a change of control or changes in our management. Among other things, our amended and restated certificate of incorporation and amended and restated bylaws include provisions that:
70
These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. Provisions in our credit facilities also deter or prevent a business combination. In addition, institutional shareholder representative groups, shareholder activists and others may disagree with our corporate governance provisions or other practices, including anti-takeover provisions, such as those listed above. We generally will consider recommendations of institutional shareholder representative groups, but we will make decisions based on what our board and management believe to be in the best long-term interests of our company and stockholders; however, these groups could make recommendations to our stockholders against our practices or our board members if they disagree with our positions. Finally, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder.
Our amended and restated bylaws provide that the Court of Chancery of the State of Delaware and the federal district courts of the United States of America will be the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our amended and restated bylaws provides that the Court of Chancery of the State of Delaware is the exclusive forum for:
If a court were to find the Delaware exclusive-forum provision in our amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could seriously harm our business.
Our amended and restated bylaws further provides that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. Notwithstanding the foregoing, these provisions do not apply to any cause of action arising under the Exchange Act.
Both of these exclusive-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable 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 expect to declare any dividends in the foreseeable future.
We have never declared nor paid any cash dividends on our capital stock. We currently intend to retain any future earnings to finance the operation and expansion of our business, service our debt, and fund our share repurchase program, and we do not expect to declare or pay any cash dividends in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors. As a result, stockholders must rely on sales of their common stock after price appreciation as the only way to realize any future gains on their investment, if any. Our ability to pay dividends is also subject to restrictions in our credit facilities as well as the restrictions on the ability of our subsidiaries to pay dividends or make distributions to us.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
On February 26, 2022, our board of directors authorized a share repurchase program to repurchase up to $200.0 million of our common stock. The repurchase program does not have an expiration date. The timing and actual number of shares repurchased depend on a variety of factors, including price, general business and market conditions, and other investment opportunities. Shares may be repurchased through the open market or privately negotiated transactions (through 10b5-1 trading plans or otherwise). There were no share repurchases for the three months ended March 31, 2023.
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ITEM 6. EXHIBITS
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Incorporated by Reference |
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Exhibit No. |
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Exhibit Description |
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Form |
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File No. |
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Exhibit |
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Filing Date |
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2.1 |
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8-K |
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001-38664 |
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2.1 |
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March 14, 2023 |
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3.1 |
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Fifth Amended and Restated Certificate of Incorporation of the Registrant. |
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8-K |
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001-38664 |
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3.1 |
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June 10, 2022 |
3.2 |
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8-K |
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001-38664 |
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3.2 |
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June 10, 2022 |
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4.1 |
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10-Q |
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001-38664 |
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4.1 |
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August 5, 2021 |
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10.1 |
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31.1 |
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31.2 |
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32.1 |
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101.INS |
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XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document. |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document. |
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101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document. |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
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104 |
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Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
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The certification attached as Exhibit 32.1 to this Quarterly Report on Form 10-Q is furnished pursuant to 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and it is not to be incorporated by reference into any filing of Momentive Global Inc., whether made before or after the date of this Quarterly Report on Form 10-Q, regardless of any general incorporation language in such filing.
73
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Momentive Global Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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Momentive Global Inc. |
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Date: May 4, 2023 |
By: |
/s/ RICHARD E. SULLIVAN JR. |
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Richard E. Sullivan Jr. |
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Chief Financial Officer (Duly Authorized Officer and Principal Financial Officer) |
Exhibit 10.1
EXECUTION VERSION
AMENDMENT AGREEMENT dated as of March 1, 2023 (this “Agreement”), to the SECOND AMENDED AND RESTATED CREDIT AGREEMENT dated as of October 10, 2018 (as otherwise amended, supplemented or modified prior to the date hereof, the “Existing Credit Agreement”), among MOMENTIVE INC. (f/k/a SURVEYMONKEY INC.), a Delaware corporation (the “Borrower”), MOMENTIVE GLOBAL INC. (f/k/a SVMK INC.), a Delaware corporation (“Holdings”), the lenders from time to time party thereto and JPMORGAN CHASE BANK, N.A., as administrative agent (in such capacity, the “Agent”).
In accordance with the terms of the Existing Credit Agreement, including Section 2.14(b) thereof, the Borrower and the Agent have elected to establish an alternate rate of interest to the LIBO Rate (as defined in the Existing Credit Agreement) and the Agent has previously provided notice of such alternate rate of interest and a copy of this Agreement to the Lenders (the “SOFR Election”).
The Agent has not received within five Business Days written notice of objection to such SOFR Election from the Lenders comprising the Required Lenders and as a result thereof the SOFR Election has become effective as of the date hereof (the “SOFR Effective Date”).
Pursuant to Section 2.14(b) of the Existing Credit Agreement, the Agent and the Borrower have the right to enter into an amendment to the Existing Credit Agreement to reflect such alternate rate of interest and such other related changes as may be applicable.
Accordingly, in consideration of the mutual agreements herein contained and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Defined Terms. Capitalized terms used but not defined herein (including in the recitals hereto) shall have the meanings given to them in the Amended Credit Agreement (as defined below). The rules of interpretation set forth in Section 1.03 (Terms Generally) of the Amended Credit Agreement are hereby incorporated by reference herein, mutatis mutandis.
SECTION 2. Amendments to the Credit Agreement. Effective as of the SOFR Effective Date, (a) the Existing Credit Agreement is hereby amended to delete the stricken text (indicated textually in the same manner as the following example: stricken text) and to add the double-underlined text (indicated textually in the same manner as the following example: double-underlined text), all as set forth in the pages of the Existing Credit Agreement attached as Annex I hereto (the Existing Credit Agreement as so amended is referred to herein as the “Amended Credit Agreement”), and (b) Exhibits B
and E to the Existing Credit Agreement are hereby amended and replaced in their entirety with the exhibits attached as Annex II hereto.
SECTION 3. Representations and Warranties. In order to induce the Agent to enter into this Agreement, each of the Borrower and the other Loan Parties represents and warrants to the Agent that (a) this Agreement has been duly authorized, executed and delivered by each of the Borrower and the other Loan Parties, and this Agreement constitutes a legal, valid and binding obligation of each such party, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or other similar laws affecting creditors’ rights generally and to general principles of equity (regardless of whether enforcement is sought in equity or at law), (b) after giving effect to this Agreement, the representations and warranties of the Borrower and each other Loan Party set forth in Article III of the Amended Credit Agreement and in each other Loan Document are true and correct (i) in the case of representations and warranties qualified as to materiality or Material Adverse Effect, in all respects and (ii) otherwise, in all material respects, in each case on and as of the Effective Date (as defined below), except to the extent that such representations and warranties relate to an earlier date, in which case they were true and correct in all material respects on and as of such earlier date and (c) as of the Effective Date, after giving effect to this Agreement, no Default or Event of Default has occurred and is continuing.
SECTION 4. Conditions Precedent to Effectiveness. This Agreement shall become effective as of the date (the “Effective Date”) on which the Agent shall have executed this Agreement and received from the Borrower and each other Loan Party a counterpart of this Agreement signed on behalf of the Borrower and each other Loan Party (or written evidence satisfactory to the Agent (which may include a facsimile or other electronic transmission) that each of the Borrower and the other Loan Parties has signed a counterpart of this Agreement). The Agent shall notify the Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding.
SECTION 5. Reaffirmation of Guarantee and Security. (a) The Borrower and each other Loan Party, by its signature below, hereby (i) agrees that, notwithstanding the effectiveness of this Agreement, the Security Documents continue to be in full force and effect and (ii) affirms and confirms its guarantee of the Obligations (after giving effect to this Agreement) and the pledge of and/or grant of a security interest in its assets as Collateral to secure such Obligations (after giving effect to this Agreement), all as provided in the Security Documents as originally executed (and giving effect to this Agreement), and acknowledges and agrees that such guarantee, pledge and/or grant continue in full force and effect in respect of, and to secure, such Obligations under the Amended Credit Agreement (after giving effect to this Agreement) and the other Loan Documents.
2
SECTION 6. Reference to and Effect on the Existing Credit Agreement and the Other Loan Documents.
3
SECTION 7. Expenses. The Borrower and Holdings agree, jointly and severally, to pay all reasonable and documented out-of-pocket expenses incurred by the Agent in connection with this Agreement (including the reasonable and documented fees, charges and disbursements of Cravath, Swaine & Moore LLP).
SECTION 8. Counterparts. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall be deemed an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Agreement by facsimile transmission, “.pdf” or similar electronic format shall be as effective as delivery of a manually signed counterpart of this Agreement. The words “execution”, “signed”, “signature”, “delivery” and words of like import in or relating to any document to be signed in connection with this Agreement and the transactions contemplated hereby shall be deemed to include Electronic Signatures, deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.
SECTION 9. Governing Law; Jurisdiction; WAIVER OF JURY TRIAL; Etc. The provisions of Sections 9.09 (Governing Law; Jurisdiction; Consent to Service of Process) and 9.10 (WAIVER OF JURY TRIAL) of the Existing Credit Agreement shall apply to this Agreement, mutatis mutandis.
SECTION 10. Headings. The headings of this Agreement are for purposes of reference only and shall not limit or otherwise affect the meaning hereof.
[Remainder of page intentionally left blank]
4
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized officers, all as of the date first above written.
MOMENTIVE INC. (F/K/A
SURVEYMONKEY INC.), as Borrower,
By |
/s/ Zander Lurie |
Name: |
Zander Lurie |
Title: |
Chief Executive Officer |
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MOMENTIVE GLOBAL INC. (F/K/A SVMK
INC.), as Holdings,
By |
/s/ Zander Lurie |
Name: |
Zander Lurie |
Title: |
Chief Executive Officer |
[Signature Page to Amendment Agreement]
JPMORGAN CHASE BANK, N.A., as Agent,
By |
/s/ Peter B. Thauer |
Name: |
Peter B. Thauer |
Title: |
Managing Director |
[Signature Page to Amendment Agreement]
2
ANNEX I
[ To Attach Amended Credit Agreement]
1
ANNEX I
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
dated as of
October 10, 2018,
among MOMENTIVE INC. (F/K/A SURVEYMONKEY INC.), as Borrower MOMENTIVE GLOBAL INC. (F/K/A SVMK INC.), as Holdings The LENDERS Party Hereto and JPMORGAN CHASE BANK, N.A., ___________________________ MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, as Syndication Agent, SUNTRUST BANK as Documentation Agent ___________________________ JPMORGAN CHASE BANK, N.A., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, and SUNTRUST ROBINSON HUMPHREY, INC. as Joint Lead Arrangers and Joint Bookrunners |
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1
TABLE OF CONTENTS
ARTICLE I
Definitions
SECTION 1.01. |
Defined Terms |
1 |
SECTION 1.02. |
Classification of Loans and Borrowings |
54 |
SECTION 1.03. |
Terms Generally |
5455 |
SECTION 1.04. |
Accounting Terms; GAAP; Pro Forma Calculations |
55 |
SECTION 1.05. |
Interest Rates; Benchmark Notification |
56 |
SECTION 1.06. |
Excluded Swap Obligations |
5657 |
ARTICLE II
The Credits
SECTION 2.01. |
Commitments |
5657 |
SECTION 2.02. |
Loans and Borrowings |
57 |
SECTION 2.03. |
Requests for Borrowings |
5758 |
SECTION 2.04. |
Swingline Loans |
5859 |
SECTION 2.05. |
Letters of Credit |
6061 |
SECTION 2.06. |
Funding of Borrowings |
67 |
SECTION 2.07. |
Interest Elections |
6768 |
SECTION 2.08. |
Termination and Reduction of Commitments |
69 |
SECTION 2.09. |
Repayment of Loans; Evidence of Debt |
6970 |
SECTION 2.10. |
Amortization of Term Loans |
7071 |
SECTION 2.11. |
Prepayment of Loans |
7172 |
SECTION 2.12. |
Fees |
7576 |
SECTION 2.13. |
Interest |
7677 |
SECTION 2.14. |
Alternate Rate of Interest |
7778 |
SECTION 2.15. |
Increased Costs |
7879 |
SECTION 2.16. |
Break Funding Payments |
8081 |
SECTION 2.17. |
Taxes |
8182 |
SECTION 2.18. |
Payments Generally; Pro Rata Treatment; Sharing of Setoffs |
8586 |
SECTION 2.19. |
Mitigation Obligations; Replacement of Lenders |
8788 |
SECTION 2.20. |
Defaulting Lenders |
89 |
SECTION 2.21. |
Incremental Facilities |
9192 |
SECTION 2.22. |
Loan Modification Offers |
9596 |
SECTION 2.23. |
Loan Repurchases |
9798 |
SECTION 2.24. |
Refinancing Facilities |
99100 |
ARTICLE III
Representations and Warranties
SECTION 3.01. |
Organization; Powers |
101102 |
SECTION 3.02. |
Authorization; Enforceability |
101102 |
SECTION 3.03. |
Governmental Approvals; Absence of Conflicts |
102 |
SECTION 3.04. |
Financial Condition; No Material Adverse Change |
102103 |
SECTION 3.05. |
Properties |
103 |
SECTION 3.06. |
Litigation and Environmental Matters |
104105 |
SECTION 3.07. |
Compliance with Laws and Agreements |
104105 |
SECTION 3.08. |
Investment Company Status |
104105 |
SECTION 3.09. |
Taxes |
105 |
SECTION 3.10. |
ERISA; Labor Matters |
105106 |
SECTION 3.11. |
Subsidiaries and Joint Ventures; Disqualified Equity Interests |
105106 |
SECTION 3.12. |
Insurance |
106107 |
SECTION 3.13. |
Solvency |
106107 |
SECTION 3.14. |
Disclosure |
107 |
SECTION 3.15. |
Collateral Matters |
107108 |
SECTION 3.16. |
Federal Reserve Regulations |
108109 |
SECTION 3.17. |
Anti-Terrorism Laws; Anti-Corruption Laws and Sanctions |
108109 |
SECTION 3.18. |
Plan Assets; Prohibited Transactions |
109110 |
ARTICLE IV
Conditions
SECTION 4.01. |
[Reserved] |
109110 |
SECTION 4.02. |
Each Credit Event |
109110 |
ARTICLE V
Affirmative Covenants
SECTION 5.01. |
Financial Statements and Other Information |
110111 |
SECTION 5.02. |
Notices of Material Events |
112 |
SECTION 5.03. |
Additional Subsidiaries |
114113 |
SECTION 5.04. |
Information Regarding Collateral |
114 |
SECTION 5.05. |
Existence; Conduct of Business |
115 |
SECTION 5.06. |
Payment of Taxes |
115 |
SECTION 5.07. |
Maintenance of Properties |
115 |
SECTION 5.08. |
Insurance |
116 |
SECTION 5.09. |
Books and Records; Inspection and Audit Rights |
116 |
SECTION 5.10. |
Compliance with Laws |
117116 |
SECTION 5.11. |
Use of Proceeds and Letters of Credit |
117 |
SECTION 5.12. |
Further Assurances |
117 |
SECTION 5.13. |
Maintenance of Ratings |
118117 |
SECTION 5.14. |
Databases; Software |
118 |
SECTION 5.15. |
Maintenance of Websites and Domain Names |
118 |
ARTICLE VI
Negative Covenants
SECTION 6.01. |
Indebtedness; Certain Equity Securities |
118 |
SECTION 6.02. |
Liens |
121 |
SECTION 6.03. |
Fundamental Changes; Business Activities |
123124 |
SECTION 6.04. |
Investments, Loans, Advances, Guarantees and Acquisitions |
125 |
SECTION 6.05. |
Asset Sales |
129 |
SECTION 6.06. |
Sale/Leaseback Transactions |
131132 |
SECTION 6.07. |
Hedging Agreements |
131132 |
SECTION 6.08. |
Restricted Payments; Certain Payments of Indebtedness |
131132 |
SECTION 6.09. |
Transactions with Affiliates |
134135 |
SECTION 6.10. |
Restrictive Agreements |
134136 |
SECTION 6.11. |
Amendment of Material Documents |
136137 |
SECTION 6.12. |
Leverage Ratio |
136138 |
SECTION 6.13. |
[Reserved] |
136138 |
SECTION 6.14. |
Fiscal Year |
136138 |
ARTICLE VII
Events of Default
SECTION 7.01. |
Events of Default |
136138 |
SECTION 7.02. |
Right to Cure |
139141 |
ARTICLE VIII
The Administrative Agent
SECTION 8.01. |
Authorization and Action |
140142 |
SECTION 8.02. |
Certain ERISA Matters |
145146 |
ARTICLE IX
Miscellaneous
SECTION 9.01. |
Notices |
147148 |
SECTION 9.02. |
Waivers; Amendments |
149150 |
SECTION 9.03. |
Expenses; Indemnity; Damage Waiver |
152153 |
SECTION 9.04. |
Successors and Assigns |
154155 |
SECTION 9.05. |
Survival |
162163 |
SECTION 9.06. |
Integration; Effectiveness |
163164 |
|
163 |
|
SECTION 9.07. |
Severability |
164 |
SECTION 9.08. |
Right of Setoff |
164 |
SECTION 9.09. |
Governing Law; Jurisdiction; Consent to Service of Process |
164165 |
SECTION 9.10. |
WAIVER OF JURY TRIAL |
165166 |
SECTION 9.11. |
Headings |
165166 |
SECTION 9.12. |
Confidentiality |
165166 |
SECTION 9.13. |
Interest Rate Limitation |
166167 |
SECTION 9.14. |
Release of Liens and Guarantees |
166167 |
SECTION 9.15. |
USA PATRIOT Act Notice |
167168 |
SECTION 9.16. |
No Fiduciary Relationship |
167168 |
SECTION 9.17. |
Non-Public Information |
168169 |
SECTION 9.18. |
Acknowledgement and Consent to Bail-In of EEA Financial Institutions |
169170 |
SCHEDULE: |
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Schedule 2.01 |
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Commitments |
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EXHIBITS: |
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Exhibit A |
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Form of Assignment and Assumption |
Exhibit B |
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Form of Borrowing Request |
Exhibit C |
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Form of Guarantee and Collateral Agreement |
Exhibit D |
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Form of Compliance Certificate |
Exhibit E |
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Form of Interest Election Request |
Exhibit F |
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Form of Perfection Certificate |
Exhibit G |
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Form of Solvency Certificate |
Exhibit H-1 |
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Form of U.S. Tax Compliance Certificate for Non- U.S. Lenders that are not Partnerships for U.S. Federal Income Tax Purposes |
Exhibit H-2 |
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Form of U.S. Tax Compliance Certificate for Non- U.S. Participants that are not Partnerships for U.S. Federal Income Tax Purposes |
Exhibit H-3 |
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Form of U.S. Tax Compliance Certificate for Non- U.S. Participants that are Partnerships for U.S. Federal Income Tax Purposes |
Exhibit H-4 |
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Form of U.S. Tax Compliance Certificate for Non- U.S. Lenders that are Partnerships for U.S. Federal Income Tax Purposes |
Exhibit I |
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Form of Affiliated Assignment and Assumption |
Exhibit J |
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Auction Procedures |
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SECOND AMENDED AND RESTATED CREDIT AGREEMENT dated as of October 10, 2018 (this “Agreement”), among MOMENTIVE INC. (f/k/a SURVEYMONKEY INC.), as Borrower, MOMENTIVE GLOBAL INC. (f/k/a SVMK INC.), the LENDERS party hereto from time to time and JPMORGAN CHASE BANK, N.A., as Administrative Agent.
The parties hereto agree as follows:
SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the meanings specified below:
“ABR”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, shall bear interest at a rate determined by reference to the Alternate Base Rate.
“Accepting Lenders” has the meaning set forth in Section 2.22(a).
“Acquired EBITDA” means, with respect to any Person or business acquired in a Material Acquisition for any period, the amount for such period of Consolidated EBITDA of such Acquired Person or business (determined as if references to Holdings and the Subsidiaries in the definition of the term “Consolidated EBITDA” were references to such Acquired Person or business and its subsidiaries which become Subsidiaries), all as determined on a consolidated basis for such Acquired Person or business.
“Acquired Person” has the meaning set forth in the definition of Permitted Acquisition.
“Adjusted LIBOTerm SOFR Rate” means, with respect to any Eurocurrency Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to (a) the LIBOTerm SOFR Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate, plus (b)(i) 0.11448% for a one-month Interest Period, (ii) 0.26161% for a three-month Interest Period or (iii) 0.42826% for a six-month Interest Period; provided that if the Adjusted Term SOFR Rate as so determined would be less than zero, such rate shall be deemed to be equal to zero for the purposes of this Agreement.
“Administrative Agent” means JPMorgan Chase Bank, N.A., in its capacity as administrative agent hereunder and under the other Loan Documents, and its successors in such capacity as provided in Article VIII.
“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent.
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“Affiliate” means, with respect to a specified Person, another Person that directly or indirectly Controls or is Controlled by or is under common Control with the Person specified.
“Affiliated Assignment and Assumption” means an affiliated assignment and assumption agreement entered into by a Lender and a Purchasing Affiliated Lender or a Purchasing Borrower Party, as the case may be, substantially in the form of Exhibit I hereto.
“Aggregate Revolving Commitment” means the sum of the Revolving Commitments of all the Revolving Lenders.
“Aggregate Revolving Exposure” means the sum of the Revolving Exposures of all the Revolving Lenders.
“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the NYFRB Rate in effect on such day plus 1/2 of 1.00% per annum and (c) the Adjusted LIBOTerm SOFR Rate onfor a one month Interest Period as published two U.S. Government Securities Business Days prior to such day (or, if such day is not a U.S. Government Securities Business Day, the immediately preceding U.S. Government Securities Business Day) plus 1.00% per annum. For purposes of clause (c) above, the Adjusted LIBOTerm SOFR Rate on any day shall be based on the LIBO ScreenTerm SOFR Reference Rate at approximately 11:005:00 a.m., LondonChicago time, on such day for deposits in dollars with a maturity of one month (or if the LIBO Screen Rate is not available for such one month Interest Period(or any amended publication time for the Term SOFR Reference Rate, as specified by the Interpolated ScreenCME Term SOFR Administrator in the Term SOFR Reference Rate methodology). Any change in the Alternate Base Rate due to a change in the Prime Rate, the NYFRB Rate or the Adjusted LIBOTerm SOFR Rate shall be effective from and including the effective date of such change in the Prime Rate, the NYFRB Rate or the Adjusted LIBOTerm SOFR Rate, respectively. If the Alternate Base Rate is being used as an alternative rate of interest pursuant to Section 2.14 hereof, then the Alternate Base Rate shall be the greater of clauseclauses (a) and (b) above and shall be determined without reference to clause (c) above. For the avoidance of doubt, if the Alternate Base Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.
“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to Holdings, the Borrower or any Subsidiary from time to time concerning or relating to bribery, corruption or money laundering.
“Applicable Percentage” means, at any time, with respect to any Revolving Lender, the percentage of the Aggregate Revolving Commitment represented by such Lender’s Revolving Commitment at such time, subject to adjustment as required to give effect to any reallocation of LC Exposure or Swingline Exposure made pursuant to paragraph (a)(iv) of Section 2.20. If the Revolving Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Revolving
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Commitments most recently in effect, giving effect to any assignments and to any Revolving Lender’s status as a Defaulting Lender at the time of determination.
“Applicable Rate” means, for any day, (a) with respect to any Term Loan, (i) 2.75 % per annum, in the case of an ABR Loan, or (ii) 3.75% per annum, in the case of a EurocurrencyTerm Benchmark Loan, (b) with respect to any Incremental Term Loan of any Series, the rate per annum specified in the Incremental Facility Agreement establishing the Incremental Term Commitments of such Series, and (c) with respect to any ABR Loan or EurocurrencyTerm Benchmark Loan that is a Revolving Loan or a Swingline Loan, or with respect to the commitment fees payable hereunder, the applicable rate per annum set forth below under the caption “ABR Spread”, “EurocurrencyTerm Benchmark Spread” or “Commitment Fee Rate”, as the case may be, based upon the Leverage Ratio as of the end of the fiscal quarter of the Borrower for which consolidated financial statements have theretofore been most recently delivered pursuant to Section 5.01(a) or 5.01(b); provided that, for purposes of clause (c), until the date of the delivery of the consolidated financial statements pursuant to Section 5.01(a) or 5.01(b) as of and for the first full fiscal quarter ended after the Second Refinancing Facility Agreement Effective Date, the Applicable Rate shall be based on the rates per annum set forth in Category 2:
Leverage Ratio: |
ABR |
EurocurrencyTerm Benchmark Spread |
Commitment Fee |
Category 1 ≥3.00:1 |
1.50% |
2.50% |
0.375% |
Category 2 <3.00:1 and ≥2.25:1 |
1.25% |
2.25% |
0.325% |
Category 3 <2.25:1 and >1.50:1 |
1.00% |
2.00% |
0.275% |
Category 4 ≤1.50:1 |
0.75% |
1.75% |
0.250% |
For purposes of the foregoing, each change in the Applicable Rate resulting from a change in the Leverage Ratio shall be effective during the period commencing on and including the Business Day following the date of delivery to the Administrative Agent pursuant to Section 5.01(a) or 5.01(b) of the consolidated financial statements indicating such change and ending on the date immediately preceding the
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effective date of the next such change. Notwithstanding the foregoing, the Applicable Rate shall be based on the rates per annum set forth in Category 1 (i) at any time that an Event of Default has occurred and is continuing or (ii) if the Borrower fails to deliver the consolidated financial statements required to be delivered pursuant to Section 5.01(a) or 5.01(b) or any Compliance Certificate required to be delivered pursuant hereto, in each case within the time periods specified herein for such delivery, during the period commencing on and including the day of the occurrence of a Default resulting from such failure and until the delivery thereof.
“Approved Fund” means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in commercial loans and similar extensions of credit in the ordinary course and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.
“Arrangers” means JPMorgan Chase Bank, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated (or any other registered broker-dealer wholly-owned by Bank of America Corporation to which all or substantially all of Bank of America Corporation’s or any of its subsidiaries’ investment banking, commercial lending services or related businesses may be transferred following the date of this Agreement) and SunTrust Robinson Humphrey, Inc. in their capacities as joint lead arrangers and joint bookrunners for the credit facilities initially provided for herein.
“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an Eligible Assignee, with the consent of any Person whose consent is required by Section 9.04, and accepted by the Administrative Agent, in the form of Exhibit A (including electronic records generated by the use of an electronic platform) or any other form approved by the Administrative Agent.
“Auction Manager” has the meaning set forth in Section 2.23(a).
“Auction Notice” means an auction notice given by a Purchasing Borrower Party in accordance with the Auction Procedures with respect to an Auction Purchase Offer.
“Auction Procedures” means the auction procedures with respect to Auction Purchase Offers set forth in Exhibit J hereto.
“Auction Purchase Offer” means an offer by a Purchasing Borrower Party to purchase Term Loans of one or more Classes pursuant to modified Dutch auctions conducted in accordance with the Auction Procedures and otherwise in accordance with Section 2.23.
“Available Basket Amount” means, as of any time, (a) $30,000,000, or, if the Leverage Ratio after giving effect to any Restricted Payment, Investment or payment in respect of Junior Indebtedness referred to in clause (b) of this definition is, on a Pro Forma Basis, less than 3.00 to 1.00, $60,000,000, minus (b) the sum of all Investments made prior to such time in reliance on Section 6.04(v)(ii) of this Agreement, the First
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Amended and Restated Credit Agreement or the Original Credit Agreement, plus all Restricted Payments made prior to such time in reliance on Section 6.08(a)(viii)(B) of this Agreement, the First Amended and Restated Credit Agreement or the Original Credit Agreement plus all expenditures in respect of Junior Indebtedness made prior to such time in reliance on Section 6.08(b)(vi)(B) of this Agreement, the First Amended and Restated Credit Agreement or the Original Credit Agreement, in each case utilizing the Available Basket Amount or portions thereof in effect on the date of any such Restricted Payment, Investment or expenditure in respect of Junior Indebtedness. Under no circumstances will the sum of the amounts referred to in clause (b) of this definition at any time exceed $60,000,000; and the aggregate of all Investments, Restricted Payments and expenditures in respect of Junior Indebtedness made on any date in reliance on the Available Basket Amount on such date may not exceed the amount of the Available Basket Amount on such date.
“Available Domestic Cash” means, on any date, the amount of Unrestricted Cash held on such date by Holdings or any Domestic Subsidiary, other than Unrestricted Cash held in accounts outside the United States of America.
“Available ECF Amount” means, as of any time, the excess, if any, of:
“Available Foreign Cash” means, on any date, the amount of Unrestricted Cash held on such date by Foreign Subsidiaries in accounts outside the United States of America.
“Available Liquidity” means, on any date, the sum of (i) Available Domestic Cash on such date plus (ii) if on such date the conditions to borrowing set forth in Section 4.02 are satisfied, the amount of the Aggregate Revolving Commitment minus the amount of the Aggregate Revolving Exposure on such date.
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“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.
“Bail-In Legislation” means, with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time that is described in the EU Bail-In Legislation Schedule.
“Bankruptcy Code” means the provisions of Title 11 of the United States Code, 11 USC. §§ 101 et seq.
“Bankruptcy Event” means, with respect to any Person, that such Person has become the subject of a voluntary or involuntary bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, administrator, custodian, assignee for the benefit of creditors or similar Person charged with the reorganization or liquidation of its business appointed for it, or, in the good faith determination of the Administrative Agent, has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in, any such proceeding or appointment or has had any order for relief in such proceeding entered in respect thereof; provided that a Bankruptcy Event shall not result solely by virtue of any ownership interest, or the acquisition of any ownership interest, in such Person by a Governmental Authority; provided, however, that such ownership interest does not result in or provide such Person with immunity from the jurisdiction of courts within the United States of America or from the enforcement of judgments or writs of attachment on its assets or permit such Person (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any agreements made by such Person.
“Benchmark Transition Event” has the meaning set forth in Section 2.14(b).
“Beneficial Ownership Certification” means a certification regarding beneficial ownership as required by the Beneficial Ownership Regulation.
“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.
“Benefit Plan” means any of (a) an “employee benefit plan” (as defined in Section 3(3) of ERISA) that is subject to Title I of ERISA, (b) a “plan” as defined in Section 4975 of the Code to which Section 4975 of the Code applies, and (c) any Person whose assets include (for purposes of the Plan Asset Regulations or otherwise for purposes of Title I of ERISA or Section 4975 of the Code) the assets of any such “employee benefit plan” or “plan”.
“Board of Governors” means the Board of Governors of the Federal Reserve System of the United States of America.
“BofA” means Bank of America, N.A.
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“Borrower” means Momentive Inc. (f/k/a SurveyMonkey Inc.), a Delaware corporation and a wholly-owned Subsidiary of Holdings, or the Successor Borrower as provided in Section 6.03.
“Borrowing” means (a) Loans of the same Class and Type made, converted or continued on the same date and, in the case of EurocurrencyTerm Benchmark Loans, as to which a single Interest Period is in effect, or (b) a Swingline Loan.
“Borrowing Request” means a request by the Borrower for a Borrowing in accordance with Section 2.03 or 2.04, as applicable, which shall be, in the case of any such written request, in the form of Exhibit B or any other form approved by the Administrative Agent.
“Business Day” means any day that is not(other than a Saturday, or a Sunday or other day) on which commercial banks are open for business in New York City are authorized or required by law to remain closed; provided that, when used in connection with a Eurocurrency Loan,addition to the termforegoing, a “Business Day” shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market, in relation to Loans referencing the Adjusted Term SOFR Rate and any interest rate settings, fundings, disbursements, settlements or payments of any such Loans referencing the Adjusted Term SOFR Rate or any other dealings of such Loans referencing the Adjusted Term SOFR Rate, be any such day that is only a U.S. Government Securities Business Day.
“Capital Expenditures” means, for any period, (a) the additions to property, plant and equipment, capitalized software development costs and other capital expenditures of Holdings and its consolidated Subsidiaries that are (or should be) set forth in a consolidated statement of cash flows of Holdings and its consolidated Subsidiaries for such period prepared in accordance with GAAP, excluding (i) any such expenditures made to restore, replace or rebuild assets to the condition of such assets immediately prior to any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of, such assets to the extent such expenditures are made with insurance proceeds, condemnation awards or damage recovery proceeds relating to any such casualty, damage, taking, condemnation or similar proceeding, and (ii) any such expenditures constituting Permitted Acquisitions and (b) such portion of principal payments on Capital Lease Obligations made by Holdings and its consolidated Subsidiaries during such period as is attributable to additions to property, plant and equipment that have not otherwise been reflected on the consolidated statement of cash flows as additions to property, plant and equipment.
“Capital Lease Obligations” of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital or finance leases on a balance sheet of such Person under GAAP; the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP, and the final maturity of such
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obligations shall be the date of the last payment of such or any other amounts due under such lease (or other arrangement) prior to the first date on which such lease (or other arrangement) may be terminated by the lessee without payment of a premium or a penalty. For purposes of Section 6.02, a Capital Lease Obligation shall be deemed to be secured by a Lien on the property being leased and such property shall be deemed to be owned by the lessee. Notwithstanding the foregoing, neither the New Building Leases nor any similar lease entered into in the future shall constitute a Capital Lease Obligation.
“Cash Consideration” has the meaning set forth in Section 6.05.
“CFC” means (a) each Person that is a “controlled foreign corporation” (within the meaning of Section 957 of the Code), but only if a U.S. Person that is a Loan Party or an Affiliate of a Loan Party is, with respect to such Person, a “United States shareholder” (within the meaning of Section 951(b)) described in Section 951(a)(1); and (b) each Subsidiary of any such Person described in clause (a).
“Change in Control” means (a) prior to a Holdings Merger, the failure of Holdings to own, directly or indirectly, 100% of issued and outstanding Equity Interests in the Borrower; (b) the acquisition or ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Exchange Act and the rules of the SEC thereunder as in effect on the Second Refinancing Facility Agreement Effective Date) (other than any Major Stockholder), of Equity Interests in Holdings representing (x) more than 35% of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests in Holdings and (y) more than the percentage of the aggregate ordinary voting power represented by the Equity Interests in Holdings then owned by the Major Stockholders; (c) persons who were (i) directors of Holdings on the Second Refinancing Facility Agreement Effective Date, (ii) nominated or approved by the board of directors of Holdings or (iii) appointed by directors who were directors of Holdings on the Second Refinancing Facility Agreement Effective Date or were nominated or approved as provided in clause (ii) above, ceasing to occupy a majority of the seats (excluding vacant seats) on the board of directors of Holdings or (d) the occurrence of any “change in control” (or similar event, however denominated) with respect to Holdings or the Borrower under and as defined in any indenture or other agreement or instrument evidencing or governing the rights of the holders of any Material Indebtedness of Holdings or the Borrower.
“Change in Law” means the occurrence, after the Original Effective Date (or with respect to any Lender, if later, the date on which such Lender becomes a Lender), of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel
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Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted, promulgated, issued or implemented.
“Class”, when used in reference to (a) any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Term Loans, Incremental Term Loans of any Series, Revolving Loans or Swingline Loans, (b) any Commitment, refers to whether such Commitment is a Term Commitment, an Incremental Term Commitment of any Series or a Revolving Commitment and (c) any Lender, refers to whether such Lender has a Loan or Commitment of a particular Class.
“CME Term SOFR Administrator” means CME Group Benchmark Administration Limited as administrator of the forward-looking term Secured Overnight Financing Rate (SOFR) (or a successor administrator).
“Code” means the Internal Revenue Code of 1986, as amended.
“Collateral” means any and all assets of any Loan Party, whether real or personal, tangible or intangible, on which Liens are purported to be granted pursuant to the Security Documents as security for the Obligations.
“Collateral Agreement” means the Guarantee and Collateral Agreement among Holdings, the Borrower, the other Loan Parties and the Administrative Agent, dated as of the Original Effective Date, together with all supplements thereto.
“Collateral and Guarantee Requirement” means, at any time (but giving effect to any time periods provided under any Loan Document for delivery), the requirement that:
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Notwithstanding the foregoing provisions of this definition or anything in this Agreement or any other Loan Document to the contrary, (a) the foregoing provisions of this definition shall not require the creation or perfection of pledges of or security interests in, or the obtaining of legal opinions or other deliverables with respect to, particular assets of the Loan Parties, or the provision of Guarantees by any Subsidiary, if, and for so long as, the Administrative Agent and the Borrower reasonably agree that the cost of creating or perfecting such pledges or security interests in such assets, or obtaining such legal opinions or other deliverables in respect of such assets, or providing such Guarantees (taking into account any adverse tax consequences to the Borrower and the Subsidiaries), shall be excessive in view of the benefits to be obtained by the Lenders therefrom, (b) Liens required to be granted from time to time pursuant to the term “Collateral and Guarantee Requirement” shall be subject to exceptions and limitations set forth in the Security Documents and, to the extent appropriate in the applicable jurisdiction, as reasonably agreed between the Administrative Agent and the Borrower, (c) in no event shall the Collateral include any Excluded Assets and (d) the foregoing provisions of this definition shall not require control agreements or perfection by “control” (other than in respect of certificated Collateral) with respect to any Collateral (including, without limitation, deposit accounts or other bank or securities accounts). The Administrative Agent may grant extensions of time for the creation and perfection of security interests, in or the obtaining of, legal opinions or other deliverables with respect to particular assets or the provision of any Guarantee by any Subsidiary (including extensions beyond the Original Effective Date or in connection with assets acquired, or Subsidiaries formed or acquired, after the Original Effective Date) where it determines that such action cannot be accomplished without undue effort or expense by the time or times at which it would otherwise be required to be accomplished by this Agreement or the Security Documents.
“Commitment” means a Revolving Commitment, a Term Commitment, an Incremental Term Commitment of any Series or any combination thereof (as the context requires).
“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.
“Compliance Certificate” means a Compliance Certificate in the form of Exhibit D or any other form approved by the Administrative Agent.
“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.
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“Consolidated EBITDA” means, for any period, Consolidated Net Income for such period, plus
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provided that (A) any cash payment made with respect to any Non-Cash Charges added back in computing Consolidated EBITDA for any prior period pursuant to clause (a)(vi) above shall be subtracted in computing Consolidated EBITDA for the period in which such cash payment is made and (B) the aggregate amount of all amounts under clauses (a)(v), (ix) and (xiii) that increase Consolidated EBITDA in any Test Period shall not exceed, and shall be limited to, 20% of Consolidated EBITDA in respect of such Test Period; and minus
provided, further that Consolidated EBITDA for any period shall be calculated so as to exclude (without duplication of any adjustment referred to above) the effect of:
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“Consolidated First Lien Debt” means, as of any date, the aggregate amount of Consolidated Funded Debt of Holdings and the Subsidiaries outstanding on such date (including the Loan Document Obligations, to the extent they constitute Consolidated Funded Debt) that is secured by Liens (other than any Liens on Collateral subordinated to the Liens under the Security Documents securing the Loan Document Obligations) on any property or assets of Holdings, the Borrower or any of the other Subsidiaries.
“Consolidated Funded Debt” means, as of any date of determination with respect to Holdings and its Subsidiaries on a consolidated basis, without duplication, the sum of: (a) the principal amount of all obligations for borrowed money, whether current or long-term and all obligations evidenced by bonds, debentures, notes, loan agreements or other similar instruments; (b) the principal amount of all purchase money Indebtedness; (c) amounts drawn and not yet reimbursed under all letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar instruments (excluding any of the foregoing securing obligations under the New Building Leases); (d) the principal amount of all obligations in respect of the deferred purchase price of property or services (excluding deferred compensation, accruals for payroll and other operating expenses accrued in the ordinary course of business and accounts payable in the ordinary course of business); (e) the principal amount of all Capital Lease Obligations; (f) all Disqualified Equity Interests (valued as set forth in clause (h) of the definition of Indebtedness); (g) all Guarantees with respect to Indebtedness of the types specified in clauses (a) through (f) above of another Person; and (h) all Indebtedness of the types referred to in clauses (a) through (g) above of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which any Loan Party or any Subsidiary is a general partner or joint venturer, to the extent that such Indebtedness is recourse to such Person. Notwithstanding anything to the contrary contained herein, (x) Consolidated Funded Debt shall not include (i) any amounts relating to employee consulting arrangements, accrued expenses, deferred rent, deferred taxes, deferred revenue, customary obligations under employment agreements and deferred compensation or (ii)(A) post-closing purchase price adjustments, (B) obligations in respect of earn-out payments (including after the amount of such earn-out payments becomes fixed) or (C) to the extent the cumulative aggregate of the initial amounts thereof does not exceed $25,000,000 in any fiscal year, other deferred purchase price obligations, in each case referred to in this subclause (x)(ii)(C), incurred in connection with any Permitted Acquisition or other Investment permitted by Section 6.04 (it being agreed that installment payments or prepayments of any deferred purchase price obligations referred to in subclause (C) that are incurred in any particular fiscal year will first be deemed to have been applied in respect of the initial amounts thereof in excess of $25,000,000) and (y) the amount of any item of Consolidated Funded Debt will be determined without giving effect to any election to value any Indebtedness at “fair value”, as described in Section 1.04(a), or any other accounting principle that results in the amount of any such Indebtedness (other than zero coupon Indebtedness) to be below the stated principal amount of such Indebtedness.
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“Consolidated Net Income” means, for any period, the net income or loss of Holdings and its consolidated Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded (a) the income or loss of any Person (other than Holdings) that is not a consolidated Subsidiary except to the extent of the amount of cash dividends or similar cash distributions actually paid by such Person to Holdings, the Borrower or, subject to clauses (b) and (c) below, any other consolidated Subsidiary during such period, (b) the income of, and any amounts referred to in clause (a) above paid to, any consolidated Subsidiary (other than any Loan Party) to the extent that, on the date of determination, the declaration or payment of cash dividends or similar cash distributions by such Subsidiary is not permitted without any prior approval of any Governmental Authority that has not been obtained or is not permitted by the operation of the terms of the organizational documents of such Subsidiary, any agreement or other instrument binding upon Holdings or any Subsidiary or any law applicable to Holdings or any Subsidiary, unless such restrictions with respect to the payment of cash dividends and other similar cash distributions has been legally and effectively waived, and (c) the income or loss of, and any amounts referred to in clause (a) above paid to, any consolidated Subsidiary that is not wholly-owned by Holdings to the extent such income or loss or such amounts are attributable to the noncontrolling interest in such consolidated Subsidiary.
In addition, to the extent not already included in Consolidated Net Income, Consolidated Net Income shall include the amount of proceeds actually received by Holdings, the Borrower and the other Subsidiaries during the relevant period from business interruption insurance or from reimbursement of expenses and charges that are covered by indemnification and other reimbursement provisions in connection with any acquisition or other Investment or any Disposition of any asset permitted hereunder; provided that the amount of any such proceeds thereafter returned or repaid shall be deducted from Consolidated Net Income in the period in which so returned or repaid.
“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies, or the dismissal or appointment of the management, of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.
“Convertible Indebtedness” means Indebtedness of Holdings that is convertible into (i) Qualified Equity Interests of Holdings (or other securities or property following a merger event or other change of the Qualified Equity Interests of Holdings) (and cash in lieu of fractional shares), (ii) cash or (iii) a combination of clauses (i) and (ii).
“Credit Party” means the Administrative Agent, each Issuing Bank, the Swingline Lender and each other Lender.
“CS” means Credit Suisse AG, Cayman Islands Branch.
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“Cumulative Borrower’s ECF Share” means, as of any day, for each fiscal year (commencing with the fiscal year ending December 31, 2013 but excluding the fiscal year ending December 31, 2016, and the fiscal year ending December 31, 2018) for which a Compliance Certificate has been delivered on or prior to such day in connection with the delivery of annual financial statements pursuant to Section 5.01(a) of this Agreement, Section 5.01(a) of the First Amended and Restated Credit Agreement or Section 5.01(a) of the Original Credit Agreement, the sum (in no event less than zero) of the amounts shown in such Compliance Certificates as the amounts of Excess Cash Flow for the fiscal years covered by such Compliance Certificates, less in each case the amount of such Excess Cash Flow required to be applied to prepay Term Loans pursuant to Section 2.11(d) of this Agreement, Section 2.11(d) of the First Amended and Restated Credit Agreement or Section 2.11(d) of the Original Credit Agreement.
“Debt Fund Affiliates” means any fund managed by, or under common management with, any Major Stockholder that is a bona fide debt fund or an investment vehicle that is primarily engaged in the making, purchasing, holding or otherwise investing in commercial loans, bonds and similar extensions of credit in the ordinary course and with respect to which no Major Stockholder, directly or indirectly, possesses the power to direct or cause the direction of the investment policies of such entity.
“Debtor Relief Laws” shall mean the Bankruptcy Code and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization or similar debtor relief laws of the United States of America or other applicable jurisdictions affecting the rights of creditors generally from time to time in effect.
“Default” means any event or condition that constitutes, or upon notice, lapse of time or both would (unless cured or waived) constitute, an Event of Default.
“Defaulting Lender” means, subject to Section 2.20(b), any Lender that (a) has failed to (i) fund all or any portion of its Loans within two Business Days of the date such Loans were required to be funded hereunder unless such Lender notifies the Administrative Agent and the Borrower in writing that such failure is the result of such Lender’s good faith determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied, or (ii) pay to the Administrative Agent, any Issuing Bank, the Swingline Lender or any other Lender any other amount required to be paid by it hereunder (including in respect of its participation in Letters of Credit or Swingline Loans) within two Business Days of the date when due, (b) has notified the Borrower, the Administrative Agent, any Issuing Bank or the Swingline Lender in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect (unless such writing or public statement relates to such Lender’s obligation to fund a Loan hereunder and states that such position is based on such Lender’s good faith determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such writing or public statement) cannot be satisfied), (c) has failed, within three Business Days after written request by the Administrative Agent or the Borrower, to
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confirm in writing to the Administrative Agent and the Borrower that it will comply with its prospective funding obligations hereunder (provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by the Administrative Agent and the Borrower), or (d) has, or has a direct or indirect parent company that has, (i) become the subject to any Bankruptcy Event, (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender or (iii) become the subject of a Bail-In Action. Any determination by the Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.20(b)) upon delivery of written notice of such determination to the Borrower, each Issuing Bank, the Swingline Lender and each Lender.
“Delaware Divided LLC” means any Delaware LLC which has been formed upon the consummation of a Delaware LLC Division.
“Delaware LLC” means any limited liability company organized or formed under the laws of the State of Delaware.
“Delaware LLC Division” means the statutory division of any Delaware LLC into two or more Delaware LLCs pursuant to Section 18-217 of the Delaware Limited Liability Company Act.
“Designated Subsidiary” means each Material Subsidiary that is not an Excluded Subsidiary and each IP Subsidiary.
“Disclosure Letter” means the disclosure letter, dated as of the Second Refinancing Facility Agreement Effective Date, delivered by Holdings and the Borrower to the Administrative Agent for the benefit of the Lenders.
“Disposition” has the meaning set forth in Section 6.05.
“Disqualified Equity Interest” means, with respect to any Person, any Equity Interest in such Person that requires the payment of any dividend (other than dividends payable solely in Qualified Equity Interests) or that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable, either mandatorily or at the option of the holder thereof), or upon the happening of any event or condition:
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in each case, on or prior to the date 91 days after the latest Maturity Date (determined as of the date of issuance thereof or, in the case of any such Equity Interests outstanding on the Second Refinancing Facility Agreement Effective Date, the Second Refinancing Facility Agreement Effective Date); provided, however, (i) an Equity Interest in any Person that would not constitute a Disqualified Equity Interest but for terms thereof giving holders thereof the right to require such Person to redeem or purchase such Equity Interest upon the occurrence of an “asset sale” or a “change of control” (or similar event, however denominated) shall not constitute a Disqualified Equity Interest if any such requirement becomes operative only after repayment in full of all the Loans and all other Loan Document Obligations that are accrued and payable, the cancellation or expiration of all Letters of Credit and the termination or expiration of the Commitments, (ii) an Equity Interest in any Person that is issued to any employee or to any plan for the benefit of employees or by any such plan to such employees shall not constitute a Disqualified Equity Interest solely because it may be required to be repurchased by such Person or any of its subsidiaries in order to satisfy any applicable exercise price with respect to such Equity Interest or any applicable statutory or regulatory obligations or as a result of such employee’s termination, death or disability, and (iii) in no event shall a Permitted Bond Hedge Transaction or a Permitted Warrant Transaction constitute a Disqualified Equity Interest.
“Documentation Agent” means SunTrust Bank in its capacity as documentation agent for the credit facilities provided for herein.
“dollars” or “$” refers to lawful money of the United States of America.
“Domain Names” means all domain names owned by, used by or assigned to the Loan Parties and all exclusive and nonexclusive licenses to the Loan Parties from third parties of rights to use domain names owned by such third parties, together with any and all renewals and extensions thereof.
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“Domestic Subsidiary” means any Subsidiary incorporated or organized under the laws of the United States of America, any State thereof or the District of Columbia.
“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member Country that is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country that is a parent of an institution described in clause (a) above or (c) any financial institution established in an EEA Member Country that is a subsidiary of an institution described in clause (a) or (b) above and is subject to consolidated supervision with its parent.
“EEA Member Country” means (a) any member state of the European Union, (b) Iceland, (c) Liechtenstein and (d) Norway.
“EEA Resolution Authority” means any public administrative authority or any Person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.
“Electronic Signature” means an electronic sound, symbol, or process attached to, or associated with, a contract or other record and adopted by a person with the intent to sign, authenticate or accept such contract or record.
“Eligible Assignee” means (a) a Lender, (b) an Affiliate of a Lender, (c) an Approved Fund and (d) any other Person, other than, in each case, (i) a natural person or, (ii) except to the extent permitted under Sections 2.23, 9.04(e) or 9.04(f), Holdings, the Borrower, any other Subsidiary or any other Affiliate of Holdings.
“Engagement Letter” means the Engagement Letter dated September 28, 2018, among the Borrower, JPMorgan Chase Bank, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, SunTrust Robinson Humphrey, Inc. and SunTrust Bank.
“Environmental Laws” means all rules, regulations, codes, ordinances, judgments, orders, decrees and other laws, and all injunctions, notices or binding agreements, issued, promulgated or entered into by any Governmental Authority and relating in any way to the environment, to preservation or reclamation of natural resources, to the management, Release or threatened Release of any Hazardous Material or to related health or safety matters.
“Environmental Liability” means any liability, obligation, loss, claim, action, order or cost, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties and indemnities), directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the Release or threatened Release of any Hazardous Materials or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.
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“Equity Interests” means shares of capital stock, partnership interests, membership interests, beneficial interests or other ownership interests, whether voting or nonvoting, in, or interests in the income or profits of, a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any of the foregoing; provided that Equity Interests shall not include any Indebtedness constituting Convertible Indebtedness.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder.
“ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with Holdings, is treated as a single employer under Section 414(b) or (c) of the Code or Section 4001(a)(14) of ERISA, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.
“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived), (b) the failure to satisfy the “minimum funding standard” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived, (c) the filing pursuant to Section 412(c) of the Code or Section 302(c) of ERISA, of an application for a waiver of the minimum funding standard with respect to any Plan, (d) a determination that any Plan is, or is expected to be, in “at-risk” status (as defined in Section 303(i)(4) of ERISA or Section 430(i)(4) of the Code), (e) the incurrence by Holdings or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan, (f) the receipt by Holdings or any of its ERISA Affiliates from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan, (g) the incurrence by Holdings or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal of Holdings or any of its ERISA Affiliates from any Plan or Multiemployer Plan, or (h) the receipt by Holdings or any of its ERISA Affiliates of any notice, or the receipt by any Multiemployer Plan from Holdings or any of its ERISA Affiliates of any notice, concerning the imposition upon Holdings or any of its ERISA Affiliates of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent, within the meaning of Title IV of ERISA or in endangered or critical status, within the meaning of Section 305 of ERISA.
“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor Person), as in effect from time to time.
“Eurocurrency”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, shall bear interest at a rate determined by reference to the Adjusted LIBO Rate.
“Event of Default” has the meaning set forth in Article VII.
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“Excess Cash Flow” means, for any fiscal year, the sum (without duplication) of:
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Notwithstanding any other provision of this Agreement, amounts used in connection with (i) acquiring Term Loans under Section 2.23 and (ii) assignments of Term Loans to Purchasing Borrower Parties pursuant to Section 9.04(e) shall in each case not reduce or be credited against Excess Cash Flow. For the avoidance of doubt, Excess Cash Flow shall not include the proceeds of an IPO of Holdings or the Borrower or the proceeds from any subordinated debt or equity financing.
“Exchange Act” means the United States Securities Exchange Act of 1934.
“Excluded Assets” means (a) any asset if, to the extent and for so long as the grant of a Lien thereon to secure the Loan Document Obligations is prohibited by any Requirements of Law (other than to the extent that any such prohibition would be rendered ineffective pursuant to any other applicable Requirements of Law); (b) any leasehold interests; (c) motor vehicles and other assets subject to certificate of title; (d) letter of credit rights (except to the extent perfection can be obtained by the filing of uniform commercial code financing statements) and commercial tort claims with a value of less than $1,000,000; (e) Equity Interests in any person, other than wholly-owned Subsidiaries, that cannot be pledged without the consent of one or more third parties (after giving effect to the applicable anti-assignment provisions of the Uniform Commercial Code or other applicable law) and which the Borrower is unable, after use of commercially reasonable efforts, to obtain such required third party consents to pledges thereof; (f) any lease, license or other agreement or any property subject to a purchase money security interest or other arrangement to the extent that a grant of a security interest therein would violate or invalidate such lease, license or agreement or arrangement or create a right of termination in favor of any other party thereto (other than the Borrower or a Guarantor) after giving effect to the applicable anti-assignment provisions of the Uniform Commercial Code or other applicable law (including the Bankruptcy Code), unless the assignment thereof is deemed effective under the Uniform Commercial Code notwithstanding such prohibition, other than, in any case, proceeds and receivables thereof; (g) any governmental licenses or state or local franchises, charters and authorizations, to the extent security interests in such licenses, franchises, charters or authorizations are prohibited or restricted thereby (except to the extent such prohibition
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or restriction is deemed ineffective under the Uniform Commercial Code or other applicable law); (h) any “intent to use” trademark applications; and (i) more than 65% of the outstanding voting Equity Interests in any CFC or FSHCO.
“Excluded Sources” means (a) proceeds of any incurrence or issuance of Long-Term Indebtedness or Capital Lease Obligations, (b) Net Proceeds of any Disposition of assets made in reliance on Section 6.05(g) (other than the abandonment of Intellectual Property thereunder) or (h), (c) the proceeds, including insurance proceeds, arising from any casualty or condemnation event or other Prepayment Event referred to in clause (b) of the definition of such term, (d) proceeds of any issuance or sale of Equity Interests in Holdings or any capital contributions to Holdings, (e) cash distributions paid by any Foreign Subsidiary and (f) amounts described in the definition of Excess Cash Flow to the extent attributable to any Domestic Subsidiary owned by a Foreign Subsidiary.
“Excluded Subsidiary” means (a) any Subsidiary that is not a wholly-owned subsidiary of Holdings, (b) any Subsidiary that is a CFC or other Foreign Subsidiary, (c) any FSHCO, (d) any Subsidiary that is prohibited by any applicable law, rule or regulation or by any contractual obligation existing on the Original Effective Date or on the date such Subsidiary is acquired (but not entered into in contemplation of the Transactions or such acquisition) from guaranteeing the Loan Document Obligations or which would require governmental consent, approval, license or authorization to do so, and (e) any other Subsidiary excused from becoming a Loan Party pursuant to the last paragraph of the definition of the term “Collateral and Guarantee Requirement”; provided that any Subsidiary shall cease to be an Excluded Subsidiary at such time as it is a wholly-owned Subsidiary of Holdings and none of clauses (b) through (e) above apply to it.
“Excluded Swap Obligation” means, with respect to any Guarantor, any Swap Obligation if, and to the extent that, the Guarantee by such Guarantor of, or the grant by such Guarantor of a security interest to secure, such Swap Obligation (or any Guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Guarantor’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act at the time the Guarantee of such Guarantor becomes effective with respect to such related Swap Obligation.
“Excluded Taxes” means any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient: (a) Taxes imposed on or measured by net income or overall gross income or profits (however denominated), franchise Taxes and branch profits Taxes, in each case, (i) imposed by a jurisdiction (or any political subdivision thereof) under whose laws such Recipient is organized, or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located or (ii) that otherwise are Other Connection Taxes, (b) in the case of a Lender, U.S. Federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable
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interest in a Loan or Commitment pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan or Commitment (other than pursuant to an assignment request by the Borrower under Section 2.19(b)) or (ii) such Lender changes its lending office, except in each case to the extent that, pursuant to Section 2.17, amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender acquired the applicable interest in such Loan or Commitment or to such Lender immediately before it changed its lending office, (c) Taxes attributable to such Recipient’s failure to comply with Section 2.17(f) and (d) any withholding Taxes imposed under FATCA.
“Family Charitable Entity” means any charitable, tax-exempt entity which is controlled by Sheryl K. Sandberg, either alone or together with one or more of her Family Members.
“Family Member” means, with respect to any individual, any other individual having a relationship by blood (to the second degree of consanguinity), marriage, or adoption to such individual.
“Family Trust” means, with respect to any individual, trusts or other estate planning vehicles established for the benefit of Family Members of such individual and in respect of which such individual serves as trustee or in a similar capacity.
“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreements entered into pursuant to Section 1471(b) of the Code and any applicable intergovernmental agreement and related legislation or official administrative guidance implementing the foregoing.
“Federal Funds Effective Rate” means, for any day, the rate calculated by the NYFRB based on such day’s federal funds transactions by depository institutions (as determined in such manner as the NYFRB shall be set forth on its public websitethe NYFRB’s Website from time to time) and published on the next succeeding Business Day by the NYFRB as the federal funds effective rate; provided that if such rate shall be less than zero, such rate shall be deemed to be zero for all purposes of this Agreement.
“Fee Letter” means the Administrative Agent Fee Letter dated as of September 28, 2018, between the Borrower and JPMorgan Chase Bank, N.A.
“Financial Officer” means, with respect to any Person, the chief financial officer, the vice president, treasurer, the vice president, finance, the principal accounting officer, treasurer or controller of such Person.
“First Amended and Restated Credit Agreement” means this Agreement as in effect immediately prior to the Transactions to occur on the Second Refinancing Facility Agreement Effective Date.
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“First Lien Secured Leverage Ratio” means, on any date, the ratio of (a) Consolidated First Lien Debt as of such date minus the lesser of (i) the sum of Available Domestic Cash in excess of $5,000,000 on such date plus 80% of Available Foreign Cash on such date, and (ii) $50,000,000 to (b) Consolidated EBITDA for the period of four consecutive fiscal quarters of Holdings most recently ended on or prior to such date for which financial statements have been delivered or were by such date required to have been delivered pursuant to Section 5.01(a) or 5.01(b) (or prior to the first delivery of any such financial statements, as of, or period of four consecutive fiscal quarters ended, June 30, 2018.
“First Refinancing Facility Agreement” means the Refinancing Facility Agreement, dated as of April 13, 2017, among Holdings, the Borrower, the Subsidiary Loan Parties, the Lenders party thereto and the Administrative Agent.
“First Refinancing Facility Agreement Effective Date” means the date of satisfaction of the conditions precedent referred to in Section 6 of the First Refinancing Facility Agreement.
“Flood Insurance Laws” means, collectively, (i) National Flood Insurance Reform Act of 1994 (which comprehensively revised the National Flood Insurance Act of 1968 and the Flood Disaster Protection Act of 1973) as now or hereafter in effect or any successor statute thereto, (ii) the Flood Insurance Reform Act of 2004 as now or hereafter in effect or any successor statue thereto and (iii) the Biggert-Waters Flood Insurance Reform Act of 2012 as now or hereafter in effect or any successor statute thereto.
“Foreign Lender” means any Lender that is not a U.S. Person.
“Foreign Pledge Agreement” means a pledge or charge agreement granting a Lien on Equity Interests in a Foreign Subsidiary to secure the Obligations, governed by the law of the jurisdiction of organization of such Foreign Subsidiary and in form and substance reasonably satisfactory to the Administrative Agent.
“Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.
“Fronting Exposure” means, at any time there is a Defaulting Lender, (a) with respect to any Issuing Bank, such Defaulting Lender’s Applicable Percentage of the outstanding LC Exposure with respect to Letters of Credit issued by such Issuing Bank other than LC Exposure as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders or cash collateralized in accordance with the terms hereof, and (b) with respect to the Swingline Lender, such Defaulting Lender’s Applicable Percentage of outstanding Swingline Loans made by such Swingline Lender other than Swingline Loans as to which such Defaulting Lender’s participation obligation has been reallocated to other Revolving Lenders.
“FSHCO” means any Domestic Subsidiary if substantially all of its assets consist of the Equity Interests in or Indebtedness of one or more Foreign Subsidiaries or other Persons described in this definition.
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“GAAP” means generally accepted accounting principles in the United States of America, applied in accordance with the consistency requirements thereof.
“Governmental Approvals” means all authorizations, consents, approvals, permits, licenses and exemptions of, registrations and filings with, and reports to, Governmental Authorities.
“Governmental Authority” means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national body exercising such powers or functions, such as the European Union or the European Central Bank).
“Guarantee” of or by any Person (the “guarantor”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or other obligation; provided that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business or customary and reasonable indemnity obligations entered into in connection with any transaction not prohibited hereby or in the ordinary course of business. The amount, as of any date of determination, of any Guarantee shall be the principal amount or other determinable amount on such date of Indebtedness or other obligation guaranteed thereby (or, in the case of (i) any Guarantee the terms of which limit the monetary exposure of the guarantor or (ii) any Guarantee of an obligation that does not have a principal or determinable amount, the maximum monetary exposure as of such date of the guarantor under such Guarantee (as determined, in the case of clause (i), pursuant to such terms or, in the case of clause (ii), in good faith by a Financial Officer of Holdings)). The term “Guarantee” as a verb has a corresponding meaning.
“Guarantor” has the meaning set forth in the Collateral Agreement.
“Hazardous Materials” means all explosive, radioactive, hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.
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“Hedging Agreement” means any agreement with respect to any swap, forward, future or derivative transaction, or any option or similar agreement, involving, or settled by reference to, one or more rates, currencies, commodities, prices of equity or debt securities or instruments, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value, or any similar transaction or combination of the foregoing transactions; provided that no (i) phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of Holdings or the Subsidiaries, (ii) Permitted Bond Hedge Transactions or (iii) Permitted Warrant Transactions, in each case, shall be a Hedging Agreement.
“Holdings” means Momentive Global Inc. (f/k/a SVMK Inc.), a Delaware corporation.
“Holdings Merger” has the meaning set forth in Section 6.03(a).
“Incremental Commitment” means an Incremental Revolving Commitment or an Incremental Term Commitment.
“Incremental Facility” means an Incremental Revolving Facility or an Incremental Term Facility.
“Incremental Facility Agreement” means an Incremental Facility Agreement, in form and substance reasonably satisfactory to the Administrative Agent and the Borrower, among Holdings, the Borrower, the Administrative Agent and one or more Incremental Lenders, establishing Incremental Term Commitments of any Series or Incremental Revolving Commitments and effecting such other amendments hereto and to the other Loan Documents as are contemplated by Section 2.21.
“Incremental Lender” means an Incremental Revolving Lender or an Incremental Term Lender, as applicable.
“Incremental Revolving Commitment” means, with respect to any Lender, the commitment, if any, of such Lender, established pursuant to an Incremental Facility Agreement and Section 2.21, to make Revolving Loans and to acquire participations in Letters of Credit and Swingline Loans hereunder, expressed as an amount representing the maximum aggregate permitted amount of such Lender’s Revolving Exposure under such Incremental Facility Agreement.
“Incremental Revolving Facility” means an incremental portion of the Revolving Commitments established hereunder pursuant to an Incremental Facility Agreement providing for Incremental Revolving Commitments.
“Incremental Revolving Lender” means a Lender with an Incremental Revolving Commitment.
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“Incremental Term Commitment” means, with respect to any Lender, the commitment, if any, of such Lender, established pursuant an Incremental Facility Agreement and Section 2.21, to make Incremental Term Loans of any Series hereunder, expressed as an amount representing the maximum principal amount of the Incremental Term Loans of such Series to be made by such Lender.
“Incremental Term Facility” means an incremental term loan facility established hereunder pursuant to an Incremental Facility Agreement providing for Incremental Term Commitments.
“Incremental Term Lender” means a Lender with an Incremental Term Commitment or an outstanding Incremental Term Loan.
“Incremental Term Loan” means a Loan made by an Incremental Term Lender to the Borrower pursuant to Section 2.21.
“Incremental Term Loan Maturity Date” means, with respect to Incremental Term Loans of any Series, the scheduled date on which such Incremental Term Loans shall become due and payable in full hereunder, as specified in the applicable Incremental Facility Agreement, and any extended maturity date with respect to all or a portion of any Class of Incremental Term Loans of any Series hereunder pursuant to a Loan Modification Agreement.
“Indebtedness” of any Person means, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person (excluding trade accounts payable incurred in the ordinary course of business), (d) all obligations of such Person in respect of the deferred purchase price of property or services (excluding (i) accounts payable incurred in the ordinary course of business, intercompany payables and charges of expenses in the ordinary course of business, and accruals for payroll and other operating expenses accrued in the ordinary course of business, (ii) deferred compensation payable to directors, officers or employees of such Person and (iii) any purchase price adjustment or earnout incurred in connection with an acquisition, except to the extent that the amount payable pursuant to such purchase price adjustment or earnout is, or becomes, reasonably determinable), (e) all Capital Lease Obligations of such Person, (f) the maximum aggregate amount of all letters of credit and letters of guaranty in respect of which such Person is an account party (x) supporting Indebtedness or (y) obtained for any purpose not in the ordinary course of business, (g) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances in respect of which such Person is an account party (x) supporting Indebtedness or (y) obtained for any purpose not in the ordinary course of business, (h) all Disqualified Equity Interests in such Person, valued, as of the date of determination, at the greater of (i) the maximum aggregate amount that would be payable upon maturity, redemption, repayment or repurchase thereof (or of Disqualified Equity Interests or Indebtedness into which such Disqualified Equity Interests are convertible or exchangeable) and (ii) the maximum liquidation preference of such Disqualified Equity
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Interests, (i) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed by such Person, and (j) all Guarantees by such Person of Indebtedness described in any of the foregoing clauses (a) through (i) hereof of others. Notwithstanding anything to the contrary contained herein, Indebtedness shall not include (x) any amounts relating to employee consulting arrangements, accrued expenses, deferred rent, deferred taxes, customary obligations under employment agreements and deferred compensation, (y) deferred revenue and (z) the conversion by Holdings of its convertible securities pursuant to the terms of such convertible securities or otherwise in exchange therefor (other than for Disqualified Equity Interests or an instrument otherwise constituting Indebtedness). The Indebtedness of any Person shall include the Indebtedness of any other Person (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such other Person, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. The amount of Indebtedness of any Person for purposes of clause (i) above shall (unless such Indebtedness has been assumed by such Person) be deemed to be equal to the lesser of (A) the aggregate unpaid amount of such Indebtedness and (B) the fair market value of the property encumbered thereby as reasonably determined by such Person.
“Indemnified Institution” has the meaning set forth in Section 9.03(b).
“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any Loan Party under any Loan Document and (b) to the extent not otherwise described in (a), Other Taxes.
“Indemnitee” has the meaning set forth in Section 9.03(b).
“Intellectual Property” means all intellectual and similar property of every kind and nature now owned or hereafter acquired by Holdings or any Subsidiary, including inventions, designs, patents, copyrights, licenses, trademarks, trade secrets, Domain Names, confidential or proprietary technical and business information, know-how, show-how or other data or information, software and databases and all embodiments or fixations thereof and related documentation, registrations and franchises, and all additions, improvements and accessions to, and books and records describing or used in connection with, any of the foregoing.
“Interest Election Request” means a request by the Borrower to convert or continue a Revolving Borrowing or Term Borrowing in accordance with Section 2.07, which shall be, in the case of any such written request, in the form of Exhibit E or any other form approved by the Administrative Agent.
“Interest Payment Date” means (a) with respect to any ABR Loan (including a Swingline Loan), the third Business Day following the last day of each March, June, September and December, and (b) with respect to any EurocurrencyTerm
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Benchmark Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a EurocurrencyTerm Benchmark Borrowing with an Interest Period of more than three months’ duration, such day or days prior to the last day of such Interest Period as shall occur at intervals of three months’ duration after the first day of such Interest Period and (c) with respect to any Loan, the applicable Maturity Date.
“Interest Period” means, with respect to any EurocurrencyTerm Benchmark Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one week or one, two, three or six months thereafter (or, if agreed to by each Lender participating therein, twelve months thereafter), as the Borrower may elect; provided that (a) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, and (b) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.
“Interpolated Screen Rate” means, with respect to any Eurocurrency Borrowing for any Interest Period, a rate per annum which results from interpolating on a linear basis between (a) the applicable LIBO Screen Rate for the longest maturity for which a LIBO Screen Rate is available that is shorter than such Interest Period and (b) the applicable LIBO Screen Rate for the shortest maturity for which a LIBO Screen Rate is available that is longer than such Interest Period, in each case at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period.
“Investment” means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of Equity Interests or debt or other securities of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of Indebtedness of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person or (c) the purchase or other acquisition (in one transaction or a series of transactions) of all or substantially all of the property and assets or business of another Person or assets constituting a business unit, line of business or division of such Person. The amount, as of any date of determination, of (i) any Investment in the form of a loan or an advance shall be the principal amount thereof outstanding on such date, minus any cash payments actually received by such investor representing a payment or prepayment of in respect of principal of such Investment, but without any adjustment for write-downs or write-offs (including as a result of forgiveness of any portion thereof) with respect to such loan or advance after the date thereof, (ii) any Investment in the form of a Guarantee shall be equal to the
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stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof, as determined in good faith by a Financial Officer of Holdings or the Borrower, (iii) any Investment in the form of a transfer of Equity Interests or other non-cash property by the investor to the investee, including any such transfer in the form of a capital contribution, shall be the fair market value (as determined in good faith by a Financial Officer of Holdings or the Borrower) of such Equity Interests or other property as of the time of the transfer, minus any payments actually received by such investor representing a return of capital of (but not any dividends or other distributions in respect of return on the capital of) such Investment, but without any other adjustment for increases or decreases in value of, or write-ups, write-downs or write-offs with respect to, such Investment after the date of such Investment, and (iv) any Investment (other than any Investment referred to in clause (i), (ii) or (iii) above) by the specified Person in the form of a purchase or other acquisition for value of any Equity Interests, evidences of Indebtedness or other securities of any other Person shall be the original cost of such Investment (including any Indebtedness assumed in connection therewith), plus (A) the cost of all additions thereto and minus (B) the amount of any portion of such Investment that has been repaid to the investor in cash as a repayment of principal or a return of capital, but without any other adjustment for increases or decreases in value of, or write-ups, write-downs or write-offs with respect to, such Investment after the date of such Investment. For purposes of Section 6.04, if an Investment involves the acquisition of more than one Person, the amount of such Investment shall be allocated among the Acquired Persons in accordance with GAAP, provided that pending the final determination of the amounts to be so allocated in accordance with GAAP, such allocation shall be as reasonably determined by a Financial Officer of Holdings.
“IP Security Agreement” has the meaning set forth in the Collateral Agreement.
“IP Subsidiary” means any Domestic Subsidiary (other than any Excluded Subsidiary) that at any time owns any Intellectual Property or rights to Intellectual Property that are material to the business or operations of Holdings and the Subsidiaries, taken as a whole.
“IPO” means the initial underwritten public offering of common Equity Interests in Holdings pursuant to an effective registration statement filed with the SEC pursuant to the Securities Act.
“IRS” means the United States Internal Revenue Service.
“Issuing Bank” means (a) each of JPMCB, BofA, WF, SunTrust, and CS and (b) each Revolving Lender that shall have become an Issuing Bank hereunder as provided in Section 2.05(j) (other than any Person that shall have ceased to be an Issuing Bank as provided in Section 2.05(k)). Each Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of such Issuing Bank, in which case the term “Issuing Bank” shall include any such Affiliate with respect to Letters of
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Credit issued by such Affiliate (it being agreed that such Issuing Bank shall, or shall cause such Affiliate to, comply with the requirements of Section 2.05 with respect to such Letters of Credit).
“Issuing Bank Sublimit” means, at any time, (a) with respect to JPMCB in its capacity as Issuing Bank, $8,332,500, (b) with respect to BofA in its capacity as Issuing Bank, $6,667,500, (c) with respect to WF in its capacity as Issuing Bank, $3,332,500, (d) with respect to SunTrust in its capacity as Issuing Bank, $5,000,000, (e) with respect to CS in its capacity as Issuing Bank, $1,667,500, and (f) with respect to any Lender that shall have become an Issuing Bank hereunder as provided in Section 2.4(j), such amount as set forth in the agreement referred to in Section 2.4(j) evidencing the appointment of such Lender (or its designated Affiliate) as an Issuing Bank.
“JPMCB” means JPMorgan Chase Bank, N.A.
“Junior Indebtedness” means any Indebtedness (or Permitted Refinancing in respect thereof) that is unsecured or subordinated by its express terms in right of payment to the Loan Document Obligations, but in any event excluding Indebtedness between or among Holdings and any Subsidiary or between or among any Subsidiaries.
“Latest Maturity Date” means at any date of determination, the latest Maturity Date applicable to any Loan or Commitment hereunder at such time, including in respect of any Incremental Facility and including any Maturity Date that has been extended from time to time in accordance with this Agreement.
“LC Disbursement” means a payment made by an Issuing Bank pursuant to a Letter of Credit.
“LC Exposure” means, at any time, the sum of (a) the aggregate amount of all Letters of Credit that remains available for drawing at such time and (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any Revolving Lender at any time shall be its Applicable Percentage of the total LC Exposure at such time.
“Lenders” means the Persons listed on Schedule 2.01 and any other Person that shall have become a party hereto pursuant to an Assignment and Assumption, an Incremental Facility Agreement or otherwise, other than any such Person that shall have ceased to be a party hereto pursuant to an Assignment and Assumption. Unless the context otherwise requires, the term “Lenders” includes the Swingline Lender.
“Letter of Credit” means any letter of credit issued or deemed issued pursuant to this Agreement, other than any such letter of credit that shall have ceased to be a “Letter of Credit” outstanding hereunder pursuant to Section 9.05; provided that CS shall not be required to issue any commercial Letter of Credit hereunder.
“Leverage Ratio” means, on any date, the ratio of (a) Consolidated Funded Debt as of such date minus the lesser of (i) the sum of Available Domestic Cash in excess of $5,000,000 on such date plus 80% of Available Foreign Cash on such date and (ii)
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$50,000,000 to (b) Consolidated EBITDA for the period of four consecutive fiscal quarters of Holdings most recently ended on or prior to such date, for which financial statements have been delivered or by such date were required to have been delivered pursuant to Section 5.01(a) or 5.01(b) (or prior to the first delivery of any such financial statements, as of, or period of four consecutive fiscal quarters ended, June 30, 2018).
“LIBO Rate” means, with respect to any Eurocurrency Borrowing for any Interest Period, a rate per annum equal to the London interbank offered rate as administered by the ICE Benchmark Administration (or any other Person that takes over the administration of such rate) for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period as displayed on the Reuters screen page that displays such rate (currently pages LIBOR01 or LIBOR 02) or, in the event such rate does not appear on a page of the Reuters screen, on the appropriate page of such other information service that publishes such rate as shall be selected by the Administrative Agent from time to time in its reasonable discretion (such applicable rate being called the “LIBO Screen Rate”), at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. If no LIBO Screen Rate shall be available for a particular Interest Period but LIBO Screen Rates shall be available for maturities both longer and shorter than such Interest Period, then the LIBO Rate for such Interest Period shall be the Interpolated Screen Rate. Notwithstanding the foregoing, if the LIBO Rate, determined as provided above, would otherwise be less than zero, then the LIBO Rate shall be deemed to be zero for all purposes.
“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, charge in the nature of a security interest, security interest or other encumbrance on, in or of such asset, including any arrangement entered into for the purpose of making particular assets available to satisfy any Indebtedness or other obligation and (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset.
“Loan Documents” means this Agreement, the Original Credit Agreement, the First Refinancing Facility Agreement, the First Amended and Restated Credit Agreement, the Second Refinancing Facility Agreement, the Incremental Facility Agreements, the Collateral Agreement, the other Security Documents, any agreement designating an additional Issuing Bank as contemplated by Section 2.05(j) and, except for purposes of Section 9.02, any promissory notes delivered pursuant to Section 2.09(c).
“Loan Document Obligations” has the meaning set forth in the Collateral Agreement.
“Loan Modification Agreement” means a Loan Modification Agreement, in form and substance reasonably satisfactory to the Administrative Agent and the Borrower, among Holdings, the Borrower, the Administrative Agent and one or more Accepting Lenders, effecting one or more Permitted Amendments and such other amendments hereto and to the other Loan Documents as are contemplated by Section 2.22.
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“Loan Modification Offer” has the meaning set forth in Section 2.22(a).
“Loan Parties” means Holdings, the Borrower and each other Subsidiary Loan Party.
“Loans” means the loans made by the Lenders to the Borrower pursuant to this Agreement.
“Long-Term Indebtedness” means any Indebtedness that, in accordance with GAAP, constitutes (or, when incurred, constituted) a long-term liability.
“Major Stockholders” set forth on Schedule 1.01 to the Disclosure Letter is a list of the Major Stockholders as of the Second Refinancing Facility Agreement Effective Date.
“Majority in Interest”, when used in reference to Lenders of any Class, means, at any time, (a) in the case of the Revolving Lenders, Lenders having Revolving Exposures and unused Revolving Commitments representing more than 50% of the sum of the Aggregate Revolving Exposures and the unused Aggregate Revolving Commitment at such time, (b) in the case of the Term Lenders of any Class, Lenders holding outstanding Term Loans of such Class representing more than 50% of all Term Loans of such Class outstanding at such time and (c) in the case of the Incremental Term Lenders of any Class, Lenders holding outstanding Incremental Term Loans of such Class representing more than 50% of all Incremental Term Loans of such Class outstanding at such time.
“Material Acquisition” means any acquisition, or a series of related acquisitions, of (a) Equity Interests in any Person if, after giving effect thereto, such Person will become a Subsidiary or (b) assets comprising all or substantially all the assets of (or all or substantially all the assets constituting a business unit, division, product line or line of business of) any Person; provided that the aggregate consideration therefor (including Indebtedness assumed in connection therewith, all obligations in respect of deferred purchase price (including obligations under any purchase price adjustment but excluding earnout or similar payments) and all other consideration payable in connection therewith (including payment obligations in respect of noncompetition agreements or other arrangements representing acquisition consideration)) exceeds $20,000,000.
“Material Adverse Effect” means an event or condition that has resulted in a material adverse effect on (a) the business, assets, results of operations, liabilities or financial condition of Holdings, the Borrower and the Subsidiaries, taken as a whole, (b) the ability of the Borrower and the other Loan Parties, taken as a whole, to perform their payment obligations under the Loan Documents or (c) the rights and remedies of the Administrative Agent and the Lenders under the Loan Documents.
“Material Disposition” means any Disposition, or a series of related Dispositions, of (a) all or substantially all the issued and outstanding Equity Interests in any Person that are owned by Holdings, the Borrower or any other Subsidiary or (b) assets comprising all or substantially all the assets of (or all or substantially all the assets
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constituting a business unit, division, product line or line of business of) any Person; provided that the aggregate consideration therefor (including Indebtedness assumed by the transferee in connection therewith, all obligations in respect of deferred purchase price (including obligations under any purchase price adjustment but excluding earnout or similar payments) and all other consideration payable in connection therewith (including payment obligations in respect of noncompetition agreements or other arrangements representing acquisition consideration)) exceeds $20,000,000.
“Material Foreign Subsidiary” means a Foreign Subsidiary that is a Material Subsidiary.
“Material Indebtedness” means Indebtedness (other than the Loans, Letters of Credit and Guarantees under the Loan Documents), or obligations in respect of one or more Hedging Agreements, of any one or more of Holdings, the Borrower and the other Subsidiaries in an aggregate principal amount of $25,000,000 or more. For purposes of determining Material Indebtedness, the “principal amount” of the obligations of Holdings, the Borrower or any other Subsidiary in respect of any Hedging Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that Holdings, the Borrower or such other Subsidiary would be required to pay if such Hedging Agreement were terminated at such time.
“Material Subsidiary” means the Borrower and each other Subsidiary, including any Foreign Subsidiary, (a) the consolidated total assets of which equal 5.0% or more of the consolidated total assets of Holdings and its Subsidiaries (excluding the assets of the Foreign Subsidiaries for purposes of determining if a Subsidiary is required to become a Loan Party) or (b) the consolidated revenues of which accounts for 5.0% or more of the consolidated revenues of Holdings and its Subsidiaries (excluding the consolidated revenues attributable to the Foreign Subsidiaries for purposes of determining if a Subsidiary is required to become a Loan Party), in each case as of the end of or for the most recent period of four consecutive fiscal quarters of Holdings for which financial statements have been delivered pursuant to Section 5.01(a) or 5.01(b) (or prior to the first delivery of any such financial statements, as of, or period of four consecutive fiscal quarters ended, June 30, 2018); provided that if at the end of or for any such most recent period of four consecutive fiscal quarters the combined consolidated total assets or combined consolidated revenues of all Domestic Subsidiaries that under clause (a) and (b) above would not constitute Material Subsidiaries shall have exceeded 7.5% of the consolidated total assets of Holdings and its Subsidiaries (excluding the assets of the Foreign Subsidiaries) or 7.5% of the consolidated revenues of Holdings and its Subsidiaries (excluding the consolidated revenues attributable to the Foreign Subsidiaries), then one or more of such excluded Domestic Subsidiaries shall for all purposes of this Agreement be deemed to be Material Subsidiaries in descending order based on the amounts of their consolidated total assets or consolidated revenues, as the case may be until such excess shall have been eliminated (it being understood that the Borrower shall, subject to such descending order, have the right to designate the Subsidiaries required to satisfy such requirement, and the Borrower shall not be required to designate any additional Subsidiaries as Material Subsidiaries if all Domestic Subsidiaries are already Material Subsidiaries).
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“Maturity Date” means the Term Maturity Date, the Incremental Term Loan Maturity Date with respect to Incremental Term Loans of any Series or the Revolving Maturity Date, and any extended maturity date with respect to all or a portion of any Class of Loans or Commitments hereunder pursuant to a Loan Modification Agreement, in each case as the context requires; provided, however, in each case, if such date is not a Business Day, the Maturity Date shall be the next preceding Business Day.
“Minimum Extension Condition” has the meaning set forth in Section 2.22(a).
“MNPI” means material information concerning Holdings, the Borrower and the other Subsidiaries and their securities that has not been disseminated in a manner making it available to investors generally, within the meaning of Regulation FD under the Securities Act and the Exchange Act.
“Moody’s” means Moody’s Investors Service, Inc., and any successor to its rating agency business.
“Mortgage” means a mortgage, deed of trust, assignment of leases and rents or other security document granting a Lien on any Mortgaged Property to secure the Obligations. Each Mortgage shall be in form and substance reasonably satisfactory to the Administrative Agent.
“Mortgaged Property” means each parcel of real property owned in fee by a Loan Party, and the improvements thereto, that (together with such improvements) has a book or fair value of $5,000,000 or more (excluding any such real property subject to a Lien securing Indebtedness permitted under Section 6.01(v) or 6.01(vi)).
“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.
“Net Proceeds” means, with respect to any event, (a) the cash proceeds and Permitted Investments (including, in the case of any casualty, condemnation or similar proceeding, insurance, condemnation or similar proceeds received in cash or Permitted Investments) received in respect of such event, including any cash received in respect of any noncash proceeds, but only as and when received in cash or Permitted Investments, net of (b) the sum, without duplication, of (i) all fees and out-of-pocket expenses paid in connection with such event by Holdings and the Subsidiaries, (ii) in the case of a Disposition (including pursuant to a Sale/Leaseback Transaction or a casualty or a condemnation or similar proceeding) of an asset, (A) the amount of all payments required to be made by Holdings and the Subsidiaries as a result of such event to repay Indebtedness (other than Loans) secured by such asset and (B) the pro rata portion of net cash proceeds thereof (calculated without regard to this clause (B)) attributable to minority interests and not available for distribution to or for the account of Holdings and the Subsidiaries as a result thereof and (C) the amount of any liabilities directly associated with such asset and retained by Holdings or any Subsidiary and (iii) the amount of all taxes paid (or reasonably estimated to be payable) by Holdings and the
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Subsidiaries, and the amount of any reserves established by Holdings and the Subsidiaries in accordance with GAAP to fund purchase price adjustment, indemnification and other contingent liabilities (other than any earnout obligations) reasonably estimated to be payable and that are directly attributable to the occurrence of such event (as determined reasonably and in good faith by a Financial Officer of Holdings). For purposes of this definition, in the event any contingent liability reserve established with respect to any event as described in clause (b)(iii) above shall be reduced in an amount equal to or greater than $500,000, the amount of such reduction shall, except to the extent such reduction is made as a result of a payment having been made in respect of the contingent liabilities with respect to which such reserve has been established, be deemed to be receipt, on the date of such reduction, of cash proceeds in respect of such event.
“Net Working Capital” means, at any date, (a) the consolidated current assets of Holdings and its consolidated Domestic Subsidiaries as of such date (excluding cash, cash equivalents and Permitted Investments) minus (b) the consolidated current liabilities (excluding deferred revenues) of Holdings and its consolidated Domestic Subsidiaries as of such date; provided that, for purposes of calculating Excess Cash Flow, increases or decreases in Net Working Capital shall be calculated without regard to any changes in current assets or current liabilities as a result of (x) any reclassification in accordance with GAAP of assets or liabilities, as applicable, between current and non-current or (y) the effects of purchase accounting. Net Working Capital at any date may be a positive or negative number. Net Working Capital increases when it becomes more positive or less negative and decreases when it becomes less positive or more negative.
“New Building Leases” means the lease for the location at 3050 South Delaware Street (also known as One Curiosity Way), San Mateo, California, as in effect on the First Refinancing Facility Agreement Effective Date.
“Non-Cash Charges” means any noncash charges, losses or expenses, including (a) any write-off for impairment of long lived assets including goodwill, intangible assets and fixed assets such as property, plant and equipment, and investments in debt and equity securities pursuant to GAAP, (b) non-cash expenses resulting from the grant of stock options, restricted stock awards or other equity-based incentives to any director, officer or employee of the Borrower or any Subsidiary (excluding, for the avoidance of doubt, any cash payments of income taxes made for the benefit of any such Person in consideration of the surrender of any portion of such options, stock or other incentives upon the exercise or vesting thereof) and (c) any non-cash charges resulting from the application of purchase accounting; provided that Non-Cash Charges shall not include additions to bad debt reserves or bad debt expense, any noncash charge that results from the write-down or write-off of inventory and any noncash charge that results from the write-down or write-off of accounts receivable or that is in respect of any other item that was included in Consolidated Net Income in a prior period.
“Non-Compliant Assets” has the meaning set forth in the definition of Permitted Acquisition.
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“Non-Compliant Subsidiary” has the meaning set forth in the definition of Permitted Acquisition.
“Non-Defaulting Lender” means, at any time, any Revolving Lender that is not a Defaulting Lender at such time.
“NYFRB” means the Federal Reserve Bank of New York.
“NYFRB’s Website” means the website of the NYFRB at http://www.newyorkfed.org, or any successor source.
“NYFRB Rate” means, for any day, the greater of (a) the Federal Funds Effective Rate in effect on such day and (b) the Overnight Bank Funding Rate in effect on such day (or for any day that is not a Business Day, for the immediately preceding Business Day); provided that if none of such rates are published for any day that is a Business Day, the term “NYFRB Rate” shall mean the rate for a federal funds transaction quoted at 11:00 a.m., New York City time, on such day received by the Administrative Agent from a federal funds broker of recognized standing selected by it; provided, further, that if any of the aforesaid rates shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.
“Obligations” has the meaning set forth in the Collateral Agreement.
“Original Credit Agreement” means this Agreement as in effect immediately prior to the Transactions to occur on the First Refinancing Facility Agreement Effective Date.
“Original Effective Date” means February 7, 2013.
“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Taxes (other than Taxes that would not have been imposed but for connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced by any Loan Document, or sold or assigned an interest in any Loan or Loan Document).
“Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 2.19).
“Overnight Bank Funding Rate” means, for any day, the rate comprised of both overnight federal funds and overnight eurodollar borrowingstransactions denominated in dollars by U.S.-managed banking offices of depository institutions, as such composite rate shall be determined by the NYFRB as set forth on its public
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websitethe NYFRB’s Website from time to time, and published on the next succeeding Business Day by the NYFRB as an overnight bank funding rate (from and after such date as the NYFRB shall commence to publish such composite rate).
“Participant Register” has the meaning set forth in Section 9.04(c).
“Participants” has the meaning set forth in Section 9.04(c).
“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.
“Perfection Certificate” means a certificate in the form of Exhibit F or any other form approved by the Administrative Agent.
“Permitted Acquisition” means the purchase or other acquisition, by merger or otherwise, by the Borrower or any Subsidiary of substantially all the Equity Interests in, or all or substantially all the assets of (or all or substantially all the assets constituting a business unit, division, product line or line of business of), any Person if (a) in the case of any purchase or other acquisition of Equity Interests in a Person, such Person and each subsidiary of such Person (collectively, the “Acquired Person”) is (except to the extent permitted below in the case of foreign and other Subsidiaries that will not become Loan Parties) organized under the laws of the United States of America, any State thereof or the District of Columbia and, upon the consummation of such acquisition, will be a wholly-owned Subsidiary that is a Domestic Subsidiary (including as a result of a merger or consolidation between any Subsidiary and such Person) and will be a Subsidiary Loan Party or (b) in the case of any purchase or other acquisition of other assets (except to the extent permitted below), such assets will be owned by the Borrower or a Subsidiary Loan Party; provided that (i) such purchase or acquisition was not preceded by, or consummated pursuant to, an unsolicited tender offer or proxy contest initiated by or on behalf of Holdings or any Subsidiary, (ii) all transactions related thereto are consummated in accordance with applicable law, except to the extent the failure to do so could not reasonably be expected to result in a Material Adverse Effect, (iii) the business of such Person, or such assets, as the case may be, constitute a business permitted under Section 6.03(b), (iv) with respect to each such purchase or other acquisition, all actions required to be taken with respect to each newly created or acquired Subsidiary or assets in order to satisfy the requirements set forth in the definition of the term “Collateral and Guarantee Requirement” shall have been taken, subject to the required time periods for satisfaction set forth therein (or arrangements for the taking of such actions reasonably satisfactory to the Administrative Agent shall have been made), (v) at the time of and immediately after giving effect to any such purchase or other acquisition (A) no Default shall have occurred and be continuing or would result therefrom, (B) Holdings and the Borrower shall be in Pro Forma Compliance with the covenant set forth in Section 6.12, (C) the Leverage Ratio, calculated on a Pro Forma Basis, shall be less than 3.65 to 1.00, and (D) Available Liquidity, calculated on a Pro Forma Basis, shall be at least $5,000,000, and (vi) if such purchase or other acquisition is a Material Acquisition, Holdings and the Borrower shall have delivered to the Administrative Agent a certificate of a Financial Officer of Holdings and the Borrower,
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certifying that all the requirements set forth in this definition have been satisfied with respect to such purchase or other acquisition, together with reasonably detailed calculations demonstrating satisfaction of the requirement set forth in clauses (v)(B), (v)(C) and (v)(D) above. Any pro forma calculations required in respect of clause (v)(B) or (C) above shall be made as of the last day of, or for, the period of four consecutive fiscal quarters of Holdings then most recently ended for which financial statements have been delivered pursuant to Section 5.01(a) or 5.01(b) of this Agreement (or prior to the first delivery of any such financial statements, as of, or period of four consecutive fiscal quarters ended, June 30, 2018). Notwithstanding the foregoing, a Permitted Acquisition may include the direct or indirect acquisition of Non-Compliant Subsidiaries or Non-Compliant Assets if the consideration allocable to the acquisition of such Non-Compliant Subsidiaries or such Non-Compliant Assets, as applicable (determined in accordance with GAAP and as reasonably estimated by a Financial Officer of Holdings at the time such Permitted Acquisition is consummated) consists of the issuance of Qualified Equity Interests of Holdings; provided that all or any portion of the consideration for the acquisition of any Non-Compliant Subsidiaries and/or any Non-Compliant Assets after the Second Refinancing Facility Agreement Effective Date that cannot be made pursuant to the foregoing provisions of this definition may also be funded in an amount not in excess of $25,000,000 plus the amount, including the Available Basket Amount, the Available ECF Amount, the amount of Qualifying Equity Proceeds and the then available portion of the $30,000,000 basket for Investments, in each case, available under Section 6.04(v). For purposes of this definition, “Non-Compliant Subsidiary” means any Person acquired pursuant to a Permitted Acquisition that will not become a Subsidiary Loan Party in accordance with the requirements of clause (a) of this definition, and “Non-Compliant Assets” means any assets acquired pursuant to a Permitted Acquisition to be held by a Subsidiary that is not a Subsidiary Loan Party. Notwithstanding the foregoing, Holdings shall be able to make Permitted Acquisitions and other Investments permitted hereunder so long as all assets and Equity Interests acquired in connection with such Permitted Acquisition or other Investment are contributed to the Borrower or another Subsidiary (in the case of any Subsidiary that is not a Loan Party, to the extent such Investment is otherwise permitted hereunder) promptly after the consummation of such Permitted Acquisition or Investment.
“Permitted Amendment” means an amendment to this Agreement and the other Loan Documents, effected in connection with a Loan Modification Offer pursuant to Section 2.22, providing for an extension of the Maturity Date applicable to the Loans and/or Commitments of the Accepting Lenders of a relevant Class and, in connection therewith, may also provide for (a)(i) a change in the Applicable Rate with respect to the Loans and/or Commitments of the Accepting Lenders subject to such Permitted Amendment and/or (ii) a change in the fees payable to, or the inclusion of new fees to be payable to, the Accepting Lenders in respect of such Loans and/or Commitments, and/or (b) other changes to the terms and conditions in respect of such Loans and/or Commitments after the Maturity Date in respect thereof, without giving effect to any extended maturity date effected pursuant to a Loan Modification Agreement.
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“Permitted Bond Hedge Transaction” means any call option or capped call option (or substantively equivalent derivative transaction) relating to or referencing Holdings’ common stock (or other securities or property following a merger event or other change of the common stock of Holdings) purchased by Holdings in connection with the issuance of any Convertible Indebtedness; provided that the purchase price for such Permitted Bond Hedge Transaction, less the proceeds received by Holdings from the sale of any related Permitted Warrant Transaction, does not exceed the net proceeds received by Holdings from the sale of such Convertible Indebtedness issued in connection with such Permitted Bond Hedge Transaction.
“Permitted Encumbrances” means:
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provided that the term “Permitted Encumbrances” shall not include any Lien securing Indebtedness other than Liens referred to in clauses (c) and (d) above securing obligations under letters of credit, bank guarantees or similar instruments or stay, surety and appeal bonds, performance bonds and other obligations of a like nature.
“Permitted Investments” means:
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“Permitted Unsecured Indebtedness” means Indebtedness of Holdings, the Borrower or any other Subsidiary Loan Party that guarantees the Loan Document Obligations that (i) is not secured by any collateral (including the Collateral), (ii) does not mature earlier than, and has a weighted average life to maturity no earlier than, 91 days after the Latest Maturity Date in effect at the time of incurrence of such Indebtedness (provided that any provision or conversion of Convertible Indebtedness into (A) Qualified Equity Interests of Holdings (or other securities or property following a merger event or other change of Qualified Equity Interests of Holdings) (and cash in lieu of fractional shares), (B) cash by reference to such Qualified Equity Interests described in the preceding clause (A), or (C) a combination of clauses (A) and (B) shall not cause such Indebtedness to fail this clause (ii)), (iii) does not provide for any amortization, mandatory prepayment, redemption or repurchase (other than upon a change of control, customary asset sale or event of loss, mandatory offers to purchase and customary acceleration rights after an event of default) prior to the date that is 91 days after the Latest Maturity Date (provided that any provision or conversion of Convertible Indebtedness into (A) Qualified Equity Interests of Holdings (or other securities or property following a merger event or other change of Qualified Equity Interests of Holdings) (and cash in lieu of fractional shares), (B) cash by reference to such Qualified Equity Interests described in the preceding clause (A), or (C) a combination of clauses (A) and (B) shall not cause such Indebtedness to fail this clause (iii)), (iv) contains covenants, events of default, guarantees and other terms that are customary for similar Indebtedness in light of then-prevailing market conditions (it being understood that such Indebtedness shall not include any financial maintenance covenants and that applicable negative covenants shall be incurrence-based to the extent customary for similar Indebtedness) and, when taken as a whole (other than interest rate premiums and redemption premiums), are not more restrictive to the Borrower and its subsidiaries than those set forth in the Loan Documents; provided that a certificate of a Financial Officer delivered to the Administrative Agent at least five Business Days prior to the incurrence of such Indebtedness or the modification, refinancing, refunding, renewal or extension thereof (or such shorter period of time as may reasonably be agreed by the Administrative Agent), together with a reasonably detailed description of the material terms and conditions of such resulting Indebtedness or drafts of the material definitive documentation relating thereto, stating that the Borrower has determined in good faith that such terms and conditions satisfy the foregoing requirements shall be conclusive unless the Administrative Agent provides notice to the Borrower of its reasonable objection during such period together with a reasonable description of the basis upon which it objects, and (v) is not guaranteed by any Subsidiary that is not a Subsidiary Loan Party.
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“Permitted Warrant Transaction” means any call option, warrant or right to purchase (or substantively equivalent derivative transaction) relating to or referencing Holdings’ common stock (or other securities or property following a merger event or other change of the common stock of Holdings) and/or cash (in an amount determined by reference to the price of such common stock) sold by Holdings substantially concurrently with any purchase by Holdings of a Permitted Bond Hedge Transaction.
“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.
“Plan” means any “employee pension benefit plan”, as defined in Section 3(2) of ERISA (other than a Multiemployer Plan), that is subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which Holdings or any of its ERISA Affiliates is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.
“Plan Asset Regulations” means 29 CFR § 2510.3-101 et seq., as modified by Section 3(42) of ERISA, as amended from time to time.
“Platform” has the meaning set forth in Section 9.17(b).
“Post-Acquisition Period” means, with respect to any Material Acquisition or any Material Disposition, the period beginning on the date such transaction is consummated and ending on the last day of the fourth full consecutive fiscal quarter immediately following the date on which such transaction is consummated.
“Prepayment Event” means:
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“Prime Rate” means the rate of interest per annum last quoted by The Wall Street Journal as the “prime rate” in the United States, or if The Wall Street Journal ceases to quote such rate, the highest per annum rate published by the Federal Reserve Board in Federal Reserve Statistical Release H.15 (519) (Selected Interest Rates) as the “bank prime loan” rate or, if such rate is no longer quoted therein, any similar rate quoted therein (as determined by the Administrative Agent) or any similar release by the Federal Reserve Board (as determined by the Administrative Agent). Each change in the Prime Rate shall be effective from and including the date such change is publicly announced or quoted as being effective.
“Private Side Lender Representatives” means, with respect to any Lender, representatives of such Lender that are not Public Side Lender Representatives.
“Pro Forma Adjustment” means, for any Test Period that includes all or any part of a fiscal quarter included in any Post-Acquisition Period for a Material Acquisition, with respect to the Acquired EBITDA of the Acquired Person or business acquired in such Material Acquisition or the Consolidated EBITDA of Holdings, the pro forma increase or decrease in such Acquired EBITDA or such Consolidated EBITDA, as the case may be (including the portion thereof attributable to any assets (including Equity Interests) acquired) projected by Holdings in good faith as a result of (a) actions taken prior to or during such Post-Acquisition Period for the purposes of realizing reasonably identifiable and factually supportable cost savings or synergies (including revenue synergies and cost saving synergies) or (b) any additional costs incurred prior to or during such Post-Acquisition Period, in each case in connection with the combination of the operations of the assets acquired with the operations of Holdings and the Subsidiaries; provided that, so long as such actions are taken prior to or during such Post-Acquisition Period or such costs are incurred prior to or during such Post-Acquisition Period, as applicable, the cost savings and synergies related to such actions or such additional costs, as applicable, may be assumed, for purposes of projecting such pro forma increase or decrease to such Acquired EBITDA or such Consolidated EBITDA, as the case may be, to be realizable during the entirety, or, in the case of, additional costs, as applicable, to be incurred during the entirety of such Test Period, provided further that any such pro forma increase or decrease to such Acquired EBITDA or such Consolidated EBITDA, as the case may be, shall be without duplication for cost savings or additional costs already reflected in such Acquired EBITDA or such Consolidated EBITDA, as the case may be, for such Test Period.
“Pro Forma Basis”, “Pro Forma Compliance” and “Pro Forma Effect” means, with respect to compliance with any test or covenant hereunder required by the terms of this Agreement to be made on a pro forma basis, that (a) to the extent applicable, the Pro Forma Adjustment shall have been made and (b) all Specified Transactions and the following transactions in connection therewith shall be deemed to have occurred as of (or commencing with) the first day of the applicable period of measurement in such test
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or covenant: (i) income statement items (whether positive or negative) attributable to the property or Person subject to such Specified Transaction (A) in the case of a Material Disposition of all or substantially all Equity Interests in any Subsidiary of the Borrower or any division, product line, or facility used for operations of Holdings, the Borrower or any of the other Subsidiaries, shall be excluded, and (B) in the case of a Permitted Acquisition or Investment described in the definition of “Specified Transaction”, shall be included, (ii) any retirement of Indebtedness, (iii) any Indebtedness incurred or assumed by Holdings, the Borrower or any of the other Subsidiaries in connection therewith and (iv) if any such Indebtedness has a floating or formula rate, such Indebtedness shall be deemed to have accrued an implied rate of interest for the applicable period for purposes of this definition determined by utilizing the rate that is or would be in effect with respect to such Indebtedness as at the relevant date of determination; provided that, without limiting the application of the Pro Forma Adjustment pursuant to clause (a) above, the foregoing pro forma adjustments may be applied to any such test or covenant solely to the extent that such adjustments are consistent with (and subject to applicable limitations included in) the definition of Consolidated EBITDA and give effect to operating expense reductions that are (i) (x) directly attributable to such transaction, (y) expected to have a continuing impact on Holdings, the Borrower and the other Subsidiaries and (z) factually supportable or (ii) otherwise consistent with the definition of Pro Forma Adjustment, provided further that (1) except as specified in the applicable provision requiring Pro Forma Compliance, any determination of Pro Forma Compliance required shall be made assuming that compliance with the financial covenant set forth in Section 6.12 is required with respect to the most recent Test Period prior to such time for which financial statements shall have been delivered pursuant to Section 5.01(a) or (b) (or prior to the first delivery of any such financial statements, as of, or period of four consecutive fiscal quarters ended, June 30, 2018).
“Proprietary Database” means any database owned, licensed or otherwise used by any Loan Party or any Subsidiary.
“Proprietary Software” means any software owned, licensed or otherwise used by any Loan Party or any Subsidiary other than any software that is generally commercially available.
“PTE” means a prohibited transaction class exemption issued by the U.S. Department of Labor, as any such exemption may be amended from time to time.
“Public Side Lender Representatives” means, with respect to any Lender, representatives of such Lender that do not wish to receive MNPI.
“Purchasing Affiliated Lender” means any Major Stockholder (other than any portfolio company of a Major Stockholder and any natural person) and any Debt Fund Affiliate. For the avoidance of doubt, Purchasing Affiliated Lenders shall not include any Purchasing Borrower Party.
“Purchasing Borrower Party” means any of Holdings, the Borrower or any other Subsidiary.
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“Qualified Equity Interests” means Equity Interests of Holdings or any direct or indirect parent thereof other than Disqualified Equity Interests.
“Qualifying Equity Proceeds” means on any date with respect to any expenditure to make an Investment under Section 6.04(v) (including in connection with the acquisition of Non-Compliant Subsidiaries and/or Non-Compliant Assets in a Permitted Acquisition), to make a Restricted Payment under Section 6.08(a)(viii) or to make a payment in reliance on Section 6.08(b)(vi), the aggregate amount of Net Proceeds received by Holdings in respect of sales and issuances of its Qualified Equity Interests (other than any equity contribution made in reliance on Section 7.02, the issuance of Equity Interests to officers, directors or employees of Holdings or any Subsidiary pursuant to employee benefit or incentive plans or other similar arrangements, and the issuance of Equity Interests to any Subsidiary) during the 365-day period ending on the date of such expenditure, less the amount of all other expenditures for such purposes made during such period and on or prior to such date in reliance on such receipts of Net Proceeds.
“Recipient” means (a) the Administrative Agent, (b) any Lender and (c) any Issuing Bank, as applicable.
“Refinancing Commitment” means a Refinancing Revolving Commitment or a Refinancing Term Loan Commitment.
“Refinancing Facility Agreement” means an amendment to this Agreement, in form and substance reasonably satisfactory to the Administrative Agent and the Borrower, among Holdings, the Borrower, the Administrative Agent and one or more Refinancing Lenders, establishing Refinancing Commitments and effecting such other amendments hereto and to the other Loan Documents as are contemplated by Section 2.24.
“Refinancing Indebtedness” means, in respect of any Indebtedness (the “Original Indebtedness”), any Indebtedness that extends, renews, replaces or refinances such Original Indebtedness (or any Refinancing Indebtedness in respect thereof); provided that (a) the principal amount of such Refinancing Indebtedness shall not exceed the principal amount of such Original Indebtedness except by an amount no greater than accrued and unpaid interest with respect to such Original Indebtedness and any fees, premium and expenses relating to such extension, renewal, replacement or refinancing; (b) the stated final maturity of such Refinancing Indebtedness shall not be earlier than that of such Original Indebtedness; (c) such Refinancing Indebtedness shall not be required to be repaid, prepaid, redeemed, repurchased or defeased, whether on one or more fixed dates, upon the occurrence of one or more events or at the option of any holder thereof (except, in each case, upon the occurrence of an event of default a change in control or a sale of assets, or as and to the extent such repayment, prepayment, redemption, repurchase or defeasance would have been required pursuant to the terms of such Original Indebtedness) prior to the earlier of (i) the maturity of such Original Indebtedness and (ii) the date 91 days after the Latest Maturity Date in effect on the date of such extension, renewal or refinancing, provided that, notwithstanding the foregoing,
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scheduled amortization payments (however denominated) of such Refinancing Indebtedness shall be permitted so long as the weighted average life to maturity of such Refinancing Indebtedness shall be longer than the shorter of (x) the weighted average life to maturity of such Original Indebtedness remaining as of the date of such extension, renewal, replacement or refinancing and (y) the weighted average life to maturity of each Class of the Term Loans remaining as of the date of such extension, renewal, replacement or refinancing; (d) if such Original Indebtedness shall have been subordinated to the Loan Document Obligations, such Refinancing Indebtedness shall also be subordinated to the Loan Document Obligations on terms not less favorable in any material respect to the Lenders; and (e) such Refinancing Indebtedness shall not be secured by any Lien on any asset other than the assets that secured such Original Indebtedness (or would have been required to secure such Original Indebtedness pursuant to the terms thereof) or, in the event Liens securing such Original Indebtedness shall have been contractually subordinated to any Lien securing the Loan Document Obligations, by any Lien that shall not have been contractually subordinated to at least the same extent.
“Refinancing Lenders” means the Refinancing Revolving Lenders and the Refinancing Term Lenders.
“Refinancing Loans” means the Refinancing Revolving Loans and the Refinancing Term Loans.
“Refinancing Revolving Commitments” has the meaning set forth in Section 2.24(a).
“Refinancing Revolving Lender” has the meaning set forth in Section 2.24(a).
“Refinancing Revolving Loans” has the meaning set forth in Section 2.24(a).
“Refinancing Term Lender” has the meaning set forth in Section 2.24(a).
“Refinancing Term Loan Commitments” has the meaning set forth in Section 2.24(a).
“Refinancing Term Loans” has the meaning set forth in Section 2.24(a).
“Register” has the meaning set forth in Section 9.04(b)(iv).
“Regulation D” means Regulation D of the Federal Reserve Board, as in effect from time to time and all official rulings and interpretations thereunder or thereof.
“Regulation U” means Regulation U of the Federal Reserve Board, as in effect from time to time and all official rulings and interpretations thereunder or thereof.
“Regulation X” means Regulation X of the Federal Reserve Board, as in effect from time to time and all official rulings and interpretations thereunder or thereof.
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“Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the directors, officers, partners, trustees, employees, agents, representatives, advisors and controlling persons of such Person and of such Person’s Affiliates.
“Release” means any release, spill, emission, leaking, dumping, injection, pouring, deposit, disposal, discharge, dispersal, leaching or migration into or through the environment or within or upon any building, structure, facility or fixture.
“Required Lenders” means, subject to Section 2.20, at any time, Lenders having Revolving Exposures, Term Loans and unused Commitments representing more than 50% of the sum of the Aggregate Revolving Exposure, outstanding Term Loans and unused Commitments at such time.
“Requirements of Law” means, with respect to any Person, any statutes, laws, treaties, rules, regulations, orders, decrees, writs, injunctions or determinations of any arbitrator or court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
“Responsible Officer” means, as to any Person, such Person’s chief executive officer or chief financial officer.
“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property, but excluding any dividend or distribution consisting solely of the issuance of common Qualified Equity Interests of Holdings and cash in lieu of fractional shares) with respect to any Equity Interests in Holdings, the Borrower or any other Subsidiary, or any payment (whether in cash, securities or other property, but excluding any payment (x) consisting solely of the issuance of common Qualified Equity Interests of Holdings and cash in lieu of fractional shares or (y) made in the ordinary course of business in connection with the satisfaction of tax withholding obligations), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation, vesting, settlement or termination of, or any other return of capital with respect to, any Equity Interests in Holdings, the Borrower or any Subsidiary.
“Revolving Availability Period” means the period from and including the Second Refinancing Facility Agreement Effective Date to but excluding the earlier of the Revolving Maturity Date and the date of termination of the Revolving Commitments.
“Revolving Commitment” means, with respect to each Lender, the commitment, if any, of such Lender to make Revolving Loans and to acquire participations in Letters of Credit and Swingline Loans hereunder, expressed as an amount representing the maximum aggregate permitted amount of such Lender’s Revolving Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.08, (b) increased or established from time to time pursuant to Section 2.21 and (c) reduced or increased from time to time pursuant to assignments by
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or to such Lender pursuant to Section 9.04. The initial amount of each Lender’s Revolving Commitment is set forth on Schedule 2.01, or in the Assignment and Assumption or the Incremental Facility Agreement pursuant to which such Lender shall have assumed its Revolving Commitment, as applicable. The initial aggregate amount of the Lenders’ Revolving Commitments as of the Second Refinancing Facility Agreement Effective Date is $75,000,000.
“Revolving Exposure” means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender’s Revolving Loans and such Lender’s LC Exposure and Swingline Exposure at such time.
“Revolving Lender” means a Lender with a Revolving Commitment or Revolving Exposure.
“Revolving Lender Parent” means, with respect to any Revolving Lender, any Person in respect of which such Lender is a subsidiary.
“Revolving Loan” means a Loan made pursuant to clause (b) of Section 2.01.
“Revolving Maturity Date” means October 10, 2023, and any extended maturity date with respect to all or a portion, as applicable, of Revolving Commitments hereunder pursuant to a Loan Modification Agreement.
“S&P” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business, and any successor to its rating agency business.
“Sale/Leaseback Transaction” means an arrangement relating to property owned by Holdings, the Borrower or any other Subsidiary whereby Holdings, the Borrower or such other Subsidiary sells or transfers such property to any Person and Holdings, the Borrower or any other Subsidiary leases such property, or other property that it intends to use for substantially the same purpose or purposes as the property sold or transferred, from such Person or its Affiliates.
“Sanctions” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the U.S. Department of State, the U.S. Department of Commerce or the U.S. Department of the Treasury or (b) the United Nations Security Council, the European Union or Her Majesty’s Treasury of the United Kingdom.
“Sanctioned Country” means, at any time, a country, region or territory which is itself the subject or target of any Sanctions.
“Sanctioned Person” means, at any time, (a) any Person listed in any Sanctions-related list of specially designated Persons maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the U.S. Department of State, the U.S. Department of Commerce or the U.S. Department of the Treasury or by the United Nations Security Council, the European Union, any EU member state or Her Majesty’s
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Treasury, (b) any Person operating, organized or resident in a jurisdiction subject to any Sanctions or (c) any Person controlled by any such Person.
“SEC” means the United States Securities and Exchange Commission.
“Second Refinancing Facility Agreement” means the Refinancing Facility Agreement, dated as of October 10, 2018, among Holdings, the Borrower, the Lenders party thereto and the Administrative Agent.
“Second Refinancing Facility Agreement Effective Date” means the date of satisfaction of the conditions precedent referred to in Section 6 of the Second Refinancing Facility Agreement.
“Secured Parties” has the meaning set forth in the Collateral Agreement.
“Securities Act” means the United States Securities Act of 1933.
“Security Documents” means the Collateral Agreement, the Foreign Pledge Agreements, the IP Security Agreements, the Mortgages and each other security agreement or other instrument or document executed and delivered pursuant to Section 5.03 or 5.12 to secure the Obligations.
“Series” has the meaning set forth in Section 2.21(b).
“SOFR” means a rate equal to the secured overnight financing rate as administered by the SOFR Administrator.
“SOFR Administrator” means the NYFRB (or a successor administrator of the secured overnight financing rate).
“Specified Transaction” means, with respect to any period, any Investment, Disposition, incurrence or repayment of Indebtedness or Restricted Payment that by the terms of this Agreement requires pro forma compliance with a test or covenant hereunder or requires such test or covenant to be calculated on a “Pro Forma Basis”.
“Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves), expressed as a decimal, established by the Board of Governors to which the Administrative Agent is subject for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board of Governors). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurocurrency Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.
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“Subordinated Indebtedness” of any Person means any Indebtedness of such Person that is subordinated by its express terms in right of payment to any other Indebtedness of such Person.
“Subsequent Maturity Date” has the meaning set forth in Section 2.05(c).
“subsidiary” of a Person means (a) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its subsidiaries or by such Person and one or more of its subsidiaries, or (b) any partnership, association, limited liability company or other Person more than 50% of the ownership interests having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its subsidiaries or by such Person and one or more of its subsidiaries.
“Subsidiary” means any subsidiary of Holdings.
“Subsidiary Loan Party” means each Subsidiary that is a party to the Collateral Agreement. Unless the context requires otherwise, the term “Subsidiary Loan Party” shall include the Borrower.
“Successor Borrower” has the meaning set forth in Section 6.03(a).
“SunTrust” means SunTrust Bank.
“Swap Obligation” means, with respect to any Guarantor, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of Section 1a(47) of the Commodity Exchange Act.
“Swingline Exposure” means, at any time, the aggregate principal amount of all Swingline Loans outstanding at such time. The Swingline Exposure of any Revolving Lender at any time shall be its Applicable Percentage of the total Swingline Exposure at such time.
“Swingline Lender” means JPMorgan Chase Bank, N.A., in its capacity as lender of Swingline Loans hereunder.
“Swingline Loan” means a Loan made pursuant to Section 2.04.
“Syndication Agent” means Merrill Lynch, Pierce, Fenner & Smith Incorporated in its capacity as syndication agent for the credit facilities provided for herein.
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“Taxes” means any present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
“Term Benchmark”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted Term SOFR Rate.
“Term Commitment” means, with respect to each Lender, the commitment, if any, of such Lender to make or continue a Term Loan on the Second Refinancing Facility Agreement Effective Date, expressed as an amount representing the maximum principal amount of the Term Loan to be made or continued by such Lender, as such commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Lender’s Term Commitment is set forth on Schedule 2.01 to the Second Refinancing Facility Agreement, or in the Assignment and Assumption pursuant to which such Lender shall have assumed its Term Commitment, as applicable. The initial aggregate amount of the Lenders’ Term Commitments on the Second Refinancing Facility Agreement Effective Date is $220,000,000.
“Term Lender” means a Lender with a Term Commitment or an outstanding Term Loan.
“Term Loan” means a Loan made pursuant to clause (a) of Section 2.01.
“Term Maturity Date” means October 10, 2025, and, as applicable, any extended maturity date with respect to all or a portion of any Class of Term Loans hereunder pursuant to a Loan Modification Agreement.
“Term SOFR Determination Day” has the meaning assigned to it under the definition of Term SOFR Reference Rate.
“Term SOFR Rate” means, with respect to any Term Benchmark Borrowing and for any tenor comparable to the applicable Interest Period, the Term SOFR Reference Rate at approximately 5:00 a.m., Chicago time, two U.S. Government Securities Business Days prior to the commencement of such tenor comparable to the applicable Interest Period, as such rate is published by the CME Term SOFR Administrator.
“Term SOFR Reference Rate” means, for any day and time (such day, the “Term SOFR Determination Day”), with respect to any Term Benchmark Borrowing denominated in Dollars and for any tenor comparable to the applicable Interest Period, the rate per annum published by the CME Term SOFR Administrator and identified by the Administrative Agent as the forward-looking term rate based on SOFR. If by 5:00 pm (New York City time) on such Term SOFR Determination Day, the “Term SOFR Reference Rate” for the applicable
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tenor has not been published by the CME Term SOFR Administrator and a Benchmark Transition Event with respect to the Term SOFR Rate has not occurred, then, so long as such day is otherwise a U.S. Government Securities Business Day, the Term SOFR Reference Rate for such Term SOFR Determination Day will be the Term SOFR Reference Rate as published in respect of the first preceding U.S. Government Securities Business Day for which such Term SOFR Reference Rate was published by the CME Term SOFR Administrator, so long as such first preceding U.S. Government Securities Business Day is not more than five (5) U.S. Government Securities Business Days prior to such Term SOFR Determination Day.
“Test Period” means each period of four consecutive fiscal quarters of Holdings.
“Transaction Costs” means the fees and expenses incurred in connection with the Transactions consummated or effected on the Second Refinancing Facility Agreement Effective Date.
“Transactions” means, collectively, (a) the execution, delivery and performance by each Loan Party of the Loan Documents (including the Second Refinancing Facility Agreement) to which it is to be a party on the Second Refinancing Facility Agreement Effective Date, the borrowing or continuation of the Term Loans on the Second Refinancing Facility Agreement Effective Date and the use of the proceeds thereof, and (b) the payment of the Transaction Costs.
“Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBOTerm SOFR Rate or the Alternate Base Rate.
“Unrestricted Cash” means, as of any date, unrestricted cash and cash equivalents owned by Holdings, the Borrower and the Subsidiaries that are not, and are not presently required under the terms of any agreement or other arrangement binding on the Borrower or any Subsidiary on such date to be, (a) pledged to or held in one or more accounts under the control of one or more creditors of the Borrower or any Subsidiary (other than to secure the Loan Document Obligations) or (b) otherwise segregated from the general assets of the Borrower and the Subsidiaries, in one or more special accounts or otherwise, for the purpose of securing or providing a source of payment for Indebtedness or other obligations that are or from time to time may be owed to one or more creditors of the Borrower or any Subsidiary (other than to secure the Loan Document Obligations). It is agreed that cash and cash equivalents held in ordinary deposit or security accounts and not subject to any existing or contingent restrictions on transfer by the Borrower or a Subsidiary will not be excluded from Unrestricted Cash by reason of setoff rights or other Liens created by law or by applicable account agreements in favor of the depositary institutions or security intermediaries.
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“USA PATRIOT Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001.
“U.S. Government Securities Business Day” means any day except for (i) a Saturday, (ii) a Sunday or (iii) a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities.
“U.S. Person” means a “United States person” within the meaning of Section 7701(a)(30) of the Code.“U.S. Tax Compliance Certificate” has the meaning assigned to such term in Section 2.17(f)(ii)(B)(3).
“USA PATRIOT Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001.
“Website Agreements” means all agreements between any Loan Party and/or any Subsidiary and any other Person pursuant to which such Person provides any services relating to the operation, management or maintenance of any Website or Domain Name, including all agreements with any Person providing web hosting, database management or maintenance of disaster recovery services to any Subsidiary and all agreements with any domain name registrar.
“Websites” means all websites (including all content (including all elements of each website and all materials published on each website), HTML documents, audiovisual material, software, data, copyrights, trademarks, patents and trade secrets relating to such websites) owned by the Loan Parties or any Subsidiary and all exclusive and nonexclusive licenses to the Loan Parties or any Subsidiary from third parties or rights to use websites owned by such third parties.
“WF” means Wells Fargo Bank, National Association.
“wholly-owned”, when used in reference to a subsidiary of any Person, means that all the Equity Interests in such subsidiary (other than directors’ qualifying shares and other nominal amounts of Equity Interests that are required to be held by other Persons under applicable law) are owned, beneficially and of record, by such Person, another wholly-owned subsidiary of such Person or any combination thereof.
“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
“Withholding Agent” means any Loan Party or the Administrative Agent.
“Write-Down and Conversion Powers” means, with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA
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Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.
SECTION 1.02. Classification of Loans and Borrowings. For purposes of this Agreement, Loans and Borrowings may be classified and referred to by Class (e.g., a “Revolving Loan” or “Revolving Borrowing”) or by Type (e.g., a “EurocurrencyTerm Benchmark Loan” or “EurocurrencyTerm Benchmark Borrowing”) or by Class and Type (e.g., a “EurocurrencyTerm Benchmark Revolving Loan” or “EurocurrencyTerm Benchmark Revolving Borrowing”).
SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. The words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all real and personal, tangible and intangible assets and properties, including cash, securities, accounts and contract rights. The word “law” shall be construed as referring to all statutes, rules, regulations, codes and other laws (including official rulings and interpretations thereunder having the force of law or with which affected Persons customarily comply), and all judgments, orders, writs and decrees, of all Governmental Authorities. Unless the context requires otherwise, (a) any definition of or reference to any agreement, instrument or other document (including this Agreement and the other Loan Documents) shall be construed as referring to such agreement, instrument or other document as from time to time amended, amended and restated, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any definition of or reference to any statute, rule or regulation shall be construed as referring thereto as from time to time amended, supplemented or otherwise modified (including by succession of comparable successor laws), (c) any reference herein to any Person shall be construed to include such Person’s successors and assigns (subject to any restrictions on assignment set forth herein) and, in the case of any Governmental Authority, any other Governmental Authority that shall have succeeded to any or all functions thereof, (d) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (e) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (f) any reference to any law, rule or regulation herein shall, unless otherwise specified, refer to such law, rule or regulation as amended, modified or supplemented from time to time.
SECTION 1.04. Accounting Terms; GAAP; Pro Forma Calculations. (i) Except as otherwise expressly provided herein, all terms of an accounting or financial nature used herein shall be construed in accordance with GAAP as in effect from time to time; provided that (i) if the Borrower, by notice to the Administrative Agent, shall request an amendment to any provision hereof to eliminate the effect of any change occurring after the Original Effective Date in GAAP or in the application thereof on the
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operation of such provision (or if the Administrative Agent or the Required Lenders, by notice to the Borrower, shall request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith and (ii) notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made, without giving effect to any election under Statement of Financial Accounting Standards 159, The Fair Value Option for Financial Assets and Financial Liabilities, or any successor thereto (including pursuant to the Accounting Standards Codification), to value any Indebtedness of Holdings or any Subsidiary at “fair value”, as defined therein. Notwithstanding any other provision contained herein, other than for purposes of Sections 3.04, 5.01(a) and 5.01(b), any lease that is treated as an operating lease for purposes of GAAP as of the Original Effective Date shall continue to be treated as an operating lease (and any future lease, if it were in effect on the Original Effective Date, that would be treated as an operating lease for purposes of GAAP as of the Original Effective Date shall be treated as an operating lease), in each case for purposes of this Agreement and the other Loan Documents, notwithstanding any change in GAAP after the Original Effective Date.
SECTION 1.05. Interest Rates; Benchmark Notification. The interest rate on a Loan denominated in dollars may be derived from an interest rate benchmark that may be discontinued or is, or may in the future become, the subject of regulatory reform. Upon the occurrence of a Benchmark Transition Event, Section 2.14(b) provides a mechanism for determining an alternative rate of interest. The Administrative Agent does not warrant or accept any responsibility for, and shall not have any liability with respect to, the administration, submission, performance or any other matter related to the rates in the definition of “LIBO Rate”any interest rate used in this Agreement, or with respect to any comparablealternative or successor rate thereto, or replacement rate thereforthereof, including without limitation, whether the composition or characteristics of any such alternative, successor or replacement reference rate will be similar to, or produce the same value or economic equivalence of, the existing interest rate being replaced or have the same volume or liquidity as did any existing interest rate prior to its discontinuance or unavailability. The Administrative Agent and its affiliates and/or other related entities may engage in transactions that affect the calculation of any interest rate used in this Agreement or any alternative, successor or alternative rate and/or any relevant adjustments thereto, in each case, in a manner adverse to the Borrower. The Administrative Agent may select information sources or services in its reasonable discretion to ascertain any interest rate used in this Agreement, any
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component thereof, or rates referenced in the definition thereof, in each case pursuant to the terms of this Agreement, and shall have no liability to the Borrower, any Lender or any other person or entity for damages of any kind, including direct or indirect, special, punitive, incidental or consequential damages, costs, losses or expenses (whether in tort, contract or otherwise and whether at law or in equity), for any error or calculation of any such rate (or component thereof) provided by any such information source or service.
SECTION 1.06. Excluded Swap Obligations. Notwithstanding any provision of this Agreement or any other Loan Document, no Guarantee by any Guarantor under any Loan Document shall include a Guarantee of any Obligation that, as to such Guarantor, is an Excluded Swap Obligation and no Collateral provided by any Guarantor shall secure any Obligation that, as to such Guarantor, is an Excluded Swap Obligation. In the event that any payment is made by, or any collection is realized from, any Guarantor as to which any Obligations are Excluded Swap Obligations, or from any Collateral provided by such Guarantor, the proceeds thereof shall be applied to pay the Obligations of such Guarantor as otherwise provided herein without giving effect to such Excluded Swap Obligations and each reference in this Agreement or any other Loan Document to the ratable application of such amounts as among the Obligations or any specified portion of the Obligations that would otherwise include such Excluded Swap Obligations shall be deemed so to provide.
ARTICLE II
The Credits
SECTION 2.01. Commitments. Subject to the terms and conditions set forth herein and in the Second Refinancing Facility Agreement, each Lender agrees (a) to make (or continue) a Term Loan in dollars to the Borrower on the Second Refinancing Facility Agreement Effective Date pursuant to the Second Refinancing Facility Agreement in an aggregate principal amount not exceeding its Term Commitment and (b) to make (or continue) Revolving Loans in dollars to the Borrower from time to time during the Revolving Availability Period in an aggregate principal amount that will not result in such Lender’s Revolving Exposure exceeding such Lender’s Revolving Commitment or the Aggregate Revolving Exposure exceeding the Aggregate Revolving Commitment. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Revolving Loans. Amounts repaid or prepaid in respect of Term Loans may not be reborrowed.
SECTION 2.02. Loans and Borrowings. (b) Each Loan (other than a Swingline Loan) shall be made as part of a Borrowing consisting of Loans of the same Class and Type made by the Lenders ratably in accordance with their respective Commitments of the applicable Class. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender’s failure to make Loans as required.
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SECTION 2.03. Requests for Borrowings. To request a Revolving Borrowing or Term Borrowing after the Second Refinancing Facility Agreement Effective Date, the Borrower shall notify the Administrative Agent of such request by submitting a Borrowing Request by electronic transmission or facsimile (a) in the case of a EurocurrencyTerm Benchmark Borrowing, not later than 11:00 a.m., New York City time, three U.S. Government Securities Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 11:00 a.m., New York City time, on the day of the proposed Borrowing. Each such Borrowing Request shall be irrevocable and shall be signed by a Financial Officer of the Borrower. Each such Borrowing Request shall specify the following information in compliance with Section 2.02:
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If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested EurocurrencyTerm Benchmark Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the applicable Class of the details thereof and of the amount of such Lender’s Loan to be made as part of the requested Borrowing.
SECTION 2.04. Swingline Loans. i. Subject to the terms and conditions set forth herein, the Swingline Lender agrees to make Swingline Loans in dollars to the Borrower from time to time during the Revolving Availability Period in an aggregate principal amount at any time outstanding that will not result in (i) the aggregate principal amount of the outstanding Swingline Loans exceeding $5,000,000, (ii) the Aggregate Revolving Exposure exceeding the Aggregate Revolving Commitment or (iii) unless otherwise agreed to in writing by the Swingline Lender, the aggregate amount of Swingline Loans, Revolving Loans and Letters of Credit issued by the Swingline Lender exceeding the Swingline Lender’s Revolving Commitments hereunder; provided that the Swingline Lender shall not be required to, but may, make a Swingline Loan to refinance an outstanding Swingline Loan. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Swingline Loans.
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SECTION 2.05. Letters of Credit. i. General. Subject to the terms and conditions set forth herein, each Issuing Bank agrees to issue Letters of Credit for the Borrower’s own account or, so long as the Borrower is a joint and several co-applicant with respect thereto, the account of any Subsidiary, denominated in dollars and in a form reasonably acceptable to the Administrative Agent and the applicable Issuing Bank, at any time and from time to time during the Revolving Availability Period. The Borrower unconditionally and irrevocably agrees that, in connection with any Letter of Credit issued for the account of any Subsidiary as provided in the first sentence of this paragraph, it will be fully responsible for the reimbursement of LC Disbursements, the payment of interest thereon and the payment of fees due under Section 2.12(b) to the same extent as if it were the sole account party in respect of such Letter of Credit. Each Letter of Credit outstanding on the Second Refinancing Facility Agreement Effective Date shall be deemed, for all purposes of this Agreement (including paragraphs (d) and (f) of this Section), to be a Letter of Credit issued hereunder for the account of the Borrower. Notwithstanding anything contained in any letter of credit application furnished to any Issuing Bank in connection with the issuance of any Letter of Credit, (i) all provisions of such letter of credit application purporting to grant liens in favor of the Issuing Bank to secure obligations in respect of such Letter of Credit shall be disregarded, it being agreed that such obligations shall be secured to the extent provided in this Agreement and in the Security Documents, and (ii) in the event of any inconsistency between the terms and conditions of such letter of credit application or any other agreement submitted by the Borrower to, or entered into by the Borrower with, the applicable Issuing Bank relating to any Letter of Credit, and the terms and conditions of this Agreement, the terms and conditions of this Agreement shall control.
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SECTION 2.06. Funding of Borrowings. i. Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 12:00 noon, New York City time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders; provided that Swingline Loans shall be made as provided in Section 2.04. The Administrative Agent will make such Loans available to the Borrower by promptly remitting the amounts so received, in like funds, to an account or accounts designated by the Borrower in the applicable Borrowing Request or, in the case of ABR Revolving Loans made to finance the reimbursement of an LC Disbursement as provided in Section 2.05(f), to the Issuing Bank specified by the Borrower in the applicable Borrowing Request.
SECTION 2.07. Interest Elections. i. Each Revolving Borrowing and Term Borrowing initially shall be of the Type and, in the case of a EurocurrencyTerm Benchmark Borrowing, shall have an initial Interest Period as specified in the applicable Borrowing Request or as otherwise provided in Section 2.03. Thereafter, the Borrower may elect to convert such Borrowing to a Borrowing of a different Type or to continue such Borrowing and, in the case of a EurocurrencyTerm Benchmark Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. This Section shall not apply to Swingline Borrowings, which may not be converted or continued.
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If any such Interest Election Request requests a EurocurrencyTerm Benchmark Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration.
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SECTION 2.08. Termination and Reduction of Commitments. i.Unless previously terminated, (i) the Term Commitments shall automatically terminate on the Second Refinancing Facility Agreement Effective Date and (ii) the Revolving Commitments shall automatically terminate on the Revolving Maturity Date.
SECTION 2.09. Repayment of Loans; Evidence of Debt. i. The Borrower hereby unconditionally promises to pay (i) to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Revolving Loan of such Lender on the Revolving Maturity Date, (ii) to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Term Loan of such Lender as provided in Section 2.10, (iii) to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Incremental Term Loan of such Lender on the maturity date applicable to such Incremental Term Loans and (iv) to the Swingline Lender the then unpaid principal amount of each Swingline Loan on the earlier of (A) the Revolving Maturity Date and ten (10) Business Days after such Swingline Loan is made; provided that on each date that a Revolving Borrowing is made, the Borrower shall repay all Swingline Loans that were outstanding on the date such Borrowing was requested.
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SECTION 2.10. Amortization of Term Loans. i. The Borrower shall repay to the Administrative Agent for the ratable account of the Term Lenders (i) on the last Business Day of each December, March, June and September, beginning with December 31, 2018 an aggregate amount equal to 0.25% of the aggregate amount of all Term Loans outstanding on the Second Refinancing Facility Agreement Effective Date (which payments shall be reduced as a result of the application of prepayments in accordance with Section 2.11) and (ii) on the Term Maturity Date, the aggregate principal amount of all Term Loans outstanding on such date. The Borrower shall repay Incremental Term Loans of any Series in such amounts and on such date or dates as shall be specified therefor in the Incremental Facility Agreement establishing the Incremental Term Commitments of such Series (as such amounts may be adjusted pursuant to paragraph (c) of this Section or pursuant to such Incremental Facility Agreement).
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SECTION 2.11. Prepayment of Loans. i. The Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, without penalty or premium (subject to paragraph (h) of this Section), subject to the requirements of this Section.
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SECTION 2.12. Fees. i. The Borrower agrees to pay to the Administrative Agent for the account of each Revolving Lender (other than any Defaulting Lender) a commitment fee which shall accrue at the Applicable Rate on the average daily unused amount of the Revolving Commitment of such Lender during the period from and including the Second Refinancing Facility Agreement Effective Date to but excluding the date on which such Revolving Commitment terminates. Accrued commitment fees in respect of the Revolving Commitments shall be payable in arrears on the third Business Day following the last day of March, June, September and December of each year and on the date on which the Revolving Commitments terminate, commencing on the first such date to occur after the Second Refinancing Facility Agreement Effective Date. All commitment fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). For purposes of computing commitment fees in respect of the Revolving Commitments, a Revolving Commitment of a Lender shall be deemed to be used to the extent of the outstanding Revolving Loans and LC Exposure of such Lender (and the Swingline Exposure of such Lender shall be disregarded for such purpose).
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SECTION 2.13. Interest. i. The Loans comprising each ABR Borrowing (including each Swingline Loan) shall bear interest at the Alternate Base Rate plus the Applicable Rate.
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SECTION 2.14. Alternate Rate of Interest. i. If at least two (2) Business Days prior to the commencement of any Interest Period for a EurocurrencyTerm Benchmark Borrowing of any Class:
then the Administrative Agent shall give notice (which may be telephonic) thereof to the Borrower and the Lenders of such Class as promptly as practicable and, until the Administrative Agent notifies the Borrower and the Lenders of such Class that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing of such Class to, or continuation of any Borrowing of such Class as, a EurocurrencyTerm Benchmark Borrowing shall be ineffective, and such Borrowing shall be continued as an ABR Borrowing, and (ii) any Borrowing Request for a EurocurrencyTerm Benchmark Borrowing of such Class shall be treated as a request for an ABR Borrowing; provided, however, that, in each case, the Borrower may revoke any Borrowing Request that is pending when such notice is received.
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SECTION 2.15. Increased Costs. i. If any Change in Law shall:
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and the result of any of the foregoing shall be to increase the cost to such Lender or other Recipient of making or maintaining any EurocurrencyTerm Benchmark Loan (or of maintaining its obligation to make any such Loan), to increase the cost to such Lender, Issuing Bank or other Recipient of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or issue any Letter of Credit) or to reduce the amount of any sum received or receivable by such Lender, Issuing Bank or other Recipient hereunder (whether of principal, interest or otherwise), then, from time to time upon request of such Lender, Issuing Bank or other Recipient, the Borrower will pay to such Lender, Issuing Bank or other Recipient, as the case may be, such additional amount or amounts as will compensate such Lender, Issuing Bank or other Recipient, as the case may be, for such additional costs or expenses incurred or reduction suffered.
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Notwithstanding the foregoing, no Lender shall claim any compensation pursuant to this Section 2.15 unless such claim for compensation is generally consistent with such Lender’s treatment of other borrowers of such Lender in the U.S. leveraged loan market with respect to similarly affected commitments, loans and/or participations under agreements with such borrowers having provisions similar to this Section 2.15; provided that such Lender shall not be required to disclose any confidential or proprietary information relating to such other borrowers, and this Section 2.15 shall not be construed to require any Lender to make available its tax return (or other information relating to its taxes which it deems confidential) to the Borrower or any other Person.
SECTION 2.16. Break Funding Payments. In the event of (a) the payment of any principal of any EurocurrencyTerm Benchmark Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any EurocurrencyTerm Benchmark Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert or continue any EurocurrencyTerm Benchmark Loan on the date specified in any notice delivered pursuant hereto, (d) the failure to prepay any EurocurrencyTerm Benchmark Loan on a date specified therefor in any notice of prepayment given by the Borrower (whether or not such notice may be revoked in accordance with the terms hereof) or (e) the assignment of any EurocurrencyTerm Benchmark Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 2.19 or pursuant to Section 2.21(e), then, in any such event, the Borrower shall, after receipt of a written request by any Lender affected by any such event (which request shall set forth in reasonable detail the basis for requesting such amount), compensate such Lender for the loss, cost and expense attributable to such event. Such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest that would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBOTerm SOFR Rate that would have been applicable to such Loan (but not including the Applicable Rate applicable thereto), for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest that would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the Londonapplicable offshore interbank market. The Borrower shall also compensate each Term Lender for the loss, cost and expense attributable to any failure by the Borrower to deliver a timely Interest Election Request with respect to a EurocurrencyTerm Benchmark Term Loan. A certificate of any Lender delivered to the Borrower and setting forth any amount or amounts (including calculations in reasonable detail) that such Lender is entitled to receive pursuant to this Section shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 15 days after receipt thereof. Notwithstanding the foregoing, no Lender shall claim any compensation pursuant to this Section 2.16 unless such claim for compensation is generally consistent with such Lender’s treatment of other borrowers of such Lender in the U.S. leveraged loan market with respect to similarly affected commitments, loans and/or participations under agreements with such borrowers having
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provisions similar to this Section 2.16; provided that such Lender shall not be required to disclose any confidential or proprietary information relating to such other borrowers, and this Section 2.16 shall not be construed to require any Lender to make available its tax return (or other information relating to its taxes which it deems confidential) to the Borrower or any other Person.
SECTION 2.17. Taxes. i. Withholding of Taxes; Gross-Up. Any and all payments by or on account of any obligation of any Loan Party under any Loan Document shall be made without deduction or withholding for any Taxes, except as required by applicable law. If any applicable law (as determined in the good faith discretion of an applicable Withholding Agent) requires the deduction or withholding of any Tax from any such payment by a Withholding Agent, then the applicable Withholding Agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law and, if such Tax is an Indemnified Tax, then the sum payable by the applicable Loan Party shall be increased as necessary so that after such deduction or withholding for Indemnified Taxes has been made (including such deductions and withholdings for Indemnified Taxes applicable to additional sums payable under this Section 2.17) the applicable Recipient receives an amount equal to the sum it would have received had no such deduction or withholding for Indemnified Taxes been made.
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Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall promptly (and in any event within 30 days after expiration, obsolescence or inaccuracy) update such form or certification or promptly notify the Borrower and the Administrative Agent in writing of its legal inability to do so.
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SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Setoffs. i. The Borrower shall make each payment required to be made by it hereunder or under any other Loan Document prior to the time expressly required hereunder or under such other Loan Document for such payment (or, if no such time is expressly required, prior to 2:00 p.m., New York City time), on the date when due, in immediately available funds, without any defense, setoff, recoupment or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to such account as may be specified by the Administrative Agent, except that payments required to be made directly to any Issuing Bank or the Swingline Lender shall be so made, payments pursuant to Sections 2.15, 2.16, 2.17 and 9.03 shall be made directly to the Persons entitled thereto and payments pursuant to other Loan Documents shall be made to the Persons specified therein. The Administrative Agent shall distribute any such payment received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment under any Loan Document shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments under each Loan Document shall be made in dollars.
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SECTION 2.19. Mitigation Obligations; Replacement of Lenders. i. If any Lender requests compensation under Section 2.15, or if the Borrower is required to pay any Indemnified Taxes or additional amounts to any Lender or to any Governmental Authority for the account of any Lender pursuant to Section 2.17, then such Lender shall (at the request of the Borrower) use commercially reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or its participation in any Letter of Credit affected by such event, or to assign and delegate its rights and obligations hereunder to another of its offices, branches or Affiliates if, in the judgment of such Lender, such designation or assignment and delegation (i) would eliminate or reduce amounts payable pursuant to Section 2.15 or 2.17, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense reasonably deemed by such Lender to be material and would not otherwise be disadvantageous in any material economic, legal or regulatory respect to such Lender. The Borrower hereby agrees to pay all reasonable and documented costs and expenses incurred by any Lender in connection with any such designation or assignment and delegation.
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SECTION 2.20. Defaulting Lenders. i. Defaulting Lender Adjustments. Notwithstanding any provision of this Agreement to the contrary, if any Revolving Lender becomes a Defaulting Lender, then, until such time as such Lender is no longer a Defaulting Lender, to the extent permitted by applicable law:
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SECTION 2.21. Incremental Facilities. (d) The Borrower may on one or more occasions after the Second Refinancing Facility Agreement Effective Date, by written notice to the Administrative Agent, request (i) during the Revolving Availability Period, the establishment of Incremental Revolving Commitments and/or (ii) the establishment of Incremental Term Commitments, provided that the aggregate amount of all the Incremental Commitments established hereunder shall not exceed (A) $50,000,000 plus (B) such greater amount that will not result in the First Lien Secured Leverage Ratio, determined on a Pro Forma Basis giving effect to such Incremental Facility (assuming that all Revolving Commitments, including any Incremental Revolving Commitments, have been fully funded with Revolving Loans and excluding in the calculation of Available Domestic Cash and Available Foreign Cash for purposes of the First Lien Secured Leverage Ratio the cash proceeds of the Borrowings under any such Incremental Revolving Facility or Incremental Term Facility, but not excluding the use of such proceeds) exceeding 3.75 to 1.00. Each such notice shall specify (A) the date on which the Borrower proposes that the Incremental Revolving Commitments or the Incremental Term Commitments, as applicable, shall be effective, which shall be a date not less than 10 Business Days (or such shorter period as may be agreed to by the Administrative Agent) after the date on which such notice is delivered to the Administrative Agent and (B) the amount of the Incremental Revolving Commitments or Incremental Term Commitments, as applicable, being requested (it being agreed that (x) any Lender approached to provide any Incremental Revolving Commitment or Incremental Term Commitment may elect or decline, in its sole discretion, to provide such Incremental Revolving Commitment or Incremental Term Commitment and (y) any Person that the Borrower proposes to become an Incremental Lender, if such Person is not then a Lender, must be an Eligible Assignee and must be reasonably acceptable to the Administrative
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Agent and, in the case of any proposed Incremental Revolving Lender, each Issuing Bank and the Swingline Lender).
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SECTION 2.22. Loan Modification Offers. (i) The Borrower may on one or more occasions, by written notice to the Administrative Agent, make one or more offers (each, a “Loan Modification Offer”) to all (and not fewer than all) the Lenders of one or more Classes (each Class subject to such an Loan Modification Offer, an “Affected Class”) to make one or more Permitted Amendments pursuant to procedures reasonably specified by the Administrative Agent and reasonably acceptable to the Borrower. Such notice shall set forth (i) the terms and conditions of the requested Loan Modification Offer and (ii) the date on which such Loan Modification Offer is requested to become effective (which shall not be less than ten Business Days nor more than 30 Business Days after the date of such notice, unless otherwise agreed to by the Administrative Agent). Permitted Amendments shall become effective only with respect to the Loans and Commitments of the Lenders of the Affected Class that accept the applicable Loan Modification Offer (such Lenders, the “Accepting Lenders”) and, in the case of any Accepting Lender, only with respect to such Lender’s Loans and Commitments of such Affected Class as to which such Lender’s acceptance has been made. With respect to all Permitted Amendments consummated by the Borrower pursuant to this Section 2.22, (i) such Permitted Amendments shall not constitute voluntary or mandatory payments or prepayments for purposes of Section 2.11 and (ii) any Loan Modification Offer, unless contemplating a Maturity Date already in effect hereunder pursuant to a previously consummated Permitted Amendment, must be in a minimum amount of $25,000,000, provided that the Borrower may at its election specify as a condition (a “Minimum Extension Condition”) to consummating any such Permitted Amendment that a minimum amount (to be determined and specified in the relevant Loan Modification Offer in the Borrower’s sole discretion and which may be waived by the Borrower) of Commitments or Loans of any or all Affected Classes be extended. If the aggregate principal amount of Commitments or Loans of any Affected Class in respect of which Lenders shall have accepted the relevant Loan Modification Offer shall exceed the maximum aggregate principal amount of Commitments or Loans of such Affected Class offered to be extended by the Borrower pursuant to such Loan Modification Offer, then the Commitments and Loans of such Lenders shall be extended ratably up to such maximum amount based on the relative principal amounts (but not to exceed actual holdings of record) with respect to which such Lenders have accepted such Loan Modification Offer.
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SECTION 2.23. Loan Repurchases. (a)Subject to the terms and conditions set forth or referred to below, any Purchasing Borrower Party may from time to time, in its discretion, conduct modified Dutch auctions to make Auction Purchase Offers, each such Auction Purchase Offer to be managed exclusively by J.P.
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Morgan Securities LLC or another investment bank of recognized standing selected by such Purchasing Borrower Party following consultation with the Administrative Agent (in such capacity, the “Auction Manager”), so long as the following conditions are satisfied:
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SECTION 2.24. Refinancing Facilities. (a) The Borrower may, on one or more occasions, by written notice to the Administrative Agent, request the establishment hereunder of (i) a new Class of revolving commitments (the “Refinancing Revolving Commitments”) pursuant to which each Person providing such a commitment (a “Refinancing Revolving Lender”) will make revolving loans to the Borrower (“Refinancing Revolving Loans”) and acquire participations in the Letters of Credit and (ii) one or more additional Classes of term loan commitments (the “Refinancing Term Loan Commitments”) pursuant to which each Person providing such a commitment (a “Refinancing Term Lender”) will make term loans to the Borrower (the “Refinancing Term Loans”); provided that (A) each Refinancing Revolving Lender and each Refinancing Term Lender shall be an Eligible Assignee and, if not already a Lender, shall otherwise be reasonably acceptable to the Administrative Agent and (B) each Refinancing Revolving Lender (if not already a Lender) shall be approved by each Issuing Bank and the Swingline Lender (such approvals not to be unreasonably withheld or delayed).
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Each of Holdings and the Borrower represents and warrants to the Lenders on the Second Refinancing Facility Agreement Effective Date and on each other date on which representations and warranties are made or deemed made hereunder that:
SECTION 3.01. Organization; Powers. Holdings, the Borrower and each Subsidiary (i) is duly organized or formed, validly existing and (to the extent the concept is applicable in such jurisdiction) in good standing under the laws of the jurisdiction of its organization, (ii) has all power and authority and all Governmental Approvals required for the ownership and operation of its properties and the conduct of its business as now conducted and as proposed to be conducted and (iii) is qualified to do business, and is in good standing (to the extent the concept is applicable in such jurisdiction), in every jurisdiction where such qualification is required, except, in the case of clauses (i) (insofar as it relates to any Subsidiary other than the Borrower), (ii) and (iii), where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.
SECTION 3.02. Authorization; Enforceability. The Transactions to be entered into by each Loan Party are within such Loan Party’s corporate or other organizational powers and have been duly authorized by all necessary corporate or other organizational and, if required, stockholder or other equityholder action of each Loan Party. This Agreement has been duly executed and delivered by each of Holdings and the Borrower and constitutes, and each other Loan Document to which any Loan Party is to be a party, when executed and delivered by such Loan Party, will constitute, a legal, valid and binding obligation of Holdings, the Borrower or such Loan Party, as the case may be, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and to general principles of equity, regardless of whether considered in a proceeding in equity or at law.
SECTION 3.03. Governmental Approvals; Absence of Conflicts. The Transactions (a) do not require any consent or approval of, registration or filing with or any other action by any Governmental Authority, except (i) such as have been or substantially contemporaneously with the funding or continuation of Loans on the Second Refinancing Facility Agreement Effective Date will be obtained or made and are (or will so be) in full force and effect and (ii) filings necessary to perfect Liens created under the Loan Documents, (b) will not violate any applicable law, including any order of any Governmental Authority, (c) will not violate the charter, by-laws or other organizational documents of Holdings, the Borrower or any Subsidiary, (d) will not violate or result (alone or with notice or lapse of time, or both) in a default under any indenture or other agreement or instrument binding upon Holdings, the Borrower or any Subsidiary or any of their assets, or give rise to a right thereunder to require any payment, repurchase or redemption to be made by Holdings, the Borrower or any Subsidiary, or give rise to a right of, or result in, any termination, cancellation, acceleration or right of
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renegotiation of any obligation thereunder, and (e) except for Liens created under the Loan Documents or other Liens permitted under Section 6.02, will not result in the creation or imposition of any Lien on any asset of the Borrower or any Subsidiary, except, in the case of clauses (a), (b) and (d), to the extent any of the foregoing in such clauses, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.
SECTION 3.04. Financial Condition; No Material Adverse Change.
(a) Holdings has heretofore furnished to the Administrative Agent (i) the consolidated balance sheet of Holdings as of December 31, 2017, and the related consolidated statements of income, stockholders’ equity and cash flows of Holdings for the fiscal year ended December 31, 2017, audited by and accompanied by the opinion of Ernst & Young LLP, independent registered public accounting firm, and (ii) the unaudited consolidated balance sheet of Holdings as at the end of, and related consolidated statements of income and cash flows of Holdings for, the fiscal quarter and the portion of the fiscal year ended June 30, 2018 (and comparable periods for the prior fiscal year), certified by its senior vice president, business operations and finance. Such financial statements present fairly, in all material respects, the financial position, results of operations and cash flows of Holdings and its consolidated Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to normal year-end audit adjustments and the absence of certain footnotes in the case of the statements referred to in clause (ii) above.
SECTION 3.05. Properties. (e) Holdings, the Borrower and each other Subsidiary has good title to, or valid leasehold interests in, all its property material to its business, except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties for their intended purposes.
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SECTION 3.06. Litigation and Environmental Matters. (i) Except as set forth on Schedule 3.06 to the Disclosure Letter, there are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of Holdings, the Borrower or any other Subsidiary, threatened in writing against or affecting Holdings, the Borrower or any Subsidiary that (i) could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or (ii) involve any of the Loan Documents.
SECTION 3.07. Compliance with Laws and Agreements. Holdings, the Borrower and each other Subsidiary is in compliance with all laws, including all orders of Governmental Authorities, applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except, in each case, where the failure to comply, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is continuing.
SECTION 3.08. Investment Company Status. None of Holdings, the Borrower or any other Subsidiary is an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940.
SECTION 3.09. Taxes. Holdings, the Borrower and each Subsidiary has timely filed or caused to be filed all Tax returns and reports required to have been filed by it and has paid or caused to be paid all Taxes required to have been paid by it, except where (a) (i) the validity or amount thereof is being contested in good faith by appropriate proceedings, (ii) Holdings, the Borrower or such Subsidiary, as applicable, has set aside on its books reserves with respect thereto to the extent required by GAAP and (iii) such contest effectively suspends collection of the contested obligation and the enforcement of any Lien securing such obligation or (b) the failure to do so could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
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SECTION 3.10. ERISA; Labor Matters. (a) No ERISA Events have occurred or are reasonably expected to occur that could, in the aggregate, reasonably be expected to result in a Material Adverse Effect. Except as could not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect, (i) each Plan is in compliance with the applicable provisions of ERISA, the Code and other Federal or state Laws, (ii) no Plan has an “accumulated funding deficiency” (within the meaning of Section 412 of the Code), whether or not waived, (iii) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Plan (other than premiums due and not delinquent under Section 4007 of ERISA), (iv) neither the Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 of ERISA with respect to a Multiemployer Plan and (v) neither the Borrower nor any ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or 4212(c) of ERISA.
(b) As of the Second Refinancing Facility Agreement Effective Date, except as could not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect, (i) there are no strikes, lockouts or slowdowns against Holdings, the Borrower or any Subsidiary pending or, to their knowledge, threatened, (ii) the hours worked by and payments made to employees of Holdings, the Borrower and the other Subsidiaries have not been in violation in any material respect of the Fair Labor Standards Act or any other applicable Federal, state, local or foreign law relating to such matters, (iii) all material payments due from Holdings, the Borrower or any other Subsidiary, or for which any claim may be made against Holdings, the Borrower or any other Subsidiary, on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as liabilities on the books of Holdings, the Borrower or such Subsidiary, and (iv) the consummation of the Transactions will not give rise to any right of termination or right of renegotiation on the part of any union under any collective bargaining agreement under which Holdings, the Borrower or any other Subsidiary is bound.
SECTION 3.11. Subsidiaries and Joint Ventures; Disqualified Equity Interests. (k) Schedule 3.11A to the Disclosure Letter sets forth, as of the Second Refinancing Facility Agreement Effective Date, the name and jurisdiction of organization of, and the percentage of each class of Equity Interests (other than warrants, options or other rights entitling the holder thereof to purchase or acquire such Equity Interests) owned by Holdings, the Borrower or any other Subsidiary in, (a) each Subsidiary and (b) each joint venture in which Holdings, the Borrower or any other Subsidiary owns any Equity Interests, and identifies each Designated Subsidiary and each Excluded Subsidiary as of the Second Refinancing Facility Agreement Effective Date. The Equity Interests in each Subsidiary have been duly authorized and validly issued and are fully paid and non-assessable (to the extent such concepts are applicable in the relevant jurisdiction and to such Subsidiary). Except as set forth on Schedule 3.11A to the Disclosure Letter, as of the Second Refinancing Facility Agreement Effective Date, there is no existing option, warrant, call, right, commitment or other agreement to which Holdings, the Borrower or
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any other Domestic Subsidiary is a party requiring, and there are no Equity Interests in any Domestic Subsidiary outstanding that upon exercise, conversion or exchange would require, the issuance by any Domestic Subsidiary of any additional Equity Interests or other securities exercisable for, convertible into, exchangeable for or evidencing the right to subscribe for or purchase any Equity Interests in any Domestic Subsidiary.
SECTION 3.12. Insurance. Schedule 3.12 to the Disclosure Letter sets forth a description of all insurance maintained by or on behalf of Holdings, the Borrower and the Subsidiaries as of the Second Refinancing Facility Agreement Effective Date.
SECTION 3.13. Solvency. Immediately after the consummation of the Transactions to occur on the Second Refinancing Facility Agreement Effective Date, and giving effect to the rights of subrogation and contribution under the Collateral Agreement or otherwise, (a) the fair value of the assets of Holdings and the Subsidiaries, taken as a whole, will exceed their debts and liabilities, subordinated, contingent or otherwise, (b) the present fair saleable value of the assets of Holdings and the Subsidiaries, taken as a whole, will be greater than the amount that will be required to pay the probable liability on their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured, (c) Holdings and the Subsidiaries, taken as a whole, will be able to pay their debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured and (d) Holdings and the Subsidiaries, taken as a whole, will not have unreasonably small capital with which to conduct the business in which they are engaged, as such business is conducted at the time of and is proposed to be conducted following the Second Refinancing Facility Agreement Effective Date. For purposes of this Section 3.13, the amount of any contingent liability at any time shall be computed as the amount that would reasonably be expected to become an actual or matured liability.
SECTION 3.14. Disclosure. None of the written reports, financial statements, certificates or other information (other than any projected financial information and forecasts and other than information of a general economic or industry specific nature) furnished by or on behalf of Holdings, the Borrower or any other Subsidiary to the Administrative Agent, the Arrangers or any Lender in connection with the negotiation of this Agreement or any other Loan Document, included herein or therein or furnished hereunder or thereunder (in each case, as modified or supplemented by other information so furnished), when taken as a whole and together with Holdings’ filings with the SEC, contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not materially misleading. The projections and forecasts
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furnished by or on behalf of Holdings, the Borrower or any other Subsidiary to the Administrative Agent, the Arrangers or any Lender in connection with this Agreement or any other Loan Document have been prepared in good faith based upon assumptions believed by Holdings, the Borrower or such other Subsidiary, as applicable, to be reasonable at the time made and at the time the related projected financial information or forecasts are so furnished (it being understood that (i) such projections and forecasts are as to future events and are not to be viewed as facts, (ii) such projections and forecasts are subject to uncertainties and contingencies, many of which are beyond Holdings’, the Borrower’s or such other Subsidiary’s control, (iii) no assurance can be given that any particular projected financial information or forecasts will be realized and (iv) actual results during the period or periods covered by any such projections or forecasts may differ from the projected results and such differences may be material).
SECTION 3.15. Collateral Matters. (m) The Collateral Agreement has created in favor of the Administrative Agent, for the benefit of the Secured Parties, a valid and enforceable security interest in the Collateral (as defined therein) and (i) when the Collateral (as defined therein) constituting certificated securities (as defined in the Uniform Commercial Code) is or was delivered to the Administrative Agent, together with instruments of transfer duly endorsed in blank, the security interest created under the Collateral Agreement constituted or will constitute a fully perfected security interest in all right, title and interest of the pledgors thereunder in such Collateral, prior and superior in right to any other Person (other than Permitted Encumbrances), and (ii) when financing statements in appropriate form were or are filed in the applicable filing offices, the security interest created under the Collateral Agreement constituted or will constitute a fully perfected security interest in all right, title and interest of the Loan Parties in the remaining Collateral (as defined therein) to the extent perfection can be obtained by filing Uniform Commercial Code financing statements, prior and superior to the rights of any other Person (other than Permitted Encumbrances).
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SECTION 3.16. Federal Reserve Regulations. None of Holdings, the Borrower or any other Subsidiary is engaged or will engage, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U of the Board of Governors), or extending credit for the purpose of purchasing or carrying margin stock. No part of the proceeds of the Loans will be used, directly or indirectly, for any purpose that entails a violation (including on the part of any Lender) of any of the regulations of the Board of Governors, including Regulations U and X.
SECTION 3.17. Anti-Terrorism Laws; Anti-Corruption Laws and Sanctions. (p) No Loan Party (i) is a person whose property or interest in property is blocked or subject to blocking pursuant to Section 1 of Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)), (ii) engages in any dealings or transactions prohibited by Section 2 of such executive order, or is otherwise associated with any such person in any manner violative in any material respect of Section 2, or (iii) is a person on the list of Specially Designated Nationals and Blocked Persons or subject to the limitations or prohibitions under any other U.S. Department of Treasury’s Office of Foreign Assets Control regulation or executive order.
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SECTION 3.18. Plan Assets; Prohibited Transactions. None of the Borrower or any of its Subsidiaries is an entity deemed to hold “plan assets” (within the meaning of the Plan Asset Regulations), and neither the execution, delivery or performance of the transactions contemplated under this Agreement, including the making of any Loan and the issuance of any Letter of Credit hereunder, will give rise to a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code.
SECTION 4.01. [Reserved].
SECTION 4.02. Each Credit Event. The obligation of each Lender to make a Loan on the occasion of any Borrowing, and of each Issuing Bank to issue, amend, renew or extend any Letter of Credit, is subject to receipt of the request therefor in accordance herewith and to the satisfaction of the following conditions:
On the date of any Loan or the issuance, amendment, renewal or extension of any Letter of Credit, Holdings and the Borrower shall be deemed to have represented and warranted that the conditions specified in paragraphs (a) and (b) of this Section have been satisfied and that, immediately after giving effect to such Loan, or such issuance, amendment, renewal or extension of a Letter of Credit, the Aggregate Revolving Exposure (or any component thereof) shall not exceed the applicable maximum amount thereof (or the applicable maximum amount of any such component) specified in Section 2.01, 2.04(a) or 2.05(b).
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Until the Commitments shall have expired or been terminated, the principal of and interest on each Loan and all fees payable hereunder shall have been paid in full, all Letters of Credit shall have expired or been terminated (or shall have been cash collateralized as contemplated by Section 2.05(c) or otherwise cease to be Letters of Credit under this Agreement in a manner approved in writing by each of the applicable Issuing Banks) and all LC Disbursements shall have been reimbursed, each of Holdings and the Borrower covenants and agrees with the Lenders that:
SECTION 5.01. Financial Statements and Other Information. Holdings and the Borrower will furnish to the Administrative Agent, on behalf of each Lender:
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Information required to be delivered pursuant to clause (a) or (b) of this Section shall be deemed to have been delivered to the Administrative Agent and the Lenders if such information, or one or more annual or quarterly reports containing such information, shall have been posted by the Administrative Agent on an IntraLinks or similar site to which the Lenders have been granted access. Information required to be delivered pursuant to clause (a) or (b) of this Section shall be deemed to have been delivered to the Administrative Agent and the Lenders if such information, or one or more annual or quarterly reports containing such information, is available on the website of the SEC at http://www.sec.gov. Information required to be delivered pursuant to this Section may also be delivered by electronic communications pursuant to procedures approved by the Administrative Agent.
SECTION 5.02. Notices of Material Events. Holdings and the Borrower will furnish to the Administrative Agent prompt (in any event within any applicable period specified below) written notice of the following:
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Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other executive officer of Holdings or the Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.
SECTION 5.03. Additional Subsidiaries. (b) If any direct Subsidiary is formed or acquired after the Second Refinancing Facility Agreement Effective Date by any Loan Party (including, without limitation, upon the formation of any Subsidiary that is a Delaware Divided LLC) or any Subsidiary that is required to be a Loan Party, Holdings and the Borrower will, as promptly as practicable, and in any event within 30 days (or such longer period as the Administrative Agent may agree to in writing), notify
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the Administrative Agent thereof and cause the Collateral and Guarantee Requirement to be satisfied with respect to such Subsidiary (if it is a Designated Subsidiary) and with respect to any Equity Interests of such Subsidiary owned by any Loan Party (including, in the case of any Equity Interests of a Material Foreign Subsidiary constituting Collateral held by a Loan Party, in each case, if requested by the Administrative Agent, the execution and delivery of a Foreign Pledge Agreement with respect to such Equity Interests (subject to the limitations referred to in the definition of “Collateral and Guarantee Requirement”) and the taking of other necessary actions to perfect the security interest of the Administrative Agent in such Equity Interests).
SECTION 5.04. Information Regarding Collateral. (d) Holdings and the Borrower will furnish to the Administrative Agent prompt written notice of any change in (i) the legal name of any Loan Party, as set forth in its organizational documents, (ii) the jurisdiction of organization or the form of organization of any Loan Party (including as a result of any merger or consolidation), (iii) the location of the chief executive office of any Loan Party or (iv) the organizational identification number, if any, or, with respect to any Loan Party organized under the laws of a jurisdiction that requires such information to be set forth on the face of a Uniform Commercial Code financing statement, the Federal Taxpayer Identification Number of such Loan Party. Holdings and the Borrower agree not to effect or permit any change referred to in the preceding sentence unless all filings have been made under the Uniform Commercial Code or otherwise that are required in order for the Administrative Agent to continue to have, to the extent required by the Loan Documents, a valid, legal and perfected security interest in all the Collateral owned by such Loan Party following such change.
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SECTION 5.05. Existence; Conduct of Business. (f) Holdings, the Borrower and each other Subsidiary will do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges, franchises, patents, copyrights, trademarks and trade names necessary to the conduct of its business, in each case, except to the extent (other than with respect to the preservation of existence of Holdings and the Borrower) that the failure to do so could not reasonably be expected to have a Material Adverse Effect; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 6.03 or any Disposition permitted by Section 6.05.
SECTION 5.06. Payment of Taxes. Holdings, the Borrower and each other Subsidiary will pay its Tax liabilities before the same shall become delinquent or in default, unless the same are being contested in good faith by appropriate proceedings diligently conducted and unless Holdings, the Borrower or such other Subsidiary is maintaining adequate reserves in accordance with GAAP (to the extent required thereby), except where the failure to pay such Tax liabilities could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
SECTION 5.07. Maintenance of Properties. Holdings, the Borrower and each other Subsidiary will keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear and casualty and condemnation excepted, except where the failure to do so could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
SECTION 5.08. Insurance. Holdings, the Borrower and each other Subsidiary will maintain, with financially sound and reputable insurance companies, insurance in such amounts (with no greater risk retention) and against such risks as are customarily maintained by companies of established repute engaged in the same or similar businesses operating in the same or similar locations. Each such policy of
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liability or casualty insurance maintained by or on behalf of Loan Parties, unless otherwise agreed by the Administrative Agent, shall (a) in the case of each liability insurance policy, name the Administrative Agent, on behalf of the Lenders, as an additional insured thereunder, (b) in the case of each casualty insurance policy, contain a lender loss payable clause or endorsement that names the Administrative Agent, on behalf of the Lenders, as the lender loss payee thereunder and (c) provide for at least 30 days’ (or such shorter number of days as may be agreed to by the Administrative Agent) prior written notice to the Administrative Agent of any cancellation of such policy. With respect to each Mortgaged Property that is located in an area determined by the Federal Emergency Management Agency to have special flood hazards, the applicable Loan Party has obtained, and will maintain, with financially sound and reputable insurance companies, such flood insurance as is required under applicable law, including Regulation H of the Board of Governors.
SECTION 5.09. Books and Records; Inspection and Audit Rights. Holdings, the Borrower and each other Subsidiary will keep proper books of record and account in which entries that are full, true and correct in all material respects and in conformity with GAAP shall be made of all material financial dealings and transactions in relation to its business and activities. Holdings, the Borrower and each other Subsidiary will permit the Administrative Agent, and any agent designated by the Administrative Agent, upon reasonable prior notice, (a) to visit and inspect its properties, (b) to examine and make extracts from its books and records and (c) to discuss its operations, business affairs, assets, liabilities (including contingent liabilities) and financial condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested; provided that (i) no such discussion with any such independent accountants shall be permitted unless the Borrower shall have received reasonable notice thereof and a reasonable opportunity to participate therein and (ii) unless an Event of Default shall have occurred and be continuing, the Administrative Agent shall not exercise such rights more often than two times during any calendar year and only one such time shall be at the Borrower’s expense. Notwithstanding anything to the contrary in this Section 5.09, none of Holdings, the Borrower or any of their respective Subsidiaries will be required to disclose, permit the inspection, examination or making of extracts, or discussion of, any documents, information or other matter that (i) in respect of which disclosure to the Administrative Agent (or any designated representative or agent or employee) or any Lender is then prohibited by law or any agreement binding on Holdings, the Borrower or any of their respective Subsidiaries or (ii) is subject to attorney-client or similar privilege or constitutes attorney work product.
SECTION 5.10. Compliance with Laws. (h) Holdings, the Borrower and each other Subsidiary will comply with all Requirements of Law, including environmental laws and ERISA, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.
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SECTION 5.11. Use of Proceeds and Letters of Credit. (j) The proceeds of the Revolving Loans and Swingline Loans will be used solely for working capital and other general corporate purposes of Holdings, the Borrower and the Subsidiaries, including for Permitted Acquisitions but excluding any purchases of Term Loans. Letters of Credit will be used by the Borrower and the Subsidiaries for general corporate purposes.
SECTION 5.12. Further Assurances. Holdings, the Borrower and each other Loan Party will execute any and all further documents, financing statements, agreements and instruments, and take all such further actions (including the filing and recording of financing statements, fixture filings, mortgages, deeds of trust and other documents), that may be required under any applicable law, or the Administrative Agent may reasonably request, to cause the Collateral and Guarantee Requirement to be and remain satisfied at all times required hereunder, all at the expense of the Loan Parties; provided that with respect to any Mortgaged Property, the Loan Parties shall give 20 days prior written notice to each Arranger that at such time is a Lender or has an Affiliate that is a Lender of their intention to execute a Mortgage and no Mortgage related to such Mortgaged Property shall be executed and delivered until confirmation is received from each such Arranger that at such time is a Lender or has an Affiliate that is a Lender that flood insurance due diligence and flood insurance compliance has been completed (such confirmation not to be unreasonably conditioned, withheld or delayed). Holdings and the Borrower will provide to the Administrative Agent, from time to time upon request, evidence reasonably satisfactory to the Administrative Agent as to the perfection and priority of the Liens required by the Security Documents.
SECTION 5.13. Maintenance of Ratings. The Borrower will use commercially reasonable efforts to maintain continuously in effect a corporate rating from S&P and a corporate family rating from Moody’s, in each case in respect of the Borrower, and a rating of the credit facilities hereunder by each of S&P and Moody’s.
SECTION 5.14. Databases; Software. If an Event of Default has occurred and is continuing, at the reasonable request of the Administrative Agent, Holdings and the Borrower will deliver to the Administrative Agent schedules (which shall be updated with such frequency as the Administrative Agent may reasonably require if an Event of Default is continuing) listing all computer hardware and operational software (specifying,
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among other things, the current versions thereof) utilized by the Loan Parties to maintain and operate the Proprietary Databases and Proprietary Software.
SECTION 5.15. Maintenance of Websites and Domain Names. Holdings, the Borrower and each other Subsidiary will (a) take actions customarily taken by companies engaged in the same or similar business to maintain, preserve and protect their rights and interests and the rights and interests of the Administrative Agent with respect to all material Websites and material Domain Names of the Loan Parties, including, making all necessary filings, registrations and applications with the appropriate domain name registrars and paying all fees, costs and expenses associated therewith, (b) maintain the effectiveness of all Domain Name registrations material to the business of the Loan Parties and their subsidiaries as of the relevant time of inquiry with an ICANN-accredited domain name registrar and prevent any such registrations from lapsing or being canceled, abandoned or terminated, (c) register all Domain Names primarily used by the Borrower or a Domestic Subsidiary and acquired after the Original Effective Date in the name of the Borrower or any other Subsidiary Loan Party and (d) comply in all material respects with all of the Loan Parties’ obligations under all Website Agreements and maintain the effectiveness of all Website Agreements, except, in the case of each of clauses (a) through (d), where the failure to do so would not interfere in any material respect with the ability of the Borrower and the other Subsidiaries to conduct their business as currently conducted.
Until the Commitments shall have expired or been terminated, the principal of and interest on each Loan and all fees payable hereunder shall have been paid in full, all Letters of Credit shall have expired or been terminated (or shall have been cash collateralized as contemplated by Section 2.05(c) or otherwise cease to be Letters of Credit under this Agreement in a manner approved in writing by each of the applicable Issuing Banks) and all LC Disbursements shall have been reimbursed, each of Holdings and the Borrower covenants and agrees with the Lenders that:
SECTION 6.01. Indebtedness; Certain Equity Securities. (a) None of Holdings, the Borrower or any other Subsidiary will create, incur, assume or permit to exist any Indebtedness, except:
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Notwithstanding anything to the contrary set forth above, if any Indebtedness incurred pursuant to this Section 6.01 is denominated in a foreign currency, no fluctuation in currency following the incurrence of such Indebtedness shall result in a breach of this Section 6.01.
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SECTION 6.02. Liens. (c) None of Holdings, the Borrower or any other Subsidiary will create, incur, assume or permit to exist any Lien on any asset now owned or hereafter acquired by it, or assign or sell (other than as permitted by Section 6.05) any income or revenues (including accounts receivable and royalties) or rights in respect of any thereof, except:
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SECTION 6.03. Fundamental Changes; Business Activities. (f) None of Holdings, the Borrower or any other Subsidiary will merge into or consolidate with any other Person or divide, or permit any other Person to merge into or consolidate with it, or liquidate or dissolve (including, in each case, pursuant to a Delaware LLC Division), except that, if at the time thereof and immediately after giving effect thereto no Default shall have occurred and be continuing,
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SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions. None of Holdings, the Borrower or any other Subsidiary will purchase, hold, acquire (including pursuant to any merger or consolidation with any Person that was not a wholly-owned Subsidiary prior thereto), make or otherwise permit to exist any Investment in any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions) all or substantially all the assets of any other Person or of a business unit, division, product line or line of business of any other Person, or assets acquired other than in the ordinary course of business that, following the acquisition thereof, would constitute a substantial portion of the assets of Holdings and the Subsidiaries, taken as a whole, except:
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Notwithstanding anything contrary set forth above, if any applicable Investment is denominated in a foreign currency, no fluctuation in currency shall result in a breach of this Section 6.04. In addition, in the event that a Loan Party makes an Investment in an Excluded Subsidiary for purposes of permitting such Excluded Subsidiary or any other Excluded Subsidiary to apply the amounts received by it to make a substantially concurrent Investment (which may be made through any other Excluded Subsidiary) permitted hereunder, such substantially concurrent Investment by such Excluded Subsidiary shall not be included as an Investment for purposes of this Section 6.04 to the extent that the initial Investment by the Loan Party reduced amounts available to make Investments hereunder.
Notwithstanding the foregoing, Holdings shall be able to make Permitted Acquisitions and other Investments permitted hereunder so long as all assets and Equity Interests acquired in connection with such Permitted Acquisition or other Investment are contributed to the Borrower or another Subsidiary promptly after the consummation of such Permitted Acquisition or other Investment.
SECTION 6.05. Asset Sales. None of Holdings, the Borrower or any other Subsidiary will sell, transfer, lease or otherwise dispose of (including any disposition of property to a Delaware Divided LLC pursuant to a Delaware LLC Division), or exclusively license, any asset, including any Equity Interest owned by it, nor will any Subsidiary issue any additional Equity Interests in such Subsidiary (other than to Holdings, the Borrower or any other Subsidiary in compliance with Section 6.03 or 6.04, and other than directors’ qualifying shares and other nominal amounts of Equity Interests that are required to be held by other Persons under Requirements of Law) (each, a “Disposition”), except:
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“Cash Consideration” means, in respect of any Disposition by Holdings, the Borrower or any other Subsidiary, (a) cash or Permitted Investments received by it in consideration of such Disposition and (b) any liabilities (as shown on the most recent balance sheet of Holdings provided hereunder or in the footnotes thereto) of Holdings or such Subsidiary, other than liabilities that are by their terms subordinated in right of payment to the Loan Document Obligations, that are assumed by the transferee with respect to the applicable Disposition and for which Holdings and all of the Subsidiaries shall have been validly released by all applicable creditors (or an applicable agent or representative thereof) in writing.
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Notwithstanding the foregoing, (i) no Disposition of any Equity Interests in any Subsidiary shall be permitted unless (A) in the case of the Disposition of any Equity Interests in any Subsidiary Loan Party, such Equity Interests constitute all the Equity Interests in such Subsidiary Loan Party held by Holdings and the Subsidiaries and (B) immediately after giving effect to such transaction, the Borrower and the Subsidiaries shall otherwise be in compliance with Section 6.04; and (ii) any Disposition of any assets pursuant to this Section 6.05 (except for those involving only Loan Parties or those pursuant to clauses (a) (in the case of used, obsolete, worn out or surplus equipment only), (b)(in the case of an Investment made in compliance with Section 6.04), (d), (f), (g), (j) and (m) of Section 6.05), shall be for no less than the fair market value of such assets at the time of such Disposition.
SECTION 6.06. Sale/Leaseback Transactions. None of Holdings, the Borrower or any other Subsidiary will consummate any Sale/Leaseback Transaction, except for any such sale of any fixed or capital assets by any Subsidiary that is made for cash consideration in an amount not less than the fair value of such fixed or capital asset and is consummated within 270 days after such Subsidiary acquires or completes the construction of such fixed or capital asset, provided that (a) the sale or transfer of the property thereunder is permitted under Section 6.05, (b) any Capital Lease Obligations arising in connection therewith are permitted under Section 6.01 and (c) any Liens arising in connection therewith (including Liens deemed to arise in connection with any such Capital Lease Obligations) are permitted under Section 6.02.
SECTION 6.07. Hedging Agreements. None of Holdings, the Borrower or any other Subsidiary will enter into any Hedging Agreement, except Hedging Agreements entered into for bona fide purposes and not for speculation.
SECTION 6.08. Restricted Payments; Certain Payments of Indebtedness. (i) None of Holdings, the Borrower or any other Subsidiary will declare or make directly or indirectly, any Restricted Payment, except that:
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Notwithstanding the foregoing, so long as no Default shall have occurred and be continuing, Holdings and any of the Subsidiaries may make Restricted Payments in any amount at any time if the Leverage Ratio, calculated on a Pro Forma Basis to give effect to any such Restricted Payment at such time, is less than 2.00 to 1.00.
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SECTION 6.09. Transactions with Affiliates. None of Holdings, the Borrower or any other Subsidiary will sell, lease, license or otherwise transfer any assets to, or purchase, lease, license or otherwise acquire any assets from, or otherwise engage in any other transactions with, any of its Affiliates, except (a) transactions that are on terms and conditions substantially as favorable to Holdings, the Borrower or such other Subsidiary as would be obtainable in arm’s-length transactions with unrelated third parties, (b) transactions between or among Holdings and any Subsidiary or between or among any Subsidiaries, (c) any Restricted Payment permitted under Section 6.08, (d) issuances by Holdings of Equity Interests (other than Disqualified Equity Interests), and receipt by Holdings of capital contributions, (e) compensation, expense reimbursement and indemnification of, and other employment arrangements with and benefit plans for, directors, officers and employees of Holdings, the Borrower or any other Subsidiary entered in the ordinary course of business, (f) Investments permitted under clauses (b), (c), (d), (e), (i), (k), (m), (n), (p) and (r) of Section 6.04, (g) any transaction (or series of related transactions) with a value of less than $120,000 and (h) extraordinary retention, bonus and similar arrangements approved by Holdings’ board of directors (or a committee thereof).
SECTION 6.10. Restrictive Agreements. None of Holdings, the Borrower or any other Subsidiary will, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that restricts or imposes any condition upon (a) the ability of Holdings, the Borrower or any other Subsidiary to create, incur or permit to exist any Lien upon any of its assets to secure any Obligations or (b) the ability of any Subsidiary to pay dividends or other distributions with respect to its Equity Interests or to make or repay loans or advances to Holdings, the Borrower or any other Subsidiary or to Guarantee Indebtedness of Holdings, the Borrower or any other Subsidiary; provided that
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Nothing in this paragraph shall be deemed to modify the requirements set forth in the definition of the term “Collateral and Guarantee Requirement” or the obligations of the Loan Parties under Sections 5.03, 5.04 or 5.12 or under the Security Documents.
SECTION 6.11. Amendment of Material Documents. None of Holdings, the Borrower or any other Subsidiary will amend, modify or waive any of its rights under (a) any agreement or instrument governing or evidencing any Junior Indebtedness or (b) its certificate of incorporation, bylaws or other organizational documents, in each case in a manner materially adverse to the Lenders.
SECTION 6.12. Leverage Ratio. Holdings and the Borrower will not permit the Leverage Ratio on the last day of any fiscal quarter to exceed 5.00 to 1.00.
SECTION 6.13. [Reserved].
SECTION 6.14. Fiscal Year. The Borrower will not, and the Borrower will not permit any other Loan Party to, change its fiscal year to end on a date other than December 31; provided, however, that the Borrower may, upon written notice to the Administrative Agent, change its fiscal year to any other fiscal year reasonably acceptable to the Administrative Agent, in which case, Holdings, the Borrower and the Administrative Agent will, and are hereby authorized by the Lenders to, make any amendments to this Agreement that are necessary, in the judgment of the Administrative Agent and the Borrower, to reflect such change in fiscal year; provided further, that any Subsidiary that is acquired by Holdings or any of its Subsidiaries may change its fiscal year to be the same as that of the Borrower.
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SECTION 7.01. Events of Default. If any of the following events (“Events of Default”) shall occur:
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then, and in every such event (other than an event with respect to Holdings or the Borrower described in clause (i) or (j) of this Section 7.01), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to Holdings and the Borrower, take any or all of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part (but ratably as among the Classes of Loans and the Loans of each Class at the time outstanding), in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrower hereunder, shall become due and payable immediately, in each case without presentment, demand, protest or other notice of any kind, all of which are hereby waived by Holdings and the Borrower; and in the case of any event with respect to Holdings or the Borrower described in clause (i) or (j) of this Section 7.01, the Commitments shall automatically terminate, and the principal of the Loans then outstanding, together with accrued interest
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thereon and all fees and other obligations of the Borrower hereunder, shall immediately and automatically become due and payable, in each case without presentment, demand, protest or other notice of any kind, all of which are hereby waived by Holdings and the Borrower.
SECTION 7.02. Right to Cure. (o) Notwithstanding anything to the contrary contained in Section 7.01, in the event that the Borrower fails (or, but for the operation of this Section 7.02, would fail) to comply with the financial covenant set forth in Section 6.12 and until the expiration of the 10th Business Day after the date on which financial statements are required to be delivered with respect to the applicable fiscal quarter hereunder (the “Cure Deadline”), Holdings may engage in a sale or issuance of any Qualified Equity Interests of Holdings or otherwise receive cash contributions to the capital of Holdings as cash common equity or other non-cash pay Qualified Equity Interests and increase Consolidated EBITDA with respect to such applicable fiscal quarter and any four fiscal quarter period that contains such fiscal quarter, by an amount equal to such net cash proceeds; provided that such net cash proceeds (i) are actually received by the Borrower (including through capital contribution of such net cash proceeds by Holdings to the Borrower) no later than 10 Business Days after the date on which financial statements are required to be delivered with respect to such fiscal quarter hereunder, and (ii) do not exceed the aggregate amount necessary to comply with Section 6.12 for any applicable period. If, after giving effect to the foregoing increase in Consolidated EBITDA, Holdings and the Borrower shall then be in compliance with the requirements of Section 6.12, Holdings and the Borrower shall be deemed to have satisfied such requirements as of the relevant date of determination with the same effect as though there had been (or would have been) no failure to comply therewith at such date, and the failure to comply that occurred (or would have occurred) shall be deemed cured for purposes of this Agreement. The parties hereby acknowledge that this Section 7.02(a) may not be relied on for purposes of calculating any financial ratios other than as applicable to Section 6.12 and shall not result in any adjustment to any amounts other than the amount of the Consolidated EBITDA referred to in the immediately preceding sentence. Upon receipt by the Administrative Agent of written notice, on or prior to the Cure Deadline, that the Borrower intends to exercise the cure right described above in this Section 7.02(a) in respect of a fiscal quarter, none of the Administrative Agent or the Lenders shall be permitted to accelerate Loans held by them or to exercise remedies against the Collateral on the basis of a failure to comply with the requirements of the financial covenant set forth in Section 6.12, unless such failure is not cured pursuant to the exercise of such cure right on or prior to the Cure Deadline.
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SECTION 8.01. Authorization and Action. Each of the Lenders and the Issuing Banks hereby irrevocably appoints the entity named as Administrative Agent in the heading of this Agreement and its successors to serve as administrative agent and collateral agent under the Loan Documents, and authorizes the Administrative Agent to take such actions and to exercise such powers as are delegated to the Administrative Agent by the terms of the Loan Documents, together with such actions and powers as are reasonably incidental thereto. In addition, to the extent required under the laws of any jurisdiction other than the United States of America, each of the Lenders and the Issuing Banks hereby grants to the Administrative Agent any required powers of attorney to execute any Security Document governed by the laws of such jurisdiction on such Lender’s or Issuing Bank’s behalf.
The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender or an Issuing Bank as any other Lender or Issuing Bank and may exercise the same as though it were not the Administrative Agent, and such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with Holdings, the Borrower or any other Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lenders.
The Administrative Agent shall not have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or to exercise any discretionary power, except discretionary rights and powers expressly contemplated by the Loan Documents that the Administrative Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith to be necessary, under the circumstances as provided in the Loan Documents), provided that the Administrative Agent shall not be required to take any action that, in its opinion, could expose the Administrative Agent to liability or be contrary to any Loan Document or applicable law, including for the avoidance of doubt any action that may be in violation of the automatic stay under any Bankruptcy Event or that may effect a forfeiture, modification or termination of property of a Defaulting Lender in violation of any Bankruptcy Event, and (c) except as expressly set forth in the Loan Documents, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to Holdings, the Borrower, any Subsidiary or any other Affiliate of any of the foregoing that is communicated to or obtained by the Person serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or
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such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith to be necessary, under the circumstances as provided in the Loan Documents) or in the absence of its own gross negligence or wilful misconduct, as determined by a court of competent jurisdiction by a final and non-appealable judgment. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by Holdings, the Borrower, a Lender or an Issuing Bank, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered thereunder or in connection therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document or the occurrence of any Default, (iv) the sufficiency, validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent or satisfaction of any condition that expressly refers to the matters described therein being acceptable or satisfactory to the Administrative Agent. Notwithstanding anything herein to the contrary, the Administrative Agent shall not have any liability arising from any confirmation of the Revolving Exposure or the component amounts thereof.
The Administrative Agent shall be entitled to rely, and shall not incur any liability for relying, upon any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person (whether or not such Person in fact meets the requirements set forth in the Loan Documents for being the signatory, sender or authenticator thereof). The Administrative Agent also shall be entitled to rely, and shall not incur any liability for relying, upon any statement made to it orally or by telephone and believed by it to be made by the proper Person (whether or not such Person in fact meets the requirements set forth in the Loan Documents for being the signatory, sender or authenticator thereof), and may act upon any such statement prior to receipt of written confirmation thereof. The Administrative Agent may consult with legal counsel (who may be counsel for Holdings or the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.
The Administrative Agent may perform any of and all its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any of and all their duties and exercise their rights and powers through their respective Related Parties. The exculpatory provisions of this Article shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.
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Subject to the terms of this paragraph, the Administrative Agent may resign at any time from its capacity as such. In connection with such resignation, the Administrative Agent shall give notice of its intent to resign to the Lenders, the Issuing Banks and the Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its intent to resign, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Banks, appoint a successor Administrative Agent, which shall be a bank with an office in New York, New York, or an Affiliate of any such bank. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents. The fees payable by Holdings and the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed by Holdings, the Borrower and such successor. Notwithstanding the foregoing, in the event no successor Administrative Agent shall have been so appointed and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its intent to resign, the retiring Administrative Agent may give notice of the effectiveness of its resignation to the Lenders, the Issuing Banks and the Borrower, whereupon, on the date of effectiveness of such resignation stated in such notice, (a) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents, provided that, solely for purposes of maintaining any security interest granted to the Administrative Agent under any Security Document for the benefit of the Secured Parties, the retiring Administrative Agent shall continue to be vested with such security interest as collateral agent for the benefit of the Secured Parties and, in the case of any Collateral in the possession of the Administrative Agent, shall continue to hold such Collateral, in each case until such time as a successor Administrative Agent is appointed and accepts such appointment in accordance with this paragraph (it being understood and agreed that the retiring Administrative Agent shall have no duty or obligation to take any further action under any Security Document, including any action required to maintain the perfection of any such security interest), and (b) the Required Lenders shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, provided that (i) all payments required to be made hereunder or under any other Loan Document to the Administrative Agent for the account of any Person other than the Administrative Agent shall be made directly to such Person and (ii) all notices and other communications required or contemplated to be given or made to the Administrative Agent shall also directly be given or made to each Lender and each Issuing Bank. Following the effectiveness of the Administrative Agent’s resignation from its capacity as such, the provisions of this Article and Section 9.03, as well as any exculpatory, reimbursement and indemnification provisions set forth in any other Loan Document, shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be
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taken by any of them while it was acting as Administrative Agent and in respect of the matters referred to in the proviso under clause (a) above.
Each Lender and Issuing Bank acknowledges that it has, independently and without reliance upon the Administrative Agent, the Arrangers or any other Lender or Issuing Bank, or any of the Related Parties of any of the foregoing, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender and Issuing Bank also acknowledges that it will, independently and without reliance upon the Administrative Agent, the Arrangers or any other Lender or Issuing Bank, or any of the Related Parties of any of the foregoing, and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.
Each Lender, by delivering its signature page to the Second Refinancing Facility Agreement and funding or continuing its Loans on the Second Refinancing Facility Agreement Effective Date, or delivering its signature page to an Assignment and Assumption or an Incremental Facility Agreement pursuant to which it shall become a Lender hereunder, shall be deemed to have acknowledged receipt of, and consented to and approved, each Loan Document and each other document required to be delivered to, or be approved by or satisfactory to, the Administrative Agent or the Lenders on the Original Effective Date, the First Refinancing Facility Agreement Effective Date or the Second Refinancing Facility Agreement Effective Date, as the case may be.
No Secured Party shall have any right individually to realize upon any of the Collateral or to enforce any Guarantee of the Obligations, it being understood and agreed that all powers, rights and remedies under the Loan Documents may be exercised solely by the Administrative Agent on behalf of the Secured Parties in accordance with the terms thereof. In the event of a foreclosure by the Administrative Agent on any of the Collateral pursuant to a public or private sale or other disposition, the Administrative Agent or any Lender may be the purchaser or licensor of any or all of such Collateral at any such sale or other disposition, and the Administrative Agent, as agent for and representative of the Secured Parties (but not any Lender or Lenders in its or their respective individual capacities unless the Required Lenders shall otherwise agree in writing) shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Loan Document Obligations as a credit on account of the purchase price for any collateral payable by the Administrative Agent on behalf of the Secured Parties at such sale or other disposition. Each Secured Party, whether or not a party hereto, will be deemed, by its acceptance of the benefits of the Collateral and of the Guarantees of the Obligations provided under the Loan Documents, to have agreed to the foregoing provisions.
In furtherance of the foregoing and not in limitation thereof, no Hedging Agreement, agreement with respect to cash management obligations or other agreement (other than the Loan Documents) the obligations under which constitute Obligations will
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create (or be deemed to create) in favor of any Secured Party that is a party thereto any rights in connection with the management or release of any Collateral or of the obligations of any Loan Party under any Loan Document. By accepting the benefits of the Collateral, each Secured Party that is a party to any such Hedging Agreement or other agreement shall be deemed to have appointed the Administrative Agent to serve as administrative agent and collateral agent under the Loan Documents and agreed to be bound by the Loan Documents as a Secured Party thereunder, subject to the limitations set forth in this paragraph.
Notwithstanding anything herein to the contrary, neither the Arrangers nor any Person named on the cover page of this Agreement as a Syndication Agent or a Documentation Agent shall have any duties or obligations under this Agreement or any other Loan Document (except in its capacity, as applicable, as a Lender or an Issuing Bank), but all such Persons shall have the benefit of the indemnities provided for hereunder.
The provisions of this Article are solely for the benefit of the Administrative Agent, the Lenders and the Issuing Banks, and none of Holdings, the Borrower or any other Loan Party shall have any rights as a third party beneficiary of any such provisions (other than the Borrower’s consultation right set forth in the sixth paragraph of this Article VIII).
SECTION 8.02. Certain ERISA Matters. (a) Each Lender (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Administrative Agent and the institutions named as Syndication Agent and Documentation Agent listed on the cover page hereof and their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Borrower or any other Loan Party, that at least one of the following is and will be true:
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(b) In addition, unless either (1) sub-clause (i) in the immediately preceding clause (a) is true with respect to a Lender or (2) a Lender has provided another representation, warranty and covenant in accordance with sub-clause (iv) in the immediately preceding clause (a), such Lender further (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Administrative Agent and the institutions named as Syndication Agent and Documentation Agent on the cover page hereof and their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Borrower or any other Loan Party, that none of the Administrative Agent or any of the institutions named as Syndication Agent and Documentation Agent on the cover page hereof or their respective Affiliates is a fiduciary with respect to the assets of such Lender involved in such Lender’s entrance into, participation in, administration of and performance of the Loans, the Letters of Credit, the Commitments and this Agreement (including in connection with the reservation or exercise of any rights by the Administrative Agent under this Agreement, any Loan Document or any documents related hereto or thereto).
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Miscellaneous
SECTION 9.01. Notices. (a) Except in the case of notices and other communications expressly permitted to be given by telephone (and subject to paragraph (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by fax, as follows:
JPMorgan Chase Bank, N.A., Loan and Agency Services Group, Floor 1, NCC 5,
500 Stanton Christiana Road
Floor 1, NCC 5
Newark, DE 19713,
Attention of Demetrius Dixon (: Loan and Agency Services Group
Telephone No.
Fax No.
Email:
Agency Withholding Tax Inquiries:
Email:
Agency Compliance/Financials/Intralinks:
Email:
JPMorgan Chase Bank, N.A., Standby LC Unit,
10420 Highland Manor Dr., 4th Floor,
Tampa, FL 33610,
Attention of: Standby LC Unit (
Telephone No.
Fax No.
Email:
with a copy to:
JPMorgan Chase Bank, N.A., Loan and Agency Services Group, Floor 01, NCC 5,
500 Stanton Christiana Road
150
Floor 1, NCC 5
Newark, DE 19713,
Attention of Demetrius Dixon (: Loan and Agency Services Group
Telephone No.
Fax No.
Email:
if to any other Issuing Bank, to it at its address (or fax number) most recently specified by it in a notice delivered to the Administrative Agent and the Borrower (or, in the absence of any such notice, to the address (or fax number) set forth in the Administrative Questionnaire of the Lender that is serving as such Issuing Bank or is an Affiliate thereof);
JPMorgan Chase Bank, N.A., Loan and Agency Services Group, Floor 1, NCC 5,
500 Stanton Christiana Road
Floor 1, NCC 5
Newark, DE 19713,
Attention of Demetrius Dixon (: Loan and Agency Services Group
Telephone No.
Fax No.
Email:
if to any other Swingline Lender, to it at its address (or fax number) most recently specified by it in a notice delivered to the Administrative Agent and the Borrower (or, in the absence of any such notice, to the address (or fax number) set forth in the Administrative Questionnaire of the Lender that is serving as Swingline Lender or is an Affiliate thereof); and
Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by fax shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next business day for the recipient); and notices delivered through electronic communications to the extent provided in paragraph (b) below shall be effective as provided in such paragraph.
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SECTION 9.02. Waivers; Amendments. (d) No failure or delay by the Administrative Agent, any Issuing Bank or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent, the Issuing Banks and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Without limiting the generality of the foregoing, the execution and delivery of this Agreement, the making of a Loan or the issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent, any Lender or any Issuing Bank may have had notice or knowledge of such Default at the time.
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If the Administrative Agent and the Borrower acting together identify any ambiguity, omission, mistake, typographical error or other defect in any provision of this Agreement or any other Loan Document or in the case of a Holdings Merger, then the Administrative Agent and the Borrower shall be permitted to amend, modify or supplement such provision to cure such ambiguity, omission, mistake, typographical error or other defect or to implement technical or administrative changes required as a result of such Holdings Merger, and such amendment shall become effective without any
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further action or consent of any other party to this Agreement, in each case so long as such amendment has been provided to the Lenders and the Required Lenders have not objected within five (5) Business Days.
Notwithstanding anything to the contrary herein, in connection with any amendment, modification, waiver or other action requiring the consent or approval of Required Lenders, Lenders that are Debt Fund Affiliates shall not be permitted, in the aggregate, to account for more than 49% of the amounts actually included in determining whether the threshold in the definition of Required Lenders has been satisfied. The voting power of each Lender that is a Debt Fund Affiliate shall be reduced, pro rata, to the extent necessary in order to comply with the immediately preceding sentence. For the avoidance of doubt, Holdings and its Subsidiaries shall not be entitled to consent or vote in its or their capacity as a Lender with respect to any amendment, modification, waiver or other action requiring the consent or approval of any Lenders.
SECTION 9.03. Expenses; Indemnity; Damage Waiver. (g) Holdings and the Borrower shall pay (i) all reasonable and documented out-of-pocket expenses incurred by the Administrative Agent, the Arrangers and their Affiliates, including expenses incurred in connection with due diligence and the reasonable and documented fees, charges and disbursements of Cravath, Swaine & Moore LLP and one firm of local counsel in each appropriate jurisdiction, in connection with the structuring, arrangement and syndication of the credit facilities provided for herein and any credit or similar facility refinancing or replacing, in whole or in part, any of the credit facilities provided for herein, including the preparation, execution and delivery of the Engagement Letter and the Fee Letter, as well as the preparation, execution, delivery and administration of this Agreement, the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable and documented out-of-pocket expenses incurred by any Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all reasonable and documented out-of-pocket expenses incurred by the Administrative Agent, any Issuing Bank and the Lenders, including the fees, charges and disbursements of one primary counsel and one firm of local counsel (and, in the case of an actual or perceived conflict of interest, where a Credit Party affected by such conflict informs the Borrower of such conflict and thereafter retains its own counsel, of another firm of counsel for such affected Credit Party) in each appropriate jurisdiction, in connection with the enforcement or protection of its rights in connection with the Loan Documents, including its rights under this Section, or in connection with the Loans made or Letters of Credit issued hereunder, including during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.
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SECTION 9.04. Successors and Assigns. (l) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any Affiliate of any Issuing Bank that issues any Letter of Credit), except that (i) neither Holdings nor the Borrower may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent and each Lender (and any attempted assignment or transfer by Holdings or the Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties
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hereto, their respective successors and assigns permitted hereby (including any Affiliate of any Issuing Bank that issues any Letter of Credit), Participants (to the extent provided in paragraph (c) of this Section), the Arrangers, the Syndication Agents, the Documentation Agent and, to the extent expressly contemplated hereby, the sub-agents of the Administrative Agent and the Related Parties of any of the Administrative Agent, the Arranger, any Issuing Bank and any Lender) any legal or equitable right, remedy or claim under or by reason of this Agreement.
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SECTION 9.05. Survival. All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, the Arrangers, the Syndication Agents, the Documentation Agent, any Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any Loan Document is executed and delivered or any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this
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Agreement is outstanding and unpaid or any LC Exposure is outstanding and so long as the Commitments have not expired or terminated. Notwithstanding the foregoing or anything else to the contrary set forth in this Agreement or any other Loan Document, in the event that, in connection with the refinancing or repayment in full of the credit facilities provided for herein, an Issuing Bank shall have provided to the Administrative Agent a written consent to the release of the Revolving Lenders from their obligations hereunder with respect to any Letter of Credit issued by such Issuing Bank (whether as a result of the obligations of the Borrower (and any other account party) in respect of such Letter of Credit having been collateralized in full by a deposit of cash with such Issuing Bank, or being supported by a letter of credit that names such Issuing Bank as the beneficiary thereunder, or otherwise), then from and after such time such Letter of Credit shall cease to be a “Letter of Credit” outstanding hereunder for all purposes of this Agreement and the other Loan Documents, and the Revolving Lenders shall be deemed to have no participations in such Letter of Credit, and no obligations with respect thereto, under Section 2.05(d) or 2.05(f). The provisions of Sections 2.15, 2.16, 2.17, 2.18(e) and 9.03 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof.
SECTION 9.06. Integration; Effectiveness. This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof, including the commitments of the Lenders and, if applicable, their Affiliates under the Engagement Letter and any commitment advices submitted by them (but do not supersede any other provisions of the Engagement Letter or the Fee Letter (or any separate letter agreements with respect to fees payable to the Administrative Agent or any Issuing Bank) that do not by the terms of such documents terminate upon the effectiveness of this Agreement, all of which provisions shall remain in full force and effect). This Agreement shall become effective as set forth in the Second Refinancing Facility Agreement.
Delivery of an executed counterpart of a signature page of this Agreement by telecopy, emailed pdf. or any other electronic means that reproduces an image of the actual executed signature page shall be effective as delivery of a manually executed counterpart of this Agreement. The words “execution,” “signed,” “signature,” “delivery,” and words of like import in or relating to any document to be signed in connection with this Agreement and the transactions contemplated hereby shall be deemed to include Electronic Signatures, deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act; provided that nothing herein shall require the Administrative Agent to accept electronic signatures in any form or format without its prior written consent.
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SECTION 9.07. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.
SECTION 9.08. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender and Issuing Bank, and each Affiliate of any of the foregoing, is hereby authorized at any time and from time to time, to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency and whether or not matured) or other amounts at any time held and other obligations (in whatever currency) at any time owing by such Lender or Issuing Bank, or by such an Affiliate, to or for the credit or the account of Holdings or the Borrower against any of and all the obligations then due of Holdings or the Borrower now or hereafter existing under this Agreement held by such Lender or Issuing Bank, irrespective of whether or not such Lender or Issuing Bank shall have made any demand under this Agreement. The rights of each Lender and Issuing Bank, and each Affiliate of any of the foregoing, under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender, Issuing Bank or Affiliate may have.
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process. (r) This Agreement and any claim, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Agreement and the transaction contemplated hereby shall be construed in accordance with and governed by the law of the State of New York without regard to conflict of laws principles thereof that would result in the application of any law other than the law of the State of New York.
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SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 9.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.
SECTION 9.12. Confidentiality. Each of the Administrative Agent, the Lenders and the Issuing Banks agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Related Parties, including accountants, legal counsel and other agents and advisors, it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential, (b) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority, such as the National Association of Insurance Commissioners) (in which case, the Administrative Agent, such Lender or such Issuing Bank, as the case may be, shall, except with respect to any audit or examination
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conducted by bank accountants or any governmental bank regulatory authority exercising examination or regulatory authority, promptly notify the Borrower, in advance, to the extent lawfully permitted to do so), (c) to the extent required by applicable law or by any subpoena or similar legal process (in which case, the Administrative Agent, such Lender or such Issuing Bank, as the case may be, shall promptly notify the Borrower, in advance, to the extent lawfully permitted to do so), (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies under this Agreement or any other Loan Document or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing confidentiality undertakings substantially similar to those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its Related Parties) to any swap or derivative transaction relating to Holdings, the Borrower or any other Subsidiary and its obligations, (g) with the written consent of the Borrower, (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to the Administrative Agent, any Lender, any Issuing Bank or any Affiliate of any of the foregoing on a nonconfidential basis from a source other than Holdings or the Borrower that is not, to the Administrative Agent’s, such Lender’s or such Issuing Bank’s knowledge, subject to a confidentiality obligation to you with respect to such information or (i) any market data collectors. For purposes of this Section, “Information” means all information received from Holdings or the Borrower relating to Holdings, the Borrower or any other Subsidiary or their businesses, other than any such information that is available to the Administrative Agent, any Lender or any Issuing Bank on a nonconfidential basis prior to disclosure by the Borrower. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.
SECTION 9.13. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts that are treated as interest on such Loan under applicable law (collectively the “Charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) that may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the NYFRB Rate to the date of repayment, shall have been received by such Lender.
SECTION 9.14. Release of Liens and Guarantees. (v) A Subsidiary Loan Party shall automatically be released from its obligations under the Loan Documents, and all security interests created by the Security Documents in Collateral owned by such
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Subsidiary Loan Party shall be automatically released, upon the consummation of any transaction permitted by this Agreement as a result of which such Subsidiary Loan Party ceases to be a Subsidiary; provided that, if so required by this Agreement, the Required Lenders shall have consented to such transaction and the terms of such consent shall not have provided otherwise. Upon any sale, transfer or other disposition by any Loan Party (other than to another Loan Party) of any Collateral in a transaction permitted under this Agreement, or upon the effectiveness of any written consent to the release of the security interest created under any Security Document in any Collateral pursuant to Section 9.02, the security interests in such Collateral created by the Security Documents shall be automatically released.
SECTION 9.15. USA PATRIOT Act Notice. Each Lender and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies each Loan Party that pursuant to the requirements of the USA PATRIOT Act it is required to obtain, verify and record information that identifies such Loan Party, which information includes the name and address of such Loan Party and other information that will allow such Lender or the Administrative Agent, as applicable, to identify such Loan Party in accordance with such Act.
SECTION 9.16. No Fiduciary Relationship. Holdings and the Borrower each acknowledge and agree, and acknowledges its respective Subsidiaries’ understanding, that no Credit Party will have any obligations except those obligations expressly set forth herein and in the other Loan Documents and each Credit Party is acting solely in the capacity of an arm’s length contractual counterparty to Holdings and the Borrower with respect to the Loan Documents and the transaction contemplated therein and not as a financial advisor or a fiduciary to, or an agent of, Holdings or the Borrower or any other Person. Holdings and the Borrower agree that they will not assert any claim against any Credit Party based on an alleged breach of fiduciary duty by such Credit Party in connection with this Agreement and the transactions contemplated hereby. Additionally, Holdings and the Borrower each acknowledge and agree that no Credit Party is advising either Holdings or the Borrower as to any legal, tax, investment, accounting, regulatory or any other matters in any jurisdiction. Holdings and the Borrower shall consult with their own advisors concerning such matters and shall be responsible for making their own independent investigation and appraisal of the transactions contemplated hereby, and the Credit Parties shall have no responsibility or liability to Holdings or the Borrower with respect thereto.
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Holdings and the Borrower further each acknowledge and agree, and acknowledges its respective Subsidiaries’ understanding, that each Credit Party, together with its Affiliates, is a full service securities or banking firm engaged in securities trading and brokerage activities as well as providing investment banking and other financial services. In the ordinary course of business, any Credit Party may provide investment banking and other financial services to, and/or acquire, hold or sell, for its own accounts and the accounts of customers, equity, debt and other securities and financial instruments (including bank loans and other obligations) of, Holdings or the Borrower and other companies with which Holdings or the Borrower may have commercial or other relationships. With respect to any securities and/or financial instruments so held by any Credit Party or any of its customers, all rights in respect of such securities and financial instruments, including any voting rights, will be exercised by the holder of the rights, in its sole discretion.
In addition, Holdings and the Borrower each acknowledge and agree, and acknowledges its respective Subsidiaries’ understanding, that each Credit Party and its affiliates may be providing debt financing, equity capital or other services (including financial advisory services) to other companies in respect of which Holdings or the Borrower may have conflicting interests regarding the transactions described herein and otherwise. No Credit Party will use confidential information obtained from Holdings or the Borrower by virtue of the transactions contemplated by the Loan Documents or its other relationships with Holdings or the Borrower in connection with the performance by such Credit Party of services for other companies, and no Credit Party will furnish any such information to other companies. Holdings and the Borrower also each acknowledge that no Credit Party has any obligation to use in connection with the transactions contemplated by the Loan Documents, or to furnish to Holdings or the Borrower, confidential information obtained from other companies.
SECTION 9.17. Non-Public Information. (x) Each Lender acknowledges that all information, including requests for waivers and amendments, furnished by Holdings, the Borrower or the Administrative Agent pursuant to or in connection with, or in the course of administering, this Agreement will be syndicate-level information, which may contain MNPI. Each Lender represents to Holdings, the Borrower and the Administrative Agent that (i) it has developed compliance procedures regarding the use of MNPI and that it will handle MNPI in accordance with such procedures and applicable law, including Federal, state and foreign securities laws, and (ii) it has identified in its Administrative Questionnaire a credit contact who may receive information that may contain MNPI in accordance with its compliance procedures and applicable law, including Federal, state and foreign securities laws.
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SECTION 9.18. Acknowledgement and Consent to Bail-In of EEA Financial Institutions. Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any EEA Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the Write-Down and Conversion Powers of any EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:
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ANNEX II
[To Attach Amended Exhibits]
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ANNEX II
EXHIBIT B
[FORM OF] BORROWING REQUEST
JPMorgan Chase Bank, N.A.,
as Administrative Agent
500 Stanton Christiana Road
Floor 01, NCC 5
Newark, DE 19713
Attention: Loan and Agency Services Group
Telephone:
Fax:
Email:
[Date]
Ladies and Gentlemen:
Reference is made to the Second Amended and Restated Credit Agreement dated as of October 10, 2018 (as amended by the Amendment Agreement dated as of March 1, 2023 and as further amended, amended and restated, supplemented or otherwise modified from time to time, the “Amended and Restated Credit Agreement”), among Momentive Inc. (f/k/a SurveyMonkey Inc.) (the “Borrower”), Momentive Global Inc. (f/k/a SVMK Inc.) (“Holdings”), the Lenders party thereto from time to time and JPMorgan Chase Bank, N.A., as Administrative Agent. Capitalized terms used but not otherwise defined herein shall have the meanings specified in the Amended and Restated Credit Agreement. This notice constitutes a Borrowing Request and the Borrower hereby gives you notice, pursuant to Section [2.03] [2.04] of the Amended and Restated Credit Agreement, that it requests a Borrowing under the Amended and Restated Credit Agreement, and in connection therewith specifies the following information with respect to such Borrowing:
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Class of Borrowing:1 |
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Aggregate principal amount of Borrowing:2 |
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Date of Borrowing (which is a Business Day): |
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Type of Borrowing:3 |
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If Term Benchmark Borrowing, Interest Period and the last day |
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thereof:4 |
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Location and number of the account or accounts to which proceeds of the requested Borrowing are to be disbursed: [Name of Bank] |
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[Issuing Bank to which proceeds of the requested Borrowing are to |
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be disbursed: |
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1 Specify Term Borrowing, Revolving Borrowing, Swingline Borrowing or Incremental Term
Borrowing, and if an Incremental Term Borrowing, specify the Series.
2 Must comply with Sections 2.02(c) and 2.04(a) of the Amended and Restated Credit Agreement, as applicable.
3 Specify ABR Borrowing or Term Benchmark Borrowing. If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing.
4 Shall be subject to the definition of “Interest Period” and can be a period of one, three or six months (or, if agreed to by each Lender participating in the requested Borrowing, twelve months). If an Interest Period is not specified, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration.
5 Specify only in the case of an ABR Revolving Borrowing requested to finance the reimbursement of an LC Disbursement as provided in Section 2.05(f) of the Amended and Restated Credit Agreement.
The Borrower hereby certifies that the conditions specified in paragraphs (a) and (b) of Section 4.02 of the Amended and Restated Credit Agreement have been satisfied and that, immediately after giving effect to the Borrowing requested hereby, the Aggregate Revolving Exposure (or any component thereof) shall not exceed the applicable maximum amount thereof (or the applicable maximum amount of any such component) specified in Section 2.01, 2.04(a) or 2.05(b) of the Amended and Restated Credit Agreement.
Very truly yours, |
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MOMENTIVE INC. (f/k/a SurveyMonkey Inc.), |
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By: |
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Name: |
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EXHIBIT E
[form of] INTEREST ELECTION REQUEST
JPMorgan Chase Bank, N.A.,
as Administrative Agent
500 Stanton Christiana Road
Floor 01, NCC 5
Newark, DE 19713
Attention: Loan and Agency Services Group
Telephone:
Fax:
Email:
[Date]
Ladies and Gentlemen:
Reference is made to the Second Amended and Restated Credit Agreement dated as of October 10, 2018 (as amended by the Amendment Agreement dated as of March 1, 2023 and as further amended, amended and restated, supplemented or otherwise modified from time to time, the “Amended and Restated Credit Agreement”), among Momentive Inc. (f/k/a SurveyMonkey Inc.) (the “Borrower”), Momentive Global Inc. (f/k/a SVMK Inc.) (“Holdings”), the Lenders party thereto from time to time and JPMorgan Chase Bank, N.A., as Administrative Agent. This notice constitutes an Interest Election Request and the Borrower hereby gives you notice, pursuant to Section 2.07 of the Amended and Restated Credit Agreement, that it requests the conversion or continuation of a Borrowing under the Amended and Restated Credit Agreement, and in that connection the Borrower specifies the following information with respect to such Borrowing and each resulting Borrowing:
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Borrowing to which this request applies: |
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Principal Amount: |
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Type: |
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Interest Period1: |
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Effective date of this election (which is a Business Day): |
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Resulting Borrowing[s]2 |
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Principal Amount3: |
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Type4 |
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Interest period5 |
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1 In the case of a Term Benchmark Borrowing, specify the last day of the current Interest Period therefor in accordance with the definition of the term “Interest Period” in Amended and Restated Credit Agreement.
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2 If different options are being elected with respect to different portions of the Borrowing, provide the information required by this item 3 for each resulting Borrowing. Each resulting Borrowings shall be in an aggregate amount that is an integral multiple of, an not less than, the amount specified for a Borrowing of such Class and Type in Sectio 2.02(c) of the Amended and Restated Credit Agreement.
3 Indicate the principal amount of the resulting Borrowing and the percentage of the Borrowing in item 1 above.
4 Specify whether the resulting Borrowing is to be a ABR Borrowing or a Term Benchmark Borrowing.
5 Applicable only if the resulting Borrowing is to be a Term Benchmark Borrowing. Shall be subject to the definition of “Interest Period” and can be a period of one, three or six months (or, if agreed to by each Lender participating in the resulting Borrowing, twelve months). Cannot extend beyond the Maturity Date.
Very truly yours, |
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MOMENTIVE INC. (f/k/a SURVEYMONKEY INC.), |
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by |
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Name: |
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Title: |
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a),
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Alexander J. Lurie, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Momentive Global 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-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 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: May 4, 2023 |
By: |
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/s/ ALEXANDER J. LURIE |
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Alexander J. Lurie Chief Executive Officer and Director (Principal Executive Officer) |
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Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a),
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Richard E. Sullivan Jr., certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Momentive Global 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-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 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: May 4, 2023 |
By: |
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/s/ RICHARD E. SULLIVAN JR. |
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Richard E. Sullivan Jr. Chief Financial Officer (Principal Financial Officer) |
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Exhibit 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Alexander J. Lurie, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of Momentive Global Inc. for the quarter ended March 31, 2023 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Momentive Global Inc.
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Date: May 4, 2023 |
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By: |
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/s/ Alexander J. Lurie |
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Alexander J. Lurie Chief Executive Officer and Director (Principal Executive Officer) |
I, Richard E. Sullivan Jr., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of Momentive Global Inc. for the quarter ended March 31, 2023 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Momentive Global Inc.
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Date: May 4, 2023 |
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By: |
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/s/ Richard E. Sullivan Jr. |
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Richard E. Sullivan Jr. Chief Financial Officer (Principal Financial Officer) |
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CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (Parenthetical) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
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Statement of Financial Position [Abstract] | ||
Allowance for accounts receivable | $ 1,020 | $ 1,121 |
Preferred stock, par value (in dollars per share) | $ 0.00001 | $ 0.00001 |
Preferred stock, shares authorized (in shares) | 100,000,000 | 100,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.00001 | $ 0.00001 |
Common stock, shares authorized (in shares) | 800,000,000 | 800,000,000 |
Common stock, shares issued (in shares) | 150,690,000 | 149,711,000 |
Common stock, shares outstanding (in shares) | 150,690,000 | 149,711,000 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | |||||||
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Mar. 31, 2023 |
Mar. 31, 2022 |
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Income Statement [Abstract] | ||||||||
Revenue | $ 118,821 | $ 116,986 | ||||||
Cost of revenue | [1],[2],[3] | 20,557 | 22,903 | |||||
Gross profit | 98,264 | 94,083 | ||||||
Operating expenses: | ||||||||
Research and development | [1],[3] | 32,665 | 36,716 | |||||
Sales and marketing | [1],[2],[3] | 47,919 | 59,636 | |||||
General and administrative | [1],[3] | 31,737 | 27,917 | |||||
Restructuring | [1],[2] | 7,197 | 4,883 | |||||
Total operating expenses | 119,518 | 129,152 | ||||||
Loss from operations | (21,254) | (35,069) | ||||||
Interest expense | 4,148 | 2,226 | ||||||
Other non-operating income, net | (2,038) | (134) | ||||||
Loss before income taxes | (23,364) | (37,161) | ||||||
Provision for income taxes | 451 | 216 | ||||||
Net loss | $ (23,815) | $ (37,377) | ||||||
Net loss per common share, basic | $ (0.16) | $ (0.25) | ||||||
Net loss per common share, diluted | $ (0.16) | $ (0.25) | ||||||
Weighted average number of basic shares outstanding | 149,345 | 150,262 | ||||||
Weighted average number of diluted shares outstanding | 149,345 | 150,262 | ||||||
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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (unaudited) - USD ($) $ in Thousands |
3 Months Ended | |||
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Mar. 31, 2023 |
Mar. 31, 2022 |
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Statement of Comprehensive Income [Abstract] | ||||
Net loss | $ (23,815) | $ (37,377) | ||
Other comprehensive income (loss): | ||||
Foreign currency translation adjustment | [1] | 1,005 | (947) | |
Total other comprehensive income (loss) | [1] | 1,005 | (947) | |
Total comprehensive loss | $ (22,810) | $ (38,324) | ||
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2023 |
Mar. 31, 2022 |
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Cash flows from operating activities | ||
Net loss | $ (23,815) | $ (37,377) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 5,710 | 9,354 |
Non-cash leases expense | 2,182 | 3,202 |
Stock-based compensation expense, net of amounts capitalized | 20,402 | 26,254 |
Deferred income taxes | 304 | 217 |
Bad debt expense | 497 | 644 |
Unrealized foreign currency (gains) losses, net and other | (195) | 727 |
Changes in assets and liabilities: | ||
Accounts receivable | 1,334 | (1,047) |
Prepaid expenses and other assets | (7,090) | (8,117) |
Accounts payable and accrued liabilities | (5,024) | (2,341) |
Accrued compensation | (8,368) | (6,898) |
Deferred revenue | 9,033 | 14,283 |
Operating lease liabilities | (2,897) | (3,801) |
Net cash used in operating activities | (7,927) | (4,900) |
Cash flows from investing activities | ||
Purchases of property and equipment | (15) | (441) |
Capitalized internal-use software | (2,079) | (2,565) |
Proceeds from sale of a private company investment | 6,753 | 0 |
Net cash provided by (used in) investing activities | 4,659 | (3,006) |
Cash flows from financing activities | ||
Proceeds from stock option exercises | 0 | 2,273 |
Payments to repurchase common stock | 0 | (36,376) |
Repayment of debt | (550) | (25,550) |
Net cash used in financing activities | (550) | (59,653) |
Effect of exchange rate changes on cash | 213 | 393 |
Net decrease in cash, cash equivalents and restricted cash | (3,605) | (67,166) |
Cash, cash equivalents and restricted cash at beginning of period | 203,258 | 306,121 |
Cash, cash equivalents and restricted cash at end of period | 199,653 | 238,955 |
Supplemental cash flow data: | ||
Interest paid for term debt | 3,967 | 2,009 |
Non-cash investing and financing transaction: | ||
Stock compensation included in capitalized software costs | $ 506 | $ 719 |
Company Overview and Basis of Presentation |
3 Months Ended |
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Mar. 31, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Company Overview and Basis of Presentation | 1. Company Overview and Basis of Presentation Business Momentive Global Inc. (the “Company”) provides Software-as-a-Service (“SaaS”) solutions that enable organizations to collect and analyze market, customer and employee sentiment data quickly and at scale. The Company offers three product categories, Surveys, Customer Experience, and Insights Solutions, that address three major business use cases: (i) building market leadership, (ii) delighting customers, and (iii) engaging employees. The Company was incorporated in 2011 as SVMK Inc., a Delaware corporation, and is the successor to operations originally started in 1999. In June 2021, SVMK Inc. was rebranded and changed its legal name to Momentive Global Inc. As a result, its common stock began trading under the ticker symbol “MNTV” instead of “SVMK” on The Nasdaq Global Select Market. In February 2022, the company announced plans to consolidate its product portfolio under two brands and web surfaces—Momentive and SurveyMonkey. The Momentive brand represents the Company's suite of upmarket solutions, while SurveyMonkey represents the Company's complementary products for value-oriented customers who prioritize speed and ease of use. The Company’s headquarters are located in the United States and its international operations are primarily based in Ireland, Canada and the Netherlands. Pending Merger with an investor consortium led by STG On March 13, 2023, the Company entered into the Agreement and Plan of Merger (the “Merger Agreement”), by and among the Company, STG and Mercury Merger Sub, Inc. (“Merger Sub”). Pursuant to the Merger Agreement, and upon the terms and subject to the conditions therein, Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly owned subsidiary of STG. The Company’s board of directors and the board of directors of STG have approved the Merger Agreement and the transactions contemplated by the Merger Agreement. Pursuant to the Merger Agreement, at the effective time of the Merger, each issued and outstanding share of the Company’s common stock (except for certain shares of the Company’s common stock specified in the Merger Agreement) will be canceled and automatically converted into the right to receive cash in an amount equal to $9.46 per share, without interest. Under the terms of the Merger Agreement, the completion of the Merger is subject to certain customary closing conditions, including, among others: (i) the adoption of the Merger Agreement by the holders of a majority of the outstanding shares of the Company’s common stock; (ii) the expiration or early termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the receipt of certain other specified regulatory approvals; and (iii) the absence of an order or law preventing the Merger. Each of STG and the Company may terminate the Merger Agreement under certain specified circumstances, including but not limited to, (i) if the Merger is not consummated by 11:59 p.m. (California time) on September 13, 2023, (ii) a governmental authority of competent jurisdiction has issued a final non-appealable governmental order preventing, materially restraining, or materially impairing the consummation of the Merger, or (iii) if the required approval of the Company’s stockholders is not obtained. STG may also terminate the Merger Agreement in certain additional limited circumstances, including if the Company’s board of directors changes its recommendation to the Company’s stockholders to vote in favor of the adoption of the Merger Agreement. If the Merger Agreement is terminated, the Company may be required to pay STG a termination fee of up to $52.0 million under certain circumstances. The foregoing summary of the Merger Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Merger Agreement, which is filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission (“SEC”) on March 14, 2023. Other than transaction expenses related to legal, accounting, financial advisory, employee retention and other costs associated with the pending Merger of $7.5 million for the three months ended March 31, 2023, the terms of the Merger Agreement did not impact the Company's condensed consolidated financial statements. Principles of Consolidation and Basis of Presentation The accompanying interim condensed consolidated balance sheet as of March 31, 2023, the statements of operations, comprehensive loss, stockholders’ equity and cash flows for the three months ended March 31, 2023 and 2022 are unaudited. Such condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the SEC regarding interim financial reporting. These condensed consolidated financial statements include the results of operations of the Company and its wholly-owned subsidiaries. All significant intercompany transactions have been eliminated. Certain other prior year balances have been reclassified to conform to the current year presentation. Such reclassifications did not affect our results of operations or operating, investing and financing cash flows. These condensed consolidated financial statements do not include all disclosures normally required in annual consolidated financial statements prepared in accordance with GAAP. In management’s opinion, the condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and include all normal recurring adjustments necessary for the fair presentation of the Company’s financial position as of March 31, 2023, the results of operations and cash flows for the three months ended March 31, 2023 and 2022. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the full year or any other future interim or annual periods. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Form 10-K filed with the SEC on February 17, 2023. Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of revenue and expenses during the reporting periods covered by the condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates due to a variety of factors. The Company is not aware of any specific event or circumstances that would require an update to its estimates, judgments or assumptions or a revision to the carrying value of its assets or liabilities as of the date of issuance of its financial statements. These estimates, judgments and assumptions may change in the future, as new events occur or additional information is obtained. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable. The Company’s most significant estimates and use of judgment involve the determination of distinct performance obligations in enterprise customer contracts, the valuation of acquired goodwill and intangibles from acquisitions and the fair value of goodwill, right-of-use assets and other long-lived assets when evaluating for impairments. Segment Information The Company operates as a operating segment. The Company’s chief operating decision maker (“CODM”) is its Chief Executive Officer, who reviews the Company’s operating results on a consolidated basis in order to make decisions about allocating resources and assessing performance for the entire company. The CODM uses one measure of profitability and does not segment the Company’s business for internal reporting. See Note 4 for additional information regarding the Company’s revenue by geographic area. Related Party Transactions Certain members of the Company’s board of directors serve as board members, are executive officers of and/or (in some cases) are investors in companies that are customers and/or vendors of the Company. The Company incurred related party expenses of $0.7 million and $0.9 million during the three months ended March 31, 2023 and 2022, respectively. |
Summary of Significant Accounting Policies |
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies There have been no material changes in our significant accounting policies as described in our Annual Report on Form 10-K for the year ended December 31, 2022. Other Non-Operating (Income) Expense Other non-operating (income) expense, net consists primarily of interest income, net foreign currency exchange (gains) losses, net realized gains and losses related to investments, and other (income) expense. The components of other non-operating (income) expense recognized in the condensed consolidated financial statements is as follows:
Accounting Pronouncement Recently Adopted Reference Rate Reform: In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 is intended to provide temporary optional expedients and exceptions to the GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. This guidance is effective beginning on March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2024. The Company adopted this guidance in the first quarter of fiscal 2023. On March 1, 2023, the Company amended the Refinancing Facility Agreement entered into in October 2018 (the “2018 Credit Facility”) by changing the reference rate from LIBOR to the Secured Overnight Financing Rate (“SOFR”) and elected to apply the practical expedient provided in Topic 848 to account for the modification as if it was not substantial. The adoption of this ASU did not have a material impact on the Company's condensed consolidated financial statements. |
Revenue and Deferred Revenue |
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Revenue and Deferred Revenue | 3. Revenue and Deferred Revenue Disaggregated revenue Revenue by sales channel was as follows:
Self-serve revenues are generated from products purchased independently through our website. Sales-assisted revenues are generated from products sold to organizations through our sales team. In addition, see Note 4 for information regarding the Company’s revenue by geographic area. Deferred revenue The Company recognized into revenue $92.9 million and $88.6 million during the three months ended March 31, 2023 and 2022, respectively, that was included in the deferred revenue balances at the beginning of each respective period. Transaction price allocated to the remaining performance obligations As of March 31, 2023, future estimated revenue related to non-cancelable performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period was $245.5 million. The substantial majority of the unsatisfied performance obligations will be satisfied over the next twelve months. |
Geographical Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Geographical Information | 4. Geographical Information Revenue by geography is generally based on the billing address of the customer. For purposes of its geographic revenue disclosure, the Company defines a customer as an organization. An organization may consist of an individual paying user, multiple paying users within an organization or the organization itself. The following table sets forth the percentage of revenue by geographic area:
No other country outside of the United States comprised 10% or greater of the Company’s revenue for each of the three months ended March 31, 2023 and 2022, respectively. |
Cash and Cash Equivalents |
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||
Cash and Cash Equivalents [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Cash and Cash Equivalents | 5. Cash and Cash Equivalents As of March 31, 2023 and December 31, 2022, the following table provides a reconciliation of the amount of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets to the total of such amounts shown in the condensed consolidated statements of cash flows:
Included in cash and cash equivalents are cash in transit from payment processors for credit and debit card transactions of $2.2 million and $1.1 million as of March 31, 2023 and December 31, 2022, respectively. |
Fair Value Measurements |
3 Months Ended |
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Mar. 31, 2023 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | 6. Fair Value Measurements Assets and liabilities recorded at fair value in the condensed consolidated financial statements are categorized based on the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels which directly relate to the amount of subjectivity associated with the inputs to the valuation of these assets or liabilities are as follows: Level 1 – Observable inputs, such as quoted prices in active markets for identical assets or liabilities. Level 2 – Observable inputs, other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The carrying amounts of the Company’s financial instruments, which generally include cash equivalents, accounts receivable and accounts payable, approximate their fair values due to their short maturities. Based on borrowing rates currently available to the Company for debt with similar terms and consideration of default and credit risk, the fair value of the Company’s debt was approximately $181.9 million and $180.1 million as of March 31, 2023 and December 31, 2022, respectively. As of March 31, 2023 and December 31, 2022, respectively, the Company did not have any significant financial instruments accounted for pursuant to ASC 820, Fair Value Measurement. |
Property and Equipment |
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Property and Equipment | 7. Property and Equipment As of March 31, 2023 and December 31, 2022, property and equipment consisted of the following:
Depreciation expense was $0.4 million and $1.4 million during the three months ended March 31, 2023 and 2022, respectively. |
Intangible Assets and Goodwill |
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Intangible Assets and Goodwill | 8. Intangible Assets and Goodwill Acquisition intangible assets, net As of March 31, 2023 and December 31, 2022, intangible assets, net consisted of the following:
Amortization expense was $0.4 million and $2.9 million during the three months ended March 31, 2023 and 2022, respectively. Goodwill The changes in the carrying amount of goodwill were as follows (in thousands):
Capitalized internal-use software As of March 31, 2023 and December 31, 2022, capitalized internal-use software consisted of the following:
Amortization expense related to capitalized internal-use software was $2.1 million and $2.8 million during the three months ended March 31, 2023 and 2022, respectively, and is included in cost of revenue in the condensed consolidated statements of operations.
The decrease in gross capitalized internal-use software is due to the removal of $19.6 million of fully amortized capitalized internal-use software during the first quarter of 2023, offset by current quarter additions.
Future amortization expense As of March 31, 2023, future amortization expense by year is expected to be as follows:
Future capitalized internal-use software amortization excludes $16.2 million of costs which are currently in the development phase. |
Stockholder's Equity and Employee Benefit Plans |
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Stockholders Equity And Employee Benefit Plans [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity and Employee Benefit Plans | 9. Stockholders' Equity and Employee Benefit Plans Common Stock Repurchases On February 26, 2022, the Company's board of directors authorized a share repurchase program to repurchase up to $200.0 million of the Company’s common stock in the open market or in privately negotiated transactions (through 10b5-1 trading plans or otherwise). The share repurchase program does not obligate the Company to acquire any particular amount of common stock and may be suspended at any time at the Company’s discretion, and the share repurchase program does not have an expiration date. The actual timing, number and value of shares repurchased is determined by management at its discretion and depends on a number of factors, including the market price of the Company’s stock, general business and market conditions, and other investment opportunities. There were no share repurchases for the three months ended March 31, 2023. During the three months ended March 31, 2022, the Company repurchased approximately 2.4 million shares of common stock for approximately $36.4 million. As of March 31, 2023, the Company’s remaining share repurchase authorization was approximately $116.5 million. Equity Incentive Plans The Company sponsors the 2018 Equity Incentive Plan (the “2018 Plan”), which was approved by stockholders on September 5, 2018. The purpose of the 2018 Plan is to promote the long-term growth and profitability of the Company by (i) providing employees with incentives to improve stockholder value and to contribute to the growth and financial success of the Company through their future services, and (ii) enabling the Company to attract, retain and reward the best available persons. The options granted under the 2018 Plan, may be granted at a price not less than the fair market value on the grant date. The board of directors, or a committee of the board of directors, has granted options with an exercise price at fair value on the grant date. Grants of time-based awards generally vest over a four-year period for new hires and over a three-year period for subsequent grants to existing employees. Options expire as determined by the board of directors, or committee of the board of directors, but not more than ten years after the date of the grant. As of March 31, 2023, 28,741,857 shares of common stock remain available for grant under the 2018 Plan. The following is a summary of restricted stock units for the current year period:
The following is a summary of stock option activity for the current year period:
The following is a summary of restricted stock awards for the current year period:
2018 Employee Stock Purchase Plan, As Amended The Company sponsors the 2018 Employee Stock Purchase Plan, as amended (the “ESPP”), which was approved by stockholders on September 5, 2018. The ESPP provides for 24-month offering periods beginning May 22 and November 22 of each year, and each offering period will consist of four six-month purchase periods, subject to a reset provision. On each purchase date, eligible employees will purchase the shares at a price per share equal to 85% of the lesser of (1) the fair market value of the Company’s common stock on the offering date, or (2) the fair market value of its common stock on the purchase date. As of March 31, 2023, 7,481,519 shares of common stock remain available for issuance under the ESPP.
Stock-Based Compensation Expense Stock-based compensation expense recognized in the condensed consolidated financial statements is as follows:
As of March 31, 2023, unamortized stock-based compensation was as follows:
401(k) Plan In the United States, the Company offers its employees a defined contribution plan that qualifies as a deferred salary arrangement under Section 401 of the U.S. Internal Revenue Code (“401(k) Plan”). Under the 401(k) Plan, participating employees may defer a portion of their pretax earnings not to exceed the maximum amount allowed by the Internal Revenue Service. The Company currently provides a matching contribution of 25% of deferrals for eligible employees. Compensation expense for the Company's matching contributions was $1.7 million and $1.9 million during the three months ended March 31, 2023 and 2022, respectively. |
Leases |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases | 10. Leases The Company leases certain equipment and facilities under operating leases which expire at various dates through 2028. The Company’s operating lease costs were as follows:
During each of the three months ended March 31, 2023 and 2022, the Company’s short-term lease costs were nominal. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The weighted average remaining operating lease term was 5.5 years and 5.7 years as of March 31, 2023 and December 31, 2022, respectively. The weighted average discount rate used to estimate operating lease liabilities was 7.1% as of March 31, 2023 and December 31, 2022, respectively. As of March 31, 2023, maturities of operating lease liabilities and sublease income, by year are as follows:
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Commitments and Contingencies |
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Mar. 31, 2023 | |||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||
Commitments and Contingencies | 11. Commitments and Contingencies Non-Cancelable Purchase Commitments The Company enters into commitments under non-cancelable purchase orders for the procurement of goods and services in the ordinary course of business. As of March 31, 2023, expected payments under such commitments are as follows (in thousands):
Letters of Credit As of March 31, 2023, the Company had a standby letter of credit for $1.0 million which was issued in connection with the San Mateo headquarters. Legal Matters The Company is party to lawsuits filed in connection with the Merger, and more may be filed. On April 21, 2023, a purported Momentive stockholder filed a complaint in the U.S. District Court for the Southern District of New York against Momentive and the Momentive board of directors, captioned O’Dell v. Momentive Global, Inc., et al. Case No. 23-cv-3360 (S.D.N.Y.) (the “O’Dell Complaint”), and a purported Momentive stockholder filed a complaint in the U.S. District Court for the Northern District of California against Momentive and the Momentive board of directors, captioned Renfer v. Momentive Global, Inc., et al. Case No. 3:23-cv-01936-TLT (N.D. Cal.) (the “Renfer Complaint”). On April 24, 2023, a purported Momentive stockholder filed a complaint in the U.S. District Court for the Southern District of New York against Momentive and the Momentive board of directors, captioned Wang v. Momentive Global, Inc., et al. Case No. 1:23-cv-03408 (S.D.N.Y.) (the “Wang Complaint”). On April 26, 2023, a purported Momentive stockholder filed a complaint in the U.S. District Court for the Northern District of California against Momentive and the Momentive board of directors, captioned DeVay v. Momentive Global, Inc., et al. Case No. 3:23-cv-02032 (N.D. Cal.) (the “DeVey Complaint”). On April 28, 2023, a purported Momentive stockholder filed a complaint in the U.S. District Court for the Northern District of California against Momentive and the Momentive board of directors, captioned Bushansky v. Momentive Global, Inc., et al. Case No. 3:23-cv-02068 (N.D. Cal.) (the “Bushansky Complaint”), and together with the O’Dell Complaint, the Renfer Complaint, the Wang Complaint and the DeVey Complaint, the “Momentive Complaints”). The Momentive Complaints assert claims against certain defendants under Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder for allegedly false and misleading statements in the proxy statement and against certain defendants under Section 20(a) of the Exchange Act for alleged “control person” liability with respect to such allegedly false and misleading statements. Each complaint seeks, among other relief, an order enjoining the Merger and an award for plaintiffs’ fees and costs. The Company believes the allegations in the Momentive Complaints are without merit. Momentive stockholders may file additional lawsuits challenging the Merger, which may name the Company, members of the Company’s board of directors and/or other defendants. No assurance can be made as to the outcome of such lawsuits or the Momentive Complaints, including the amount of costs associated with defending against, or any other liabilities that may be incurred in connection with the litigation of, such claims. In addition, from time to time, the Company is subject to legal proceedings, claims and litigation arising in the ordinary course of business, which may include, but are not limited to, patent and privacy matters, labor and employment claims, class action lawsuits, as well as inquiries, investigations, audits and other regulatory proceedings. Periodically, the Company evaluates developments in its legal matters and records a liability when it believes that it is both probable that a loss has been incurred and the amount can be reasonably estimated. Significant judgment is required to determine both the likelihood of there being, and the estimated amount of, a loss related to such matters, and the Company's judgment may be incorrect. There are currently no legal matters or claims that have arisen from the normal course of business that the Company believes would have a material impact on the Company’s financial position, results of operations or cash flows. Warranties and Indemnification The Company’s subscription services are generally warranted to perform materially in accordance with the Company’s online help documentation under normal use and circumstances. Additionally, the Company’s arrangements generally include provisions for indemnifying customers against liabilities if its subscription services infringe a third party’s intellectual property rights. Furthermore, the Company may also incur liabilities if it breaches the security or confidentiality obligations in its arrangements. To date, the Company has not incurred significant costs and has not accrued a liability in the accompanying condensed consolidated financial statements as a result of these obligations. |
Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | 12. Debt As of March 31, 2023 and December 31, 2022 the carrying values of debt were as follows:
In October 2018, the Company entered into the 2018 Credit Facility, comprising a $220.0 million term loan (the “Term Loan”) and $75.0 million revolving credit facility. Effective March 1, 2023, the Company entered into an amendment to the 2018 Credit Facility to amend the alternate base interest rate (“ABR”) from the LIBOR (as defined in the 2018 Credit Facility) to the SOFR and to make such other related changes. Loans under the amendment effective March 1, 2023 accrue interest based upon, at the Company’s option, either at an ABR or an adjusted term SOFR Rate, in each case, an applicable margin. The applicable margin for the Term Loan is 2.75% in the case of a ABR loan and 3.75% in the case of a Term Benchmark loan, and the applicable margin for the revolving loan ranges from 0.75% to 1.50% in the case of a ABR loan and 1.75% to 2.50% in the case of a Term Benchmark loan, and is based on the Company’s leverage ratio. The Company will make quarterly principal payments of $550,000 on the Term Loan with any remaining principal amounts due on October 10, 2025. The principal amount on the revolving credit facility is due and all revolver commitments terminate on October 10, 2023. As of March 31, 2023, the Company had $74.0 million of borrowing available under the line of credit portion of the 2018 Credit Facility. The Company’s obligations under the 2018 Credit Facility are guaranteed by certain of its subsidiaries and secured by liens on substantially all of the assets of the Company and such subsidiaries. The 2018 Credit Facility contains financial, affirmative and negative covenants that, if violated, may require the Company to pay down the loans earlier than the stated maturity dates with higher interest rates. As of March 31, 2023, the Company was compliant with all of its debt covenant requirements in the 2018 Credit Facility. The Company believes that it will continue to comply with the terms of the loan agreements through the stated maturity dates. However, if the Company’s projections do not materialize, the Company may require additional equity or debt financing. There can be no assurance that additional financing, if required, will be available on terms satisfactory to the Company. As of March 31, 2023, future minimum payment obligations of principal amounts due by year under the 2018 Credit Facility were as follows (in thousands):
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Income Taxes |
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Mar. 31, 2023 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 13. Income Taxes The Company recorded an income tax provision of $0.5 million and $0.2 million for the three months ended March 31, 2023 and 2022, respectively. The increase in the Company’s income tax expense for the three months ended March 31, 2023, relative to the prior year period, was primarily due to an estimated increase in U.S. state income taxes resulting from capitalization of certain expenses under Section 174. The Company regularly evaluates the realizability of its net deferred tax assets based on all available evidence, both positive and negative. The realization of net deferred tax assets is dependent on several factors, including the likelihood and amount, if any, of future taxable income in relevant jurisdictions during periods in which those temporary differences become deductible. As of March 31, 2023, the Company continues to maintain a valuation allowance on certain deferred tax assets in the United States and certain foreign jurisdictions that are not realizable on a more likely than not basis. The Company believes that it has provided adequate reserves for its income tax uncertainties in all open tax years. As the outcome of the audits cannot be predicted with certainty, if any issues addressed in the Company's tax audits are resolved in a manner inconsistent with management's expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs. There were no material changes in gross unrecognized tax benefits during each of the three months ended March 31, 2023 and 2022. |
Net Loss Per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Loss Per Share | 14. Net Loss Per Share Basic earnings per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net loss for the period by the weighted-average number of common shares outstanding during the period which includes potential dilutive common shares assuming the dilutive effect of outstanding restricted stock units, stock options, restricted stock awards, and shares issuable under the ESPP calculated using the treasury stock method. The following table sets forth the computation of basic and diluted earnings per share:
The Company was in a loss position for the periods presented. Accordingly, basic net loss per share is the same as diluted net loss per share as the inclusion of all potential common shares outstanding would have been anti-dilutive. Prior to application of the treasury stock method, share equivalents (comprising of restricted stock units, stock options, restricted stock awards, and shares issuable under the ESPP) excluded from the calculations of diluted net loss per share were 20.2 million and 26.3 million for the three months ended March 31, 2023 and 2022, respectively. |
Restructuring Costs |
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Restructuring Costs [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring Costs | 15. Restructuring Costs A description of the Company's restructuring and other activities and their related costs is provided below. February 2023 Restructuring Plan In February 2023, the Company committed to a restructuring plan (the "February 2023 Restructuring Plan") that is designed to improve operating margin. The February 2023 Restructuring plan resulted in a reduction of the Company's workforce by approximately 14%. The total estimated restructuring costs was approximately $7.2 million, consisting of cash expenditures for employee severance, employee benefits, and related facilitation costs, and was substantially recognized during the first quarter of 2023. October 2022 Restructuring Plan In October 2022, the Company committed to a plan designed to improve operating margin and create efficiencies in its go-to-market motion and in other areas throughout the Company (the “October 2022 Restructuring Plan”). The October 2022 Restructuring Plan resulted in a reduction of the Company’s workforce by approximately 11%. The Company incurred total charges of approximately $4.2 million, consisting of cash expenditures for employee severance, employee benefits, and related facilitation costs, and was substantially recognized during the fourth quarter of 2022. March 2022 Restructuring Plan In March 2022, the Company implemented a restructuring plan (the “March 2022 Restructuring Plan”) to streamline its business, increase operating efficiency, and reduce costs over the long-term after the termination of its proposed merger with Zendesk. In connection with the March 2022 Restructuring Plan, the Company incurred total charges of approximately $2.4 million, which are primarily comprised of employee severance, stock-based compensation expense, gain on lease modification due to the partial termination of its San Mateo, CA headquarters lease and related leasehold improvement impairment costs, and other contract termination costs related to the Company's decision to abandon its future office expansion plans. Additionally, the Company has streamlined its brand positioning and accelerated the amortization of the brand-related intangibles that were discontinued. Substantially all of the costs related to the March 2022 Restructuring Plan has been recognized as of the fourth quarter of 2022. The restructuring plans were subject to applicable laws and consultation processes as part of the Company's strategic plan to reduce costs and improve efficiencies. In connection with these actions, the Company incurred the following pre-tax costs for the three months ended March 31, 2023 and 2022:
Restructuring costs included $2.0 million recorded in accrued expenses and other current liabilities line in the condensed consolidated balance sheet as of March 31, 2023. The majority of the amounts accrued pertain to severance costs which will be paid through the second quarter of 2023. |
Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Principles of Consolidation and Basis of Presentation | Principles of Consolidation and Basis of Presentation The accompanying interim condensed consolidated balance sheet as of March 31, 2023, the statements of operations, comprehensive loss, stockholders’ equity and cash flows for the three months ended March 31, 2023 and 2022 are unaudited. Such condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the SEC regarding interim financial reporting. These condensed consolidated financial statements include the results of operations of the Company and its wholly-owned subsidiaries. All significant intercompany transactions have been eliminated. Certain other prior year balances have been reclassified to conform to the current year presentation. Such reclassifications did not affect our results of operations or operating, investing and financing cash flows. These condensed consolidated financial statements do not include all disclosures normally required in annual consolidated financial statements prepared in accordance with GAAP. In management’s opinion, the condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and include all normal recurring adjustments necessary for the fair presentation of the Company’s financial position as of March 31, 2023, the results of operations and cash flows for the three months ended March 31, 2023 and 2022. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the full year or any other future interim or annual periods. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Form 10-K filed with the SEC on February 17, 2023. |
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Use of Estimates | Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of revenue and expenses during the reporting periods covered by the condensed consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates due to a variety of factors. The Company is not aware of any specific event or circumstances that would require an update to its estimates, judgments or assumptions or a revision to the carrying value of its assets or liabilities as of the date of issuance of its financial statements. These estimates, judgments and assumptions may change in the future, as new events occur or additional information is obtained. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable. The Company’s most significant estimates and use of judgment involve the determination of distinct performance obligations in enterprise customer contracts, the valuation of acquired goodwill and intangibles from acquisitions and the fair value of goodwill, right-of-use assets and other long-lived assets when evaluating for impairments. |
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Segment Information | Segment Information The Company operates as a operating segment. The Company’s chief operating decision maker (“CODM”) is its Chief Executive Officer, who reviews the Company’s operating results on a consolidated basis in order to make decisions about allocating resources and assessing performance for the entire company. The CODM uses one measure of profitability and does not segment the Company’s business for internal reporting. See Note 4 for additional information regarding the Company’s revenue by geographic area. |
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Related Party Transactions | Related Party Transactions Certain members of the Company’s board of directors serve as board members, are executive officers of and/or (in some cases) are investors in companies that are customers and/or vendors of the Company. The Company incurred related party expenses of $0.7 million and $0.9 million during the three months ended March 31, 2023 and 2022, respectively. |
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Other Non-Operating (Income) Expense | Other Non-Operating (Income) Expense Other non-operating (income) expense, net consists primarily of interest income, net foreign currency exchange (gains) losses, net realized gains and losses related to investments, and other (income) expense. The components of other non-operating (income) expense recognized in the condensed consolidated financial statements is as follows:
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Accounting Pronouncements Recently Adopted | Accounting Pronouncement Recently Adopted Reference Rate Reform: In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 is intended to provide temporary optional expedients and exceptions to the GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates. This guidance is effective beginning on March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2024. The Company adopted this guidance in the first quarter of fiscal 2023. On March 1, 2023, the Company amended the Refinancing Facility Agreement entered into in October 2018 (the “2018 Credit Facility”) by changing the reference rate from LIBOR to the Secured Overnight Financing Rate (“SOFR”) and elected to apply the practical expedient provided in Topic 848 to account for the modification as if it was not substantial. The adoption of this ASU did not have a material impact on the Company's condensed consolidated financial statements. |
Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Other Non-Operating (Income) Expense Recognized in Condensed Consolidated Financial Statements | The components of other non-operating (income) expense recognized in the condensed consolidated financial statements is as follows:
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Revenue and Deferred Revenue (Tables) |
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Disaggregated Revenue by Sales Channel | Revenue by sales channel was as follows:
|
Geographical Information (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Schedule of Percentage of Revenue by Geographic Area | The following table sets forth the percentage of revenue by geographic area:
|
Cash and Cash Equivalents (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||
Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Schedule of Reconciliation of the Amount of Cash, Cash Equivalents, and Restricted Cash | As of March 31, 2023 and December 31, 2022, the following table provides a reconciliation of the amount of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets to the total of such amounts shown in the condensed consolidated statements of cash flows:
|
Property and Equipment (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Property and Equipment | As of March 31, 2023 and December 31, 2022, property and equipment consisted of the following:
|
Intangible Assets and Goodwill (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Intangible Assets, net | As of March 31, 2023 and December 31, 2022, intangible assets, net consisted of the following:
As of March 31, 2023 and December 31, 2022, capitalized internal-use software consisted of the following:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Carrying Amount of Goodwill | The changes in the carrying amount of goodwill were as follows (in thousands):
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Future Amortization Expense | As of March 31, 2023, future amortization expense by year is expected to be as follows:
|
Stockholder's Equity and Employee Benefit Plans (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Stock Option Activity | The following is a summary of stock option activity for the current year period:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Stock-based Compensation Expense Recognized in Financial Statements | Stock-based compensation expense recognized in the condensed consolidated financial statements is as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Unamortized Stock-based Compensation | As of March 31, 2023, unamortized stock-based compensation was as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Stock Units | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Restricted Stock Units and Restricted Stock Awards | The following is a summary of restricted stock units for the current year period:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Restricted Stock Units and Restricted Stock Awards | The following is a summary of restricted stock awards for the current year period:
|
Leases (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Operating Lease Costs | The Company’s operating lease costs were as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Maturities of Operating Lease Liabilities and Sublease Income | As of March 31, 2023, maturities of operating lease liabilities and sublease income, by year are as follows:
|
Commitments and Contingencies (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | |||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||
Schedule of Non-Cancelable Purchase Commitments | The Company enters into commitments under non-cancelable purchase orders for the procurement of goods and services in the ordinary course of business. As of March 31, 2023, expected payments under such commitments are as follows (in thousands):
|
Debt (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Carrying Values of Debt | As of March 31, 2023 and December 31, 2022 the carrying values of debt were as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Future Minimum Payment Obligations of Principal Amounts Due | As of March 31, 2023, future minimum payment obligations of principal amounts due by year under the 2018 Credit Facility were as follows (in thousands):
|
Net Loss Per Share (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computation of Basic and Diluted Earnings Per Share | The following table sets forth the computation of basic and diluted earnings per share:
|
Restructuring Costs (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring Costs [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring - pre-tax costs | The restructuring plans were subject to applicable laws and consultation processes as part of the Company's strategic plan to reduce costs and improve efficiencies. In connection with these actions, the Company incurred the following pre-tax costs for the three months ended March 31, 2023 and 2022:
|
Company Overview and Basis of Presentation - Business - Additional Information (Details) $ / shares in Units, $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2023
USD ($)
Product
$ / shares
| |
Number of major product categories offering SaaS feedback solutions | Product | 3 |
Proposed Merger with STG Partners, LLC | |
Business merger, Share price | $ / shares | $ 9.46 |
Business merger, Transaction costs | $ 7.5 |
Momentive Global Inc. | |
Termination Fee | $ 52.0 |
Company Overview and Basis of Presentation - Segment Information - Additional Information (Details) |
3 Months Ended |
---|---|
Mar. 31, 2023
Segment
| |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of operating segment | 1 |
Company Overview and Basis of Presentation - Related Party Transactions - Additional Information (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Related party expenses | $ 0.7 | $ 0.9 |
Summary of Significant Accounting Policies - Components of Other Non-Operating (Income) Expense Recognized in Condensed Consolidated Financial Statements (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Nonoperating Income (Expense) [Abstract] | ||
Interest Income | $ (2,141) | $ (165) |
Foreign currency (gains) losses, net | 130 | 127 |
Other income, net | (27) | (96) |
Other non-operating income, net | $ (2,038) | $ (134) |
Revenue and Deferred Revenue - Summary of Disaggregated Revenue by Sales Channel (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Disaggregation Of Revenue [Line Items] | ||
Revenue | $ 118,821 | $ 116,986 |
Self-serve revenue | ||
Disaggregation Of Revenue [Line Items] | ||
Revenue | 72,099 | 75,803 |
Sales-assisted revenue | ||
Disaggregation Of Revenue [Line Items] | ||
Revenue | $ 46,722 | $ 41,183 |
Revenue and Deferred Revenue - Additional Information (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Revenue from Contract with Customer [Abstract] | ||
Deferred revenue, revenue recognized | $ 92.9 | $ 88.6 |
Revenue and Deferred Revenue - Additional Information (Details 1) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2023-04-01 $ in Millions |
Mar. 31, 2023
USD ($)
|
---|---|
Disaggregation Of Revenue [Line Items] | |
Revenue, unsatisfied performance obligation | $ 245.5 |
Performance obligation, expected timing of satisfaction, period | 12 months |
Geographical Information - Schedule of Percentage of Revenue by Geographic Area (Details) - Geographic Concentration Risk - Revenue |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
United States | ||
Revenues From External Customers And Long Lived Assets [Line Items] | ||
Percentage of revenue by geographic area | 66.00% | 64.00% |
Rest of World | ||
Revenues From External Customers And Long Lived Assets [Line Items] | ||
Percentage of revenue by geographic area | 34.00% | 36.00% |
Cash and Cash Equivalents - Summary of Reconciliation of Cash, Cash Equivalents, and Restricted Cash (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
Mar. 31, 2022 |
Dec. 31, 2021 |
---|---|---|---|---|
Cash and Cash Equivalents [Abstract] | ||||
Cash and cash equivalents | $ 199,080 | $ 202,816 | ||
Restricted cash included in prepaid expenses and other current assets | $ 573 | $ 442 | ||
Restricted Cash, Current, Asset, Statement of Financial Position [Extensible List] | Prepaid expenses and other current assets | Prepaid expenses and other current assets | ||
Total cash, cash equivalents and restricted cash | $ 199,653 | $ 203,258 | $ 238,955 | $ 306,121 |
Cash and Cash Equivalents - Additional Information (Details) - USD ($) $ in Millions |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Cash and Cash Equivalents [Abstract] | ||
Cash in transit for credit and debit card transactions | $ 2.2 | $ 1.1 |
Fair Value Measurements - Additional Information (Details) - USD ($) $ in Millions |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Fair Value Disclosures [Abstract] | ||
Fair value of debt | $ 181.9 | $ 180.1 |
Property and Equipment - Schedule of Property and Equipment (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Property Plant And Equipment [Line Items] | ||
Gross property and equipment | $ 59,629 | $ 60,767 |
Less: Accumulated depreciation | (58,999) | (59,761) |
Property and equipment, net | 630 | 1,006 |
Computer Equipment | ||
Property Plant And Equipment [Line Items] | ||
Gross property and equipment | 7,422 | 7,492 |
Leasehold Improvements | ||
Property Plant And Equipment [Line Items] | ||
Gross property and equipment | 44,623 | 45,710 |
Furniture, Fixtures, and Other Assets | ||
Property Plant And Equipment [Line Items] | ||
Gross property and equipment | $ 7,584 | $ 7,565 |
Property and Equipment - Additional Information (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 0.4 | $ 1.4 |
Intangible Assets and Goodwill - Schedule of Intangible Assets, Net (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Finite Lived Intangible Assets [Line Items] | ||
Acquisition intangible assets, Net, Gross carrying amount | $ 11,000 | $ 11,000 |
Acquisition intangible assets, Net, Accumulated amortization | (6,215) | (5,844) |
Acquisition intangible assets, Net carrying amount | 4,785 | 5,156 |
Customer Relationships | ||
Finite Lived Intangible Assets [Line Items] | ||
Acquisition intangible assets, Net, Gross carrying amount | 10,100 | 10,100 |
Acquisition intangible assets, Net, Accumulated amortization | (5,315) | (4,944) |
Acquisition intangible assets, Net carrying amount | 4,785 | 5,156 |
Trade Name | ||
Finite Lived Intangible Assets [Line Items] | ||
Acquisition intangible assets, Net, Gross carrying amount | 900 | 900 |
Acquisition intangible assets, Net, Accumulated amortization | (900) | (900) |
Acquisition intangible assets, Net carrying amount | $ 0 | $ 0 |
Intangible Assets and Goodwill - Additional Information (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
|
Intangible Assets And Goodwill [Line Items] | |||
Amortization of intangible assets | $ 371 | $ 2,911 | |
Amortization expense related to capitalized internal-use software | 2,100 | $ 2,800 | |
Removal of fully amortized capitalized internal-use software | 19,600 | ||
Capitalized internal-use software, net | 29,942 | $ 29,595 | |
Capitalized Internal-Use Software Net in Development Phase | |||
Intangible Assets And Goodwill [Line Items] | |||
Capitalized internal-use software, net | $ 16,200 |
Intangible Assets and Goodwill - Schedule of Carrying Amount of Goodwill (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2023
USD ($)
| |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Beginning balance | $ 459,817 |
Foreign currency translation | 1,162 |
Ending Balance | $ 460,979 |
Intangible Assets and Goodwill - Schedule of Capitalized Internal-Use Software (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Capitalized Computer Software, Net [Abstract] | ||
Gross capitalized internal-use software | $ 45,078 | $ 62,249 |
Less: Accumulated amortization | (15,136) | (32,654) |
Capitalized internal-use software, net | $ 29,942 | $ 29,595 |
Intangible Assets and Goodwill - Summary of Future Amortization Expense (Details) $ in Thousands |
Mar. 31, 2023
USD ($)
|
---|---|
Capitalized Internal-Use Software, Net | |
Finite Lived Intangible Assets [Line Items] | |
Remainder of 2023 | $ 5,085 |
2024 | 4,964 |
2025 | 3,458 |
2026 | 279 |
Finite-Lived Intangible Assets Amortization Expense, Total | 13,786 |
Acquisition Intangible Assets, Net | |
Finite Lived Intangible Assets [Line Items] | |
Remainder of 2023 | 1,113 |
2024 | 1,483 |
2025 | 1,389 |
2026 | 800 |
Finite-Lived Intangible Assets Amortization Expense, Total | $ 4,785 |
Stockholder's Equity and Employee Benefit Plans - Additional Information (Details) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2023
USD ($)
Offering_period
shares
|
Mar. 31, 2022
USD ($)
shares
|
Feb. 26, 2022
USD ($)
|
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Stock Repurchased During Period, Shares | shares | 0 | ||
Payments for repurchase of common stock | $ | $ 0 | $ 36,376 | |
Stock repurchase authorization amount | $ | $ 116,500 | ||
2018 Employee Stock Purchase Plan | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Offering period | 24 months | ||
Number of offering periods | Offering_period | 4 | ||
Length of purchase period | 6 months | ||
Employee share purchase price percentage | 85.00% | ||
Time-Based Awards | Equity Incentive Plans | New Hires | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Vesting period | 4 years | ||
Time-Based Awards | Equity Incentive Plans | Existing Employees | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Vesting period | 3 years | ||
Maximum | Equity Incentive Plans | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Expiration period | 10 years | ||
Common Stock | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Authorized repurchase amount, stock repurchase program | $ | $ 200,000 | ||
Stock Repurchased During Period, Shares | shares | 2,411,000 | ||
Payments for repurchase of common stock | $ | $ 36,400 | ||
Common Stock | 2018 Equity Incentive Plan | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Number of shares available for grant | shares | 28,741,857 | ||
Common Stock | 2018 Employee Stock Purchase Plan | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Number of shares available for issuance | shares | 7,481,519 |
Stockholder's Equity and Employee Benefit Plans - Summary of Restricted Stock Units (Details) - Restricted Stock Units - $ / shares |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2023 |
Dec. 31, 2022 |
|
Number of Shares | ||
Unvested at December 31, 2022 | 8,023,173 | |
Granted | 563,320 | |
Vested | (979,131) | |
Forfeited/cancelled | (896,761) | |
Unvested at March 31, 2023 | 6,710,601 | 8,023,173 |
Unvested at December 31, 2022 | $ 15.07 | |
Granted | 8.24 | |
Vested | 17.52 | |
Forfeited/cancelled | 14.56 | |
Unvested at March 31, 2023 | $ 14.21 | $ 15.07 |
Unvested, Weighted Average Remaining Contractual Term | 1 year 2 months 12 days | 1 year 2 months 12 days |
Stockholder's Equity and Employee Benefit Plans - Summary of Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2023 |
Dec. 31, 2022 |
|
Number of Shares | ||
Outstanding at December 31, 2022 | 13,133,446 | |
Granted | 0 | |
Exercised | 0 | |
Forfeited | (22,001) | |
Expired | (2,325,356) | |
Outstanding, vested and expected to vest at March 31, 2023 | 10,786,089 | 13,133,446 |
Vested and exercisable at March 31, 2023 | 8,770,544 | |
Weighted Average Exercise Price | ||
Outstanding at December 31, 2022 | $ 16.24 | |
Granted | 0 | |
Exercised | 0 | |
Forfeited | 20.18 | |
Expired | 16.61 | |
Outstanding, vested and expected to vest at March 31, 2023 | 16.15 | $ 16.24 |
Vested and exercisable at March 31, 2023 | $ 16.59 | |
Outstanding at December 31, 2022 | $ 0 | |
Outstanding, vested and expected to vest, Aggregate Intrinsic Value, at March 31, 2023 | 1,918 | $ 0 |
Vested and exercisable at March 31, 2023 | $ 0 | |
Outstanding, vested and expected to vest, Weighted Average Remaining Contractual Term | 4 years 8 months 12 days | 4 years 2 months 12 days |
Vested and exercisable, Weighted Average Remaining Contractual Term | 4 years 8 months 12 days |
Stockholder's Equity and Employee Benefit Plans - Summary of Restricted Stock Awards (Details) - Restricted Stock Awards - $ / shares |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2023 |
Dec. 31, 2022 |
|
Number of Shares | ||
Unvested at December 31, 2022 | 890,219 | |
Granted | 0 | |
Vested | (80,905) | |
Forfeited/cancelled | 0 | |
Unvested at March 31, 2023 | 809,314 | 890,219 |
Weighted Average Grant-Date Fair Value | ||
Unvested at December 31, 2022 | $ 17.43 | |
Granted | 0 | |
Vested | 17.38 | |
Forfeited/cancelled | 0 | |
Unvested at March 31, 2023 | $ 17.43 | $ 17.43 |
Weighted Average Remaining Contractual Term (in years) | ||
Unvested, Weighted Average Remaining Contractual Term | 1 year 9 months 18 days | 1 year 10 months 24 days |
Stockholder's Equity and Employee Benefit Plans - Summary of Stock-based Compensation Expense Recognized in Financial Statements (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock-based compensation expense, net of amounts capitalized | $ 20,402 | $ 26,254 |
Capitalized stock-based compensation expense | 506 | 719 |
Stock-based compensation expense | 20,908 | 26,973 |
Cost of revenue | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock-based compensation expense, net of amounts capitalized | 1,241 | 1,409 |
Research and development | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock-based compensation expense, net of amounts capitalized | 7,734 | 8,644 |
Sales and marketing | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock-based compensation expense, net of amounts capitalized | 4,075 | 6,065 |
General and administrative | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock-based compensation expense, net of amounts capitalized | 7,352 | 7,375 |
Restructuring expense | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock-based compensation expense, net of amounts capitalized | $ 0 | $ 2,761 |
Stockholder's Equity and Employee Benefit Plans - Unamortized Stock-based Compensation (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2023
USD ($)
| |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unrecognized stock-based compensation (in thousands) | $ 112,375 |
Restricted Stock Units | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unrecognized stock-based compensation (in thousands) | $ 86,935 |
Weighted average recognition period (in years) | 2 years |
Stock Options | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unrecognized stock-based compensation (in thousands) | $ 6,052 |
Weighted average recognition period (in years) | 1 year |
Restricted Stock Awards | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unrecognized stock-based compensation (in thousands) | $ 8,407 |
Weighted average recognition period (in years) | 1 year 9 months 18 days |
ESPP | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Unrecognized stock-based compensation (in thousands) | $ 10,981 |
Weighted average recognition period (in years) | 1 year 7 months 6 days |
Stockholder's Equity and Employee Benefit Plans - 401(k) Plan - Additional Information (Details) - United States - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Defined Contribution Plan Disclosure [Line Items] | ||
Matching contribution of deferrals for eligible employees | 25.00% | |
Matching contribution compensation expense | $ 1.7 | $ 1.9 |
Leases - Additional Information (Details) |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Dec. 31, 2022 |
|
Leases [Abstract] | ||
Operating lease expiration year | 2028 | |
Operating lease, Weighted average remaining operating lease term | 5 years 6 months | 5 years 8 months 12 days |
Operating lease, weighted average discount rate, percent | 7.10% | 7.10% |
Leases - Schedule of Operating Lease Costs (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Leases [Abstract] | ||
Operating lease cost (gross lease expense) | $ 2,273 | $ 3,204 |
Variable lease costs | 958 | 1,330 |
Sublease income (including reimbursed expenses) | $ 491 | $ 846 |
Leases - Schedule of Maturities of Operating Lease Liabilities and Sublease Income (Details) $ in Thousands |
Mar. 31, 2023
USD ($)
|
---|---|
Operating Leases Payments | |
Remainder of 2023 | $ 8,400 |
2024 | 9,753 |
2025 | 9,307 |
2026 | 9,516 |
2027 | 9,788 |
Thereafter | 9,363 |
Gross lease payments (income) | 56,127 |
Less: Imputed interest | 9,802 |
Less: Tenant improvement receivables | 418 |
Total operating lease liabilities | 45,907 |
Sublease Income | |
Remainder of 2023 | (1,318) |
2024 | (372) |
2025 | 0 |
2026 | 0 |
2027 | 0 |
Thereafter | 0 |
Gross lease payments (income) | $ (1,690) |
Commitments and Contingencies - Schedule of Non-Cancelable Purchase Commitments (Details) $ in Thousands |
Mar. 31, 2023
USD ($)
|
---|---|
Unrecorded Unconditional Purchase Obligation, Fiscal Year Maturity [Abstract] | |
Remainder of 2023 | $ 12,531 |
2024 | 8,082 |
2025 | 1,946 |
2026 | 49 |
2027 | 1 |
Total purchase commitments | $ 22,609 |
Commitments and Contingencies - Additional Information (Details) $ in Millions |
Mar. 31, 2023
USD ($)
|
---|---|
San Mateo Facility | |
Other Commitments [Line Items] | |
Standby letter of credit issued | $ 1.0 |
Debt - Schedule of Carrying Values of Debt (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Dec. 31, 2022 |
|
Debt Instrument [Line Items] | ||
Total debt | $ 185,100 | |
Less: Unamortized issuance discount and issuance costs, net | 759 | $ 834 |
Debt, current | 1,900 | 1,900 |
Debt, non-current | $ 182,441 | 182,916 |
2018 Credit Facility | ||
Debt Instrument [Line Items] | ||
Issuance date | Oct. 31, 2018 | |
Maturity date | Oct. 10, 2025 | |
Total debt | $ 185,100 | $ 185,650 |
2018 Credit Facility | Minimum | ||
Debt Instrument [Line Items] | ||
Effective Interest Rate | 8.10% | 3.90% |
2018 Credit Facility | Maximum | ||
Debt Instrument [Line Items] | ||
Effective Interest Rate | 8.70% | 8.10% |
Debt - Additional Information (Details) - 2018 Credit Facility - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Oct. 31, 2018 |
|
Debt Instrument [Line Items] | ||
Debt instrument, due date | Oct. 10, 2025 | |
Line of credit facility, remaining borrowing capacity | $ 74,000,000.0 | |
Term Loan | ||
Debt Instrument [Line Items] | ||
Debt instrument, face amount | $ 220,000,000.0 | |
Debt instrument, quarterly principal payments | $ 550,000 | |
Debt instrument, due date | Oct. 10, 2025 | |
Domestic Line of Credit | ||
Debt Instrument [Line Items] | ||
Credit facility, maximum borrowing capacity | $ 75,000,000.0 | |
Debt instrument, due date | Oct. 10, 2023 | |
Alternate Base Rate | Term Loan | ||
Debt Instrument [Line Items] | ||
Applicable margin | 2.75% | |
Alternate Base Rate | Domestic Line of Credit | Minimum | ||
Debt Instrument [Line Items] | ||
Applicable margin | 0.75% | |
Alternate Base Rate | Domestic Line of Credit | Maximum | ||
Debt Instrument [Line Items] | ||
Applicable margin | 1.50% | |
Term Benchmark Rate | Term Loan | ||
Debt Instrument [Line Items] | ||
Applicable margin | 3.75% | |
Term Benchmark Rate | Domestic Line of Credit | Minimum | ||
Debt Instrument [Line Items] | ||
Applicable margin | 1.75% | |
Term Benchmark Rate | Domestic Line of Credit | Maximum | ||
Debt Instrument [Line Items] | ||
Applicable margin | 2.50% |
Debt - Schedule of Future Minimum Payment Obligations of Principal Amounts Due (Details) $ in Thousands |
Mar. 31, 2023
USD ($)
|
---|---|
Debt Disclosure [Abstract] | |
Remainder of 2023 | $ 1,650 |
2024 | 2,200 |
2025 | 181,250 |
Total principal outstanding | $ 185,100 |
Income Taxes - Additional Information (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Income Tax Disclosure [Abstract] | ||
Income tax provision | $ 451 | $ 216 |
Net Loss Per Share - Computation of Basic and Diluted Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Numerator: | ||
Net loss | $ (23,815) | $ (37,377) |
Denominator: | ||
Weighted average number of basic shares outstanding | 149,345 | 150,262 |
Weighted average number of diluted shares outstanding | 149,345 | 150,262 |
Net loss per common share, basic | $ (0.16) | $ (0.25) |
Net loss per common share, diluted | $ (0.16) | $ (0.25) |
Net Loss Per Share - Additional Information (Details) - shares shares in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Earnings Per Share [Abstract] | ||
Antidilutive securities excluded from computation of net loss per share | 20.2 | 26.3 |
Restructuring Costs - Additional Information (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2023 |
Dec. 31, 2022 |
Mar. 31, 2022 |
Dec. 31, 2022 |
Feb. 15, 2023 |
Oct. 10, 2022 |
|||||
Restructuring Cost [Line Items] | ||||||||||
Restructuring | [1],[2] | $ 7,197 | $ 4,883 | |||||||
Restructuring reserve, current | 2,000 | |||||||||
February 2023 Restructuring Plan | ||||||||||
Restructuring Cost [Line Items] | ||||||||||
Restructuring | $ 7,200 | |||||||||
Reduction of the company's workforce | 14.00% | |||||||||
October 2022 Restructuring Plan | ||||||||||
Restructuring Cost [Line Items] | ||||||||||
Restructuring | $ 4,200 | |||||||||
Reduction of the company's workforce | 11.00% | |||||||||
March 2022 Restructuring Plan | ||||||||||
Restructuring Cost [Line Items] | ||||||||||
Restructuring | $ 2,400 | |||||||||
|
Restructuring Costs - Pre -Tax Costs (Details) - USD ($) $ in Thousands |
3 Months Ended | |||||
---|---|---|---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|||||
Restructuring Cost and Reserve [Line Items] | ||||||
Employee severance | $ 7,197 | $ 822 | ||||
Stock-based compensation | 0 | 2,761 | ||||
Amortization of intangible assets | 371 | 2,911 | ||||
Restructuring Costs, Total | [1],[2] | 7,197 | 4,883 | |||
Restructuring expense | ||||||
Restructuring Cost and Reserve [Line Items] | ||||||
Amortization of intangible assets | 0 | 45 | ||||
Contract termination | ||||||
Restructuring Cost and Reserve [Line Items] | ||||||
Contract termination and other costs | $ 0 | $ 1,255 | ||||
|
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