S-1 1 d28493ds1.htm FORM S-1 FORM S-1
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As filed with the Securities and Exchange Commission on August 19, 2021.

Registration No. 333-                

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

iCIMS Holding LLC

to be converted as described herein to a corporation named

iCIMS Holding Corp.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware
  7372
  83-1601391
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification No.)

101 Crawfords Corner Road

Suite 3-100

Holmdel, NJ 07733

Telephone: (888) 279-3992

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

N. Steven Lucas

iCIMS Holding Corp.

Chief Executive Officer

101 Crawfords Corner Road

Suite 3-100

Holmdel, NJ 07733

(888) 279-3992

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies of all communications, including communications sent to agent for service, should be sent to:

Robert M. Hayward, P.C.

Robert E. Goedert, P.C.
Kirkland & Ellis LLP
300 North LaSalle
Chicago, Illinois 60654
(312) 862-2000

 

Michael Kaplan

Pedro J. Bermeo

Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, New York 10017

(212) 450-4000

Approximate date of commencement of proposed sale to the public:

As soon as practicable after this Registration Statement becomes effective.

 

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box:  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer      Accelerated Filer  
Non-accelerated filer      Smaller Reporting Company  
     Emerging Growth Company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

 

 

Title of Each Class of Securities

to be Registered

    

Proposed Maximum

Aggregate Offering

Price(1)(2)

    

Amount of

Registration Fee

Common Stock, par value $0.001 per share

     $100,000,000      $10,910.00

 

 

(1)

Includes the aggregate offering price of shares of common stock subject to the underwriters’ option to purchase additional shares.

(2)

Estimated solely for purposes of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

 

 

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Subject to Completion, dated                 , 2021

            Shares

 

LOGO

Common Stock

 

 

This is an initial public offering of shares of common stock of iCIMS Holding Corp.

Prior to this offering, there has been no public market for our common stock. It is currently estimated that the initial public offering price per share will be between $                 and $                . We have applied to list our common stock on the NASDAQ Global Select Market under the symbol “TLNT.”

We are an “emerging growth company” as defined under the federal securities laws, and as such, we have elected to comply with certain reduced reporting requirements for this prospectus and may elect to do so in future filings.

See “Risk Factors” beginning on page 24 to read about factors you should consider before buying shares of our common stock.

Immediately after this offering, assuming an offering size as set forth above, funds controlled by our Majority Stockholder, Vista Equity Partners, will own approximately                 % of our outstanding common stock (or                 % of our outstanding common stock if the underwriters’ option to purchase additional shares is exercised in full). As a result, we expect to be a “controlled company” within the meaning of the corporate governance standards of the NASDAQ Stock Market, or NASDAQ. See “Management—Corporate Governance—Controlled Company Status.”

At our request, the underwriters have reserved up to                 % of the shares of common stock offered by this prospectus for sale, at the initial public offering price, to certain persons associated with us.

 

 

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

 

 

 

      

Per Share

      

Total

 

Initial public offering price

       $                      $              

Underwriting discount(1)

       $                      $              

Proceeds, before expenses, to iCIMS Holding Corp.

       $                      $              

 

(1)

See “Underwriters” for a description of compensation payable to the underwriters.

To the extent that the underwriters sell more than                  shares of common stock, the underwriters have the option to purchase up to an additional                  shares of our common stock at the initial public offering price less the underwriting discount.

The underwriters expect to deliver the shares of common stock against payment in New York, New York on                 , 2021.

 

 

 

Morgan Stanley   J.P. Morgan   Citigroup
Barclays   Credit Suisse
Baird       Needham & Company       Oppenheimer & Co.   Stifel

 

Guzman & Company   Loop Capital Markets   Roberts & Ryan   R. Seelaus & Co., LLC   Tribal Capital Markets

Prospectus dated                , 2021


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TABLE OF CONTENTS

 

Prospectus Summary

     1  

Risk Factors

     24  

Forward-Looking Statements

     67  

Market and Industry Data

     70  

Use of Proceeds

     71  

Dividend Policy

     73  

Capitalization

     74  

Dilution

     77  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     80  

Business

     108  

Corporate Conversion

     129  

Management

     131  
 

 

 

Neither we nor any of the underwriters have authorized anyone to provide any information or make any representations other than those contained in this prospectus or in any free writing prospectus filed with the Securities and Exchange Commission, or the SEC. Neither we nor any of the underwriters take any responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We are offering to sell, and seeking offers to buy, shares of common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock. Our business, financial condition, results of operations, and prospects may have changed since such date.

For investors outside of the United States, neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about, and to observe any restrictions relating to, this offering and the distribution of this prospectus outside of the United States.

Through and including                 , 2021 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

 

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PROSPECTUS SUMMARY

This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all of the information that you should consider before investing in our common stock. For a more complete understanding of us and this offering, you should read and carefully consider the entire prospectus, including the more detailed information set forth under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes. Some of the statements in this prospectus are forward-looking statements. See “Forward-Looking Statements.”

Our Purpose

Our purpose is to deliver the world’s leading Talent Cloud to empower organizations everywhere to hire the best talent and build their winning workforce.

Overview

We believe that the right talent, on the right team, transforms businesses, communities, and the world. Talent enables organizations to out-innovate competition, provide customer experiences that create brand ambassadors, and serve their local and global communities. We believe Talent Powers TransformationTM.

No asset matters more to a business than its people. We believe an integrated end-to-end software solution to attract talent, engage candidates, hire employees, and advance careers is more critical now than ever before. The iCIMS Talent Cloud enables the world’s best brands to build the pipeline that matters the most—their talent pipeline—and innovate, differentiate, and succeed through their talent.

 

LOGO

The accelerating pace of digital transformation and the increasing importance of talent as an essential driver of business performance, have caused businesses and organizations everywhere to not only rethink their approaches to finding, developing, and retaining talent, but to also rethink their very definition of a workforce.

We recognize the transformational power that funnel-based software technologies have had in areas such as Sales and Marketing, and believe that the same level of impact has been brought to talent with the iCIMS Talent Cloud.


 

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As an established leader in talent acquisition software, iCIMS is at the forefront of an innovative breed of talent platform for the new, global talent economy. The iCIMS Talent Cloud is a talent-focused software platform for growth, designed to empower organizations everywhere to build their talent pipeline and winning workforce.

We drive talent transformation at scale for many of the world’s leading companies and brands, including over 25% of the Fortune 500 companies in 2020. Such companies accounted for less than 20% of our revenue in 2020. During 2020 our customers managed approximately 64 million applicants and made more than 3.8 million hires through the iCIMS Talent Cloud. We have developed our software platform to be flexible and scalable to address a diverse range of customer needs across industries and geographies. As of June 30, 2021, we supported 4,198 customers in over 200 countries and territories, including leading enterprises such as CommonSpirit Health, Dish Network, Emory University and Emory Healthcare, Enterprise Holdings, Finastra, Keurig Dr Pepper, Mercy Health, Sprouts Farmers Market, Uber and Wipro.

Since our inception, we have focused on building iCIMS with a combination of strong growth and profitability. As of June 30, 2021 and 2020, our annual recurring revenue, or ARR, was $299.5 million and $258.7 million, respectively, representing a 15.8% year-over-year growth rate. As of December 31, 2020 and 2019, our ARR was $284.6 million and $246.1 million, respectively, representing a 15.6% year-over-year growth rate. See “—Key Business Metrics” for a description and limitations of ARR. Our revenues for the six months ended June 30, 2021 were $138.4 million as compared to $124.5 million for the same period a year ago, representing a 11.1% year-over-year growth rate. Our revenues were $251.3 million for the year ended December 31, 2020 as compared to $214.2 million for the year ended December 31, 2019, representing a 17.3% year-over-year growth rate. For the six months ended June 30, 2021 and 2020, we generated a net loss of $(31.0 million) and $(20.9 million), representing a 48.4% increase during this period, and we generated Adjusted EBITDA of $17.2 million and $24.0 million, respectively, representing a 28.4% decrease during this period. In 2020 and 2019, we generated a net loss of $(48.2) million and $(59.1) million, respectively, representing a 18.5% decrease during this period, and we generated Adjusted EBITDA of $47.7 million and $21.3 million, respectively, representing a 123.9% increase during this period. See “Summary Consolidated Financial Data—Non-GAAP Financial Measures” for a definition of Adjusted EBITDA and a reconciliation to its most directly comparable GAAP financial measure.

Why It Matters

The acceleration of the talent economy, which recognizes talent is no longer a mere business expense, but an asset to be invested in and measured, has forever changed the way businesses compete and the way they view talent. The ultimate differentiator between competitors is their talent.

We believe that winning in the talent economy means organizations must find, acquire, develop, and retain diverse, digitally skilled, mission-driven talent at scale. This means businesses must now cultivate relationships with candidates and talent for employment the same way they have worked for decades to cultivate relationships with their prospects and customers. For businesses, this means consistently attracting, engaging, hiring, and advancing the absolute best people, over and over again, thousands of times per year. However, it has never been more challenging to do this, and the vast majority of organizations are ill-prepared.

COVID-19 accelerated the talent transformation, forcing organizations to reimagine the way they attract, engage, hire, and advance talent, and increasing the need for workforce agility. This has exposed outdated human resources (HR) technology that was never designed for the talent economy.

For example, according to Korn Ferry, a global skills shortage is forecasted to leave a gap of more than 85 million unfilled jobs and nearly $8.5 trillion in unrealized revenue by 2030.1 Data from the Future of Jobs Survey from the World Economic Forum, suggests that on average 15% of a company’s workforce is at risk of

 

1 

Korn Ferry’s Global Talent Crunch.


 

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disruption on the horizon up to 2025, and on average 6% of workers are expected to be fully displaced.2 Businesses also continue to rebalance machines, artificial intelligence (AI), and human talent at work—across full-time, gig, and contingent hiring—further punctuating the need to re-skill talent for new opportunities. Businesses are also increasingly identifying diversity, equity and inclusion as an organizational imperative. While business leaders and HR organizations are rethinking their approaches, yesterday’s tools are not equipped to keep up. The traditional HR tools of yesterday were built as rigid tools for administration. Today, there is nothing traditional about how organizations need to attract, engage, hire and advance talent.

These outdated HR tools were not designed for the market and organizational dynamics of the talent economy, which requires more adaptive, intelligent, and talent-centric experiences for how organizations build their winning workforce. Organizations that fail to address these risks and transform their relationship with talent will struggle to win in a post-COVID digital world.

iCIMS is answering the call with a new breed of platform—delivering the innovation that drives critical talent transformation that is key to winning in the talent economy. The iCIMS Talent Cloud is a market-leading, mission-critical software platform that is designed to transform how organizations attract, engage, hire, and advance talent, helping such organizations build their winning workforce in the talent economy.

Unlike yesterday’s recruiting tools, we believe that iCIMS Talent Cloud is a future-fit software platform of growth for our customers, focused on interactions between talent and organizational hiring teams. We think that legacy, rigid “one size fits all” approaches will be exchanged for dynamic, “consumer-level” experiences, which we define as personalized and delivered how and where candidates, hiring managers, and recruiters require.

Industry Trends That Accelerate Our Opportunity

CEOs know that having the right talent is mission critical

Hiring and retaining the best talent is a top priority for every company. CEOs of the largest organizations agree on the importance of building the best teams and its direct correlation with driving successful results for their companies. Companies understand that talent is not a “resource,” but rather a key competitive advantage. Companies of all sizes and across every industry are in continuous search for top talent and face increasing challenges and complexities for attracting, engaging, hiring, and advancing talent.

Hiring at scale is very complex

Organizations need to hire different types of talent (e.g., full-time, part-time, contingent, seasonal), with a wide range of skills, and across multiple geographies. They need to do this in a way that is engaging, automated, scalable, and effective to meet their business needs. However, we believe many organizations today are navigating this complex environment with outdated, cumbersome, and unintegrated tech stacks that distract recruiters and hiring managers from their most important priority—building their winning teams.

Market forces are accelerating talent transformation

Changing workforce demographics, a widening global skills shortage, increased importance of diversity and inclusion, and the ability to hire and work from anywhere have further accentuated the challenges of building winning teams. Furthermore, the COVID-19 pandemic accelerated the talent transformation and need for workforce agility, exposing outdated HR technology. We believe an integrated end-to-end software solution to attract talent, engage candidates, hire employees, and advance careers is more critical now than ever before.

 

2 

World Economic Forum, The Future of Jobs Report 2020.


 

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Today’s candidates, HR teams, and hiring managers expect consumer-level experiences

According to the U.S. Bureau of Labor Statistics, by 2025, more than half of the US workforce will be comprised of Gen Z and Millennials.3 These are digital-native generations that grew up with technology and are accustomed to establishing personal and professional relationships through social media and using online reviews to choose the brands they consume or the companies they want to join. We believe legacy recruiting approaches based on paper job descriptions and written resumes are quickly fading away. Recruiting processes that engage candidates with static and stale communications, require manual and repetitive tasks, and rely on rigid systems and disparate tech stacks are therefore insufficient. Today’s candidates need to be engaged through digital channels, with consumer-level experiences, and in a personalized way that builds authentic relationships.

Traditional talent solutions are outdated

Legacy talent solutions were built for a world where paper job descriptions and resumes were the main tools used to hire candidates. As enterprises have undergone digital transformations, the tools required to build a winning workforce have transformed as well, leaving traditional talent solutions largely obsolete. We believe that traditional talent solutions are characterized by the following key limitations:

 

   

Lack of breadth. Traditional solutions include homegrown or point solutions that are siloed, antiquated, and narrow in scope.

 

   

Inability to scale. Traditional solutions were not built for large enterprises and fail to scale across multiple geographies, divisions, or use cases.

 

   

Lack of talent intelligence. Traditional solutions lack the intelligence to identify potential, and fail at relating similar, but not exact, skills or experiences to relevant jobs. This can be the difference between identifying the perfect candidates and letting them fall through the cracks, contributing to the growing talent gap.

 

   

Inequitable. Traditional solutions rely heavily on human reviews and evaluations that are likely to result in bias, impeding organizations’ strides towards diversity and inclusion.

 

   

Poor user experience. Traditional solutions were not designed to be consumer-focused. These solutions were built with a “systems of record” mentality, which is exhibited through antiquated user interfaces.

Organizations need a new breed of talent platform for the new, global talent economy

Organizations are looking for next-generation talent software solutions that enable them to overcome the complexities of hiring at scale in the current world. These organizations understand that talent is the key driver of business success. Therefore, having the right talent software is a top-line driver, not a back-office expense.

Market Opportunity

We believe that the critical importance of having the right talent, further fueled by market forces, sets the stage for sustainable growth in our space. The market for talent-focused solutions that solve hiring needs at-scale is large and growing, creating a significant growth opportunity for iCIMS. According to Information Services Group, Inc., or ISG, the global total addressable market for Talent Software is estimated to be $10.1 billion in 2021 and is expected to grow at a compound annual growth rate of 13.5% to $16.8 billion in 2025.

This market includes candidate relationship management, applicant tracking systems, employee onboarding software, contingent labor management, assessment software, and point solutions (including talent analytics, video interviewing software, and recruiting chatbots).

 

3 

U.S. Bureau of Labor Statistics.


 

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We believe our potential market opportunity could expand further as we innovate new solutions which provide value to enterprises around the world.

The iCIMS Talent Cloud

iCIMS has been recognized as an established leader in talent acquisition software and has led the market in transforming the ways in which companies build their winning workforce. Our value is simple: we make hiring at scale possible to enable talent driven transformation for our customers. As of June 30, 2021, we supported 4,198 customers in over 200 countries and territories. In 2020, approximately 2.4 million recruiters and team leaders worldwide utilized the iCIMS Talent Cloud to process approximately 120 million applications to build their most important pipeline, the talent pipeline.

The iCIMS Talent Cloud is a system of engagement designed to replace yesterday’s systems of administration with a future-fit software platform for growth that is designed to allow companies of all sizes and industries to quickly and easily build winning teams that drive business results. We think that legacy, rigid “one size fits all” approaches will be exchanged for dynamic, “consumer-level” experiences, personalized, and delivered how and where candidates, hiring managers, and recruiters require.

 

LOGO

Core pillars of the iCIMS Talent Cloud

We empower companies to build their winning workforce with the iCIMS Talent Cloud. The iCIMS Talent Cloud is a mission-critical software system that consists of a portfolio of applications, platforms and ecosystems built around candidate data, and is designed to enable companies to effectively attract, engage, hire and advance talent at scale. The core pillars of the iCIMS Talent Cloud are:

 

   

Applications: Full portfolio of business applications for recruiters and hiring managers to attract, engage, hire, and advance the best talent.

 

   

Platform: An open platform, with an extensible application programming interface (API), that unites talent data into dynamic candidate data profiles, creates seamless workflows across the iCIMS Talent Cloud and third-party software, and leverages our AI-capabilities and analytics across the entire set of talent data.


 

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Ecosystem: iCIMS has built an ecosystem of third-party products and service providers that build applications that integrate with our platform and offer consulting and other professional services to our customers.

At the center of the iCIMS Talent Cloud is the individual candidate. Underpinning the iCIMS Talent Cloud is a deep candidate data layer that aggregates talent information from across the iCIMS Talent Cloud and customers’ multiple talent systems into a single individual profile with enriched data around skills, competencies, and potential—candidate data profiles.

We recognize that talent is the core differentiator in successful businesses. Our end-to-end software platform uniquely helps companies of all sizes and across all industries address the challenge of building their winning workforce in the following ways:

 

   

Better business performance: Enable organizations to hire at scale and fill open positions with the best talent, which is mission-critical for organizations and can represent the difference between business success or failure.

 

   

Holistic talent experience: The iCIMS Talent Cloud delivers simple, intuitive, and streamlined interfaces for recruiters, dynamic and relevant content for candidates, and robust frameworks for third party developers.

 

   

Flexible configuration: Our customers can configure our platform to meet the diverse needs of their business.

 

   

Integrated and embedded across the talent ecosystem: More than 900 different third-party products have been integrated with the iCIMS Talent Cloud and approximately 300 of these are listed in our marketplace, enabling our customers to always pick the best tools for the job through our platform.

 

   

Simple to use: Designed from the ground up to deliver a consumer-level experience, the iCIMS Talent Cloud is designed to enable businesses to attract, engage, hire and advance talent.

We believe the right talent on the right team transforms businesses for the better. Attracting the best talent to work for your company is a front office responsibility and is the most important pipeline your company can build. The iCIMS Talent Cloud drives the following benefits to help hire the best people:

 

   

Expanded talent pipeline: By replacing generic bolt-on human resources information systems (HRIS), with an end-to-end software platform designed with talent acquisition in mind, recruiters are able to increase their talent pipeline, expanding the quality and diversity of candidates.

 

   

Superior candidate experience: Companies that use the iCIMS Talent Cloud deliver a simpler, faster and better experience for their own employees and the candidates that interface with them.

Why We Win

We believe that our market leadership position is based on the following key strengths:

Leading end-to-end software platform: We have designed and built a world-class, end-to-end software platform designed to transform how businesses attract, engage, hire and advance talent at scale. We believe our customers choose our platform over others because of its powerful, integrated and easy-to-use applications.

Relentless focus on the talent experience: We designed the iCIMS Talent Cloud with user experiences for candidates, recruiters and hiring managers in mind. The best companies are hyper-conscious of how their brand is perceived and this is especially true when trying to attract the right talent to work for them.

Brand recognition and reputation: iCIMS has enabled tens of millions of people to find their next job since we began in 2000. iCIMS has been recognized as a Talent Acquisition vendor in industry reports including the


 

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2020 Gartner Market Guide for Talent Acquisition Applications.4 Also, iCIMS has won numerous awards and has been named a leader on multiple occasions, including IDC’s Marketscape on Talent Acquisition report.5

Innovation leader: iCIMS has been recognized as an established leader in talent acquisition software and has led the market in transforming the ways in which companies build their winning workforce. In 2020 alone, we launched four new solutions, each focused on helping our customers stay ahead of the game as digital transformation accelerated in the wake of the pandemic.

Robust partnerships and ecosystem: We have built a large and growing ecosystem around our platform and company, with approximately 700 partners globally, including integrated software vendors, marketing agencies, and consultants among others. We have built what we believe is the largest engaged audience in our industry, which now comprises more than two million active professionals that use the iCIMS Talent Cloud to build winning workforces for their organizations.

Secure, scalable and extensible: Being entrusted with people’s career choices is something we take very seriously. We are committed to the security and compliance of customers’ and individuals’ data, leveraging strong encryption methods for data at rest and in transit. A single multi-tenant code base with microservices architecture ensures scalability of our solutions for all of our customers.

Industry agnostic and relevant for every business: Talent enables businesses to out-innovate the competition and achieve market leadership in any industry. As such, our platform is designed to serve any industry and we have expertise in healthcare and life sciences, financial services, technology, business services, retail, transportation, and manufacturing.

Our Strategy for Growth

We intend to drive the growth of our business by executing on the following strategies:

Drive new customer acquisition

Despite our success to date, we believe the market for dedicated talent acquisition software platforms remains largely underpenetrated. As a result, there is a vast opportunity to take our core capabilities to many more enterprise and commercial businesses around the world. We estimate that our total customer base of 4,198 customers represents less than 10% of the estimated enterprise and commercial businesses worldwide located in our current core target market.6

Focus on large customers

Our go-to-market model is primarily based on the following types of customers: enterprises (companies with 2,500 employees or more) and commercial businesses (companies with up to 2,499 employees). Our focus on landing primarily enterprise customers that pay greater than $100,000 in ARR has been a key driver to our success, growing at 32% compound annual growth rate from 2017 to 2020, representing approximately 65% of total ARR as of December 31, 2020. Furthermore, the compound annual growth rate from 2017 to 2020 for customers with more than $250,000, $500,000, and $1 million in ARR was 44%, 57%, and 70%, respectively. Customers with revenues greater than $100,000 accounted for 63% of the total revenues in 2020 and grew 39% compounded annually from 2017 to 2020. Furthermore, the compound annual growth rate from 2017 to 2020 for customers with revenues greater than $250,000, $500,000, and $1 million was 50%, 69%, and 101%, respectively.

 

4 

Gartner Research.

5 

IDC Marketscape—Worldwide Modern Talent Acquisition Suites for Large Enterprises, 2020 Vendor Assessment.

6 

Based on the number of businesses with more than 500 employees as estimated by the United States Census Bureau for the U.S. market & S&P Capital IQ database for businesses outside the U.S.


 

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Deliver product innovation

Businesses are increasingly realizing the value of having an end-to-end integrated talent acquisition and service platform. We believe we are well positioned to capitalize on this opportunity by introducing new products and applications to extend the functionality of our software platform. Insights from our growing customer base provide for a rich roadmap of product expansion.

Capitalize on significant cross-sell opportunity

A company’s first exposure to iCIMS is often through our applicant tracking system to manage the hiring process. Once a company begins to realize the benefits of our platform, we often have an opportunity to expand into other use cases—going beyond hiring into employer branding, employee on-boarding, candidate relationship management, and other applications—thereby expanding our reach and stickiness with a customer. As of December 31, 2020, only 29% of our customers had adopted 3 or more products within our portfolio and we believe there is strong potential to expand within our existing customer base.

Penetrate underserved global market

As of June 30, 2021, we derived 9.0% (or $27.1 million) of our ARR from customers outside the United States, up from 6.0% (or $15.5 million) at June 30, 2020, representing more than 74% year-over-year growth. As of year-end 2020, we derived 8.9% (or $25.5 million) of our ARR from customers outside the United States, up from 6.2% (or $15.1 million) at December 31, 2019, representing more than 65% year over year growth. In addition, for the six months ended June 30, 2021, we derived 8.1% (or $11.2 million) of our revenue from customers outside the United States, up from 5.0% (or $6.2 million) for the same period in 2020, representing more than 78% year-over-year growth. In 2020, we derived 5.0% (or $12.5 million) of our revenue from customers outside the United States, up from $10.9 million, or 5.1%, of our revenue, in 2019, representing more than 14% year over year growth. We believe there is a substantial opportunity for us to increase our international customer base by leveraging and expanding investments in our technology, direct sales force, and strategic partnerships around the world.

Drive strategic M&A

We plan to selectively pursue acquisitions of complementary businesses, technologies and teams that would allow us to add new features and functionalities to our software platform, accelerate the pace of our innovation and expand into new geographies, industry verticals, and hiring types. We have demonstrated that we can successfully integrate and accelerate the growth of our acquisition targets. For example, TextRecruit, which was acquired in 2018 has seen ARR grow 8x largely from adoption of TextRecruit products into our installed customer base which now boasts over 50% adoption by our enterprise customers as of December 31, 2020. Jibe, which was acquired in 2019, has seen ARR grow more than 65% as of December 31, 2020 through our cross-selling motion since the acquisition.

Risk Factor Summary

There are a number of risks related to our business, this offering and our common stock that you should consider before you decide to participate in this offering. You should carefully consider all the information presented in the section entitled “Risk Factors” in this prospectus. Some of the principal risks related to our business include the following:

 

   

the effects of the COVID-19 pandemic have affected how we and our customers are operating our businesses, and the duration and extent to which this lasts will impact our future;

 

   

we face significant competition which may adversely affect our ability to add new customers, retain existing customers and grow our business;


 

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our future revenues and operating results will be harmed if we are unable to develop new products, acquire new customers or renew and expand sales with our existing customers;

 

   

if for any reason we are not able to enhance and create new features, keep pace with technological developments or respond to future disruptive technologies, our business may suffer;

 

   

adverse economic conditions generally, and a decline in market share for enterprise cloud computing specifically, could limit our ability to grow our business and negatively affect our operating results;

 

   

a substantial majority of our subscription revenue is derived solely from our iCIMS Talent Cloud products;

 

   

defects in our solutions or breaches of warranties could affect our reputation, result in significant costs to us and impair our ability to sell our products and related services;

 

   

if we fail to maintain and evolve our purpose-driven culture of innovation, curiosity, passion, customer commitment and employee empathy, our business will be harmed;

 

   

if we fail to maintain, enhance or protect our brand, our ability to expand our customer base will be impaired and our business, financial condition and results of operations may suffer;

 

   

forecasts of our business growth, profitability, market growth and market opportunity may prove to be inaccurate, and even if the markets in which we compete achieve the forecasted growth, we cannot assure our business will grow at similar rates, or at all;

 

   

we have a history of losses, and we cannot be certain that we will achieve or sustain profitability;

 

   

we are subject to seasonal sales and customer growth fluctuations, the volatility of which may not be immediately reflected in our financial position and results of operations;

 

   

our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our business;

 

   

due to our revenue recognition practices, a significant downturn in our business may not be immediately reflected in our operating results, and any changes to applicable accounting rules could further affect our reported operating results;

 

   

future acquisitions could harm our business and operating results;

 

   

unfavorable laws, regulations, interpretive positions or standards governing new and evolving technologies we use could result in significant costs and compliance challenges;

 

   

evolutions in internet regulations, infrastructure and accessibility may create interruptions in our solutions, thereby increasing our expenditures and causing customer dissatisfaction;

 

   

compliance with or changes in U.S. or foreign laws, rules and regulations concerning data privacy and data localization could create operational challenges and increase potential liabilities;

 

   

a breach or compromise of the security measures we rely on could result in unauthorized access to ours or our customers’ data, materially harming our reputation, business and results of operations;

 

   

any future litigation against us could damage our reputation and be costly and time-consuming to defend;

 

   

failure to obtain, maintain, protect and enforce our proprietary technology and intellectual property rights and the failure to comply with the terms of the open source software licenses that we utilize, may jeopardize our ability to protect our proprietary software and subject our business to litigation and could substantially harm our business, operating results and financial condition;

 

   

if we fail to retain key employees and recruit qualified personnel, our business could be harmed;

 

   

our business depends substantially on the level of our customer satisfaction and specifically on customers renewing their agreements, purchasing additional products, or adding additional users;


 

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any failure to offer high-quality support could cause our business and reputation to suffer;

 

   

our growth depends in part on the success of our strategic relationships with third parties;

 

   

our services, solutions and growth depend on our ability to effectively integrate our applications with a variety of third-party technologies, as well as on our ability to successfully use the underlying third-party computer hardware and software themselves;

 

   

we face risk related to catastrophes, disruptions, capacity limitations or interference with our use of data centers operated by third-party providers;

 

   

interruptions or performance problems associated with our technology or infrastructure could result in delays or outages of our services;

 

   

we have experienced rapid growth, we may not be able to manage our growth effectively;

 

   

we are, and expect to continue to be, dependent upon our principal asset, iCIMS, Inc.;

 

   

our international sales and presence expose us to risks inherent in global operations;

 

   

changes in domestic and foreign tax laws or regulations that are applied adversely to us may increase our tax liability; and

 

   

the other factors set forth under “Risk Factors.”

These and other risks are more fully described in the section entitled “Risk Factors” in this prospectus. If any of these risks actually occurs, our business, financial condition, results of operations, cash flows and prospects could be materially and adversely affected. As a result, you could lose all or part of your investment in our common stock.

Our Majority Stockholder

We have a valuable relationship with our Majority Stockholder, Vista. In September 2018, Vista acquired us for the purpose of acquiring all of the capital stock of iCIMS, Inc. We refer to this transaction as the “Vista Acquisition.” In connection with the Vista Acquisition, we are party to a director nomination agreement with Vista that provides Vista the right to designate nominees to our board of directors, or our Board, subject to certain conditions. In addition, in connection with this offering, we intend to enter into a director nomination agreement, or the Director Nomination Agreement. The Director Nomination Agreement will provide Vista the right to designate: (i) all of the nominees for election to our Board for so long as Vista beneficially owns 40% or more of the total number of shares of our common stock it owns as of the date of this offering; (ii) a number of directors (rounded up to the nearest whole number) equal to 40% of the total directors for so long as Vista beneficially owns at least 30% and less than 40% of the total number of shares of our common stock it owns as of the date of this offering; (iii) a number of directors (rounded up to the nearest whole number) equal to 30% of the total directors for so long as Vista beneficially owns at least 20% and less than 30% of the total number of shares of our common stock it owns as of the date of this offering; (iv) a number of directors (rounded up to the nearest whole number) equal to 20% of the total directors for so long as Vista beneficially owns at least 10% and less than 20% of the total number of shares of our common stock it owns as of the date of this offering; and (v) one director for so long as Vista beneficially owns at least 5% and less than 10% of the total number of shares of our common stock it owns as of the date of this offering. The Director Nomination Agreement will also provide that Vista may assign such right to a Vista affiliate. The Director Nomination Agreement will prohibit us from increasing or decreasing the size of our Board without the prior written consent of Vista. See “Certain Relationships and Related Party Transactions—Related Party Transactions—Director Nomination Agreement” for more details with respect to the Director Nomination Agreement. In addition, our amended and restated bylaws will provide that Vista has the right to designate the Chairman of the Board for so long as Vista beneficially owns at least 30% or more of the voting power.


 

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We also intend to enter into a registration rights agreement, or the Registration Rights Agreement, pursuant to which (i) Vista will be entitled to request that we register Vista’s shares on a long-form or short-form registration statement on one or more occasions in the future, which registrations may be “shelf registrations” and (ii) Vista will be entitled to participate in certain of our registered offerings, subject to the restrictions in the Registration Rights Agreement. See “Certain Relationships and Related Party Transactions—Related Party Transactions—Registration Rights Agreement” for more details with respect to the Registration Rights Agreement.

Vista is a leading global investment firm with more than $77 billion in assets under management as of March 31, 2021. The firm exclusively invests in enterprise software, data and technology enabled organizations across private equity, permanent capital, credit and public equity strategies, bringing an approach that prioritizes creating enduring market value for the benefit of its global ecosystem of investors, companies, customers and employees. Vista’s investments are anchored by a sizable long-term capital base, experience in structuring technology-oriented transactions and proven, flexible management techniques that drive sustainable growth. Vista believes the transformative power of technology is the key to an even better future—a healthier planet, a smarter economy, a diverse and inclusive community and a broader path to prosperity.

General Corporate Information

iCIMS was founded in 2000. We were formed in 2018 as Cersei Topco, LLC, a Delaware limited liability company, in connection with the Vista Acquisition. Effective March 5, 2021, the name of our company was changed to iCIMS Holding LLC. Our principal executive offices are located at 101 Crawfords Corner Road, Suite 3-100, Holmdel, NJ 07733. Our telephone number is (888) 279-3992. Our website address is www.icims.com. The information contained on, or that can be accessed through, our website is not incorporated by reference into this prospectus, and you should not consider any information contained on, or that can be accessed through, our website as part of this prospectus or in deciding whether to purchase our common stock. We are a holding company and all of our business operations are conducted through our subsidiaries.

This prospectus includes our trademarks and service marks such as “iCIMS,” “Hire Expectations,” “Recruiting Intelligence,” and “Recruiting Analytics,” which are protected under applicable intellectual property laws and are the property of us or our subsidiaries. This prospectus also contains trademarks, service marks, trade names and copyrights of other companies, such as “WhatsApp,” “AWS,” and “Microsoft Azure” which are the property of their respective owners. Solely for convenience, trademarks and trade names referred to in this prospectus may appear without the ® or symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names.

Corporate Conversion

We currently operate as a Delaware limited liability company under the name iCIMS Holding LLC, which directly and indirectly holds all of the equity interests in our operating subsidiaries. Immediately after the effectiveness of the registration statement of which this prospectus forms a part, iCIMS Holding LLC will convert into a Delaware corporation pursuant to a statutory conversion and will change its name to iCIMS Holding Corp. In this prospectus, we refer to all of the transactions related to our conversion into a corporation as the Corporate Conversion. Following the Corporate Conversion, we will remain a holding company and will continue to conduct our business through our operating subsidiaries. For more information, see the section titled “Corporate Conversion.”

Following the completion of the Corporate Conversion and prior to the closing of this offering, Vista will own approximately         % of iCIMS Holding Corp.’s common stock. iCIMS Holding Corp. will have several wholly owned direct and indirect subsidiaries that are legacies from the corporate structure that existed prior to this offering. See the section titled “Corporate Conversion.”


 

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The diagram below depicts our expected organizational structure immediately following completion of the Corporate Conversion and this offering. This diagram is provided for illustrative purposes only and does not purport to represent all legal entities owned or controlled by us, or owning a beneficial interest in us.

iCIMS Holding Corp. Organizational Structure

Following the Corporate Conversion and Offering

 

LOGO

 

(1)

The Vista Funds will possess voting and dispositive power over         % of the equity of iCIMS Holding Corp. See “Principal Stockholders” for additional information about our principal stockholders.

(2)

The Susquehanna Funds (as defined herein) will possess voting and dispositive power over         % of the equity of iCIMS Holding Corp. See “Principal Stockholders” for additional information about our principal stockholders.

(3)

Management and directors will possess voting and dispositive power over         % of the equity of iCIMS Holding Corp. See “Principal Stockholders” for additional information about our principal stockholders.

(4)

Public stockholders will possess voting and dispositive power over         % of the equity of iCIMS Holding Corp.

(5)

iCIMS India Private Limited is jointly held by iCIMS, Inc. and iCIMS International, LLC.

Status as a Controlled Company

Because Vista will beneficially own                  shares of our common stock (or                  shares of our common stock if the underwriters’ option to purchase additional shares is exercised in full), representing approximately         % of the voting power of our company following the completion of this offering (or         % if


 

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the underwriters’ option to purchase additional shares is exercised in full), we will be a “controlled company” as of the completion of the offering under the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, and the rules of the NASDAQ. As a controlled company, we will not be required to have a majority of independent directors or to form an independent compensation committee or nominating and corporate governance committee. As a controlled company, we will remain subject to the rules of the Sarbanes-Oxley Act that require us to have an audit committee composed entirely of independent directors. Under these rules, we must have at least one independent director on our audit committee by the date our common stock is listed on the NASDAQ Global Select Market, at least two independent directors on our audit committee within 90 days of the listing date, and at least three directors, all of whom must be independent, on our audit committee within one year of the listing date. We expect to have three independent directors upon the closing of this offering, all of whom will qualify as independent for audit committee purposes.

If at any time we cease to be a controlled company, we will take all action necessary to comply with the Sarbanes-Oxley Act and the rules of the NASDAQ, including by having a majority of independent directors and ensuring we have a compensation committee and a nominating and corporate governance committee, each composed entirely of independent directors, subject to a permitted “phase-in” period. See the section titled “Management—Status as a Controlled Company.”

Implications of Being an Emerging Growth Company

We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. We will remain an emerging growth company until the earliest of (1) the last day of the fiscal year following the fifth anniversary of the completion of this offering, (2) the last day of the fiscal year in which we have total annual gross revenue of at least $1.07 billion, (3) the date on which we are deemed to be a large accelerated filer (this means the market value of common stock that is held by non-affiliates exceeds $700.0 million as of the end of the second quarter of that fiscal year), or (4) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

An emerging growth company may take advantage of reduced reporting requirements that are otherwise applicable to public companies. These provisions include, but are not limited to:

 

   

not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;

 

   

reduced disclosure obligations regarding executive compensation in periodic reports, proxy statements and registration statements; and

 

   

exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

We have elected to take advantage of certain of the reduced disclosure obligations regarding financial statements (such as not being required to provide audited financial statements for the year ended December 31, 2018) in this prospectus and executive compensation in this prospectus and expect to elect to take advantage of other reduced burdens in future filings. As a result, the information that we provide to our shareholders may be different than you might receive from other public reporting companies in which you hold equity interests.

The JOBS Act also permits an emerging growth company like us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We intend to take advantage of the longer phase-in periods for the adoption of new or revised financial accounting standards under the JOBS Act until we are no longer an emerging growth company. Our election to use the phase-in periods permitted by this election may make it difficult to compare our financial statements to those of non-emerging growth


 

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companies and other emerging growth companies that have opted out of the longer phase-in periods permitted under the JOBS Act and who will comply with new or revised financial accounting standards. If we were to subsequently elect instead to comply with public company effective dates, such election would be irrevocable pursuant to the JOBS Act. As a result, our operating results and consolidated financial statements may not be comparable to the operating results and financial statements of other companies who have adopted the new or revised accounting standards. It is possible that some investors will find our common stock less attractive as a result, which may result in a less active trading market for our common stock and higher volatility in our stock price.


 

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THE OFFERING

 

Common stock offered

                   shares.

Option to purchase additional shares

                   shares.

Common stock to be outstanding after this offering

  


                shares (or                shares if the underwriters’ option to purchase additional shares is exercised in full).

Use of proceeds

  

We estimate that our net proceeds from this offering will be approximately $             million, or approximately $             million if the underwriters’ option to purchase additional shares is exercised in full, assuming an initial public offering price of $             per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, and after deducting the underwriting discount and estimated offering expenses payable by us.

 

The principal purposes of this offering are to increase our capitalization and financial flexibility, create a public market for our common stock and enable access to the public equity markets for us and our shareholders. We expect to use approximately $             million of the net proceeds of this offering (or $             million of the net proceeds of this offering if the underwriters exercise their option to purchase additional shares in full) to repay outstanding borrowings under our senior secured credit agreement, dated September 12, 2018, as amended, and comprised of the $535.0 million term loan facility, or the Term Loan Facility, and the $25.0 million revolving credit facility, or the Revolving Credit Facility, in each case with a maturity date of September 12, 2024 and the remainder of such net proceeds will be used for general corporate purposes. At this time, other than repayment of indebtedness under such senior secured credit agreement, or the Credit Agreement, we have not specifically identified a large single use for which we intend to use the net proceeds and, accordingly, we are not able to allocate the net proceeds among any of these potential uses in light of the variety of factors that will impact how such net proceeds are ultimately utilized by us. See “Use of Proceeds” for additional information.

Directed share program

  

At our request, the underwriters have reserved up to             shares of common stock, or %     of the shares offered by us pursuant to this prospectus for sale, at


 

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   the initial public offering price, through a directed share program, to our directors, executive officers and certain individuals associated with Vista. If purchased by these persons, these shares will not be subject to a 180-day lock-up restriction, except to the extent that the purchasers of such shares are otherwise subject to lock-up or market stand-off agreements as a result of their relationships with us. The number of shares of common stock available for sale to the general public will be reduced by the number of reserved shares sold to these persons and entities. Any reserved shares of our common stock that are not so purchased will be offered by the underwriters to the general public on the same terms as the other shares of our common stock offered by this prospectus. See the section titled “Underwriters—Directed Share Program.”
Controlled company    After this offering, assuming an offering size as set forth in this section, the Vista Funds will own approximately         % of our common stock (or         % of our common stock if the underwriters’ option to purchase additional shares is exercised in full). As a result, we expect to be a controlled company within the meaning of the corporate governance standards of the NASDAQ. See “Management—Corporate Governance—Controlled Company Status.”

Risk factors

   Investing in our common stock involves a high degree of risk. See “Risk Factors” included elsewhere in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our common stock.

Proposed trading symbol

   “TLNT.”

The number of shares of common stock to be outstanding following this offering is based on                  shares of common stock outstanding as of                 , 2021 after giving effect to the Corporate Conversion, and excludes:

 

   

                 million shares of common stock reserved for future issuance under our 2021 Omnibus Incentive Plan, or the 2021 Plan, and the 2021 Employee Stock Purchase Plan, or the 2021 ESPP, which will be adopted in connection with this offering (exclusive of shares reserved in respect of the IPO Grants, as defined below);

 

   

                shares of common stock issuable upon vesting and settlement of restricted stock units, or RSUs, to be issued upon the closing of this offering to certain of our executive and non-executive employees, or the IPO RSU Grants, assuming an initial public offering price of $                 per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus. The IPO RSU Grants vest 25% each year and become fully vested after four years of service;

 

   

                 shares of common stock issuable upon vesting and settlement of stock options to be issued upon the closing of this offering to certain executives, or the IPO Option Grants, assuming an initial


 

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public offering price of $                 per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus. The options vest 25% after the first year, and in equal installments quarterly thereafter over the next three years, fully vesting after four years of service; and

 

   

                 shares of common stock issuable upon vesting and settlement of RSUs to be issued upon the closing of this offering to N. Steven Lucas, or the CEO RSU Grant (and, together with the IPO RSU Grants and the IPO Option Grants, the IPO Grants), assuming an initial public offering price of $                 per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus. The CEO RSU Grant vests partially over time and partially based on performance as follows: (a)                  of the RSUs vest over a period of four years, with 25% of such RSUs vesting on March 2, 2021 and the remaining 75% vesting quarterly thereafter; (b)                  of the RSUs vest on the occurrence of a Sale of the Company (defined in the iCIMS Holding LLC limited liability company agreement as the first to occur of a transaction or series of related or substantially concurrent transactions resulting in (i) the sale or transfer by the Company or its subsidiaries of all or substantially all (as defined under Delaware law) of their assets on a consolidated basis to a third party or a group of third parties acting in concert and (ii) (A) any consolidation, merger or reorganization of the Company with or into any other entity or entities or (B) any sale or transfer to any third party or group of third parties acting in concert of the Company’s units by the holders thereof, as a result of which any person or group (other than any member of Vista Equity Partners Management, LLC, it affiliates and any of their respective managed investment funds and portfolio companies (but excluding the Company and its subsidiaries), and their respective partners,members, directors, managers, employees, stockholders, agents, any successor by operation of law (including by merger or otherwise) of any such person, and any entity that acquires all or substantially all of the assets of any such person in a single transaction or series of related transactions) obtains possession of voting power (under ordinary circumstances) to elect a majority of the surviving entity’s board of managers (or equivalent governing body)) if certain specified investor return thresholds are satisfied, in each case, subject to Mr. Lucas’ continued employment through each applicable vesting date; and (c)                  of the RSUs vest if the common stock of the Company trades above $                 for                  consecutive trading days.

Unless otherwise indicated, all information in this prospectus assumes:

 

   

the completion of the transactions described in the section titled “Corporate Conversion”;

 

   

the filing of our amended and restated certificate of incorporation and the adoption of our amended and restated bylaws, each in connection with the closing of this offering;

 

   

no exercise by the underwriters of their option to purchase up to                additional shares of common stock; and

 

   

no purchases of shares of our common stock through our directed share program described in the section titled “Underwriters—Directed Share Program” herein.

SUMMARY CONSOLIDATED FINANCIAL DATA

The following tables summarize our consolidated financial data. We derived the summary consolidated statements of operations data for the six months ended June 30, 2021 and 2020 and consolidated balance sheet data as of June 30, 2021 from our unaudited condensed consolidated interim financial statements included elsewhere in this prospectus. We derived the summary consolidated statements of operations data for the years ended December 31, 2020 and 2019 and consolidated balance sheet data as of December 31, 2020 and 2019 from our audited consolidated financial statements included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in the future. The results of operations for the six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the full year ending December 31, 2021. The following summary consolidated financial data should be read in conjunction with the


 

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section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.

 

     Six Months Ended
June 30,
    Years Ended
December 31,
 
     2021     2020     2020     2019  
     (in thousands, except unit and per unit data)  

Consolidated Statements of Operations:

        

Revenues

   $ 138,353     $ 124,520     $ 251,283     $ 214,202  

Cost of revenues(1)(2)

     36,052       28,860       57,628       51,039  
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross Profit

     102,301       95,660       193,655       163,163  

Operating expenses:

        

Sales and marketing(1)(2)

     42,920       34,098       69,998       70,559  

Research and development(1)(2)

     27,238       23,962       48,255       43,121  

General and administrative(1)(2)

     23,584       22,937       51,752       42,274  

Amortization of intangible assets

     27,226       24,350       49,267       46,971  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     120,968       105,347       219,272       202,925  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating loss

     (18,667     (9,687     (25,617     (39,762
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest and other (expense) income:

        

Interest expense, net

     (22,187     (19,401     (39,140     (40,528

Other income (expense), net

     53       (121     (121     61  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest and other expense, net

     (22,134     (19,522     (39,261     (40,467
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income tax benefit

     (40,801     (29,209     (64,878     (80,229

Income tax benefit

     (9,760     (8,294     (16,708     (21,149
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (31,041   $ (20,915   $ (48,170   $ (59,080
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss per unit:

        

Basic and diluted

   $ (35.50   $ (24.42   $ (56.16   $ (69.19
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average members’ units outstanding:

        

Basic and diluted

     874,510       856,537       857,665       853,874  

Pro forma net loss per share:(3)

        

Basic and diluted

   $         N/A     $         N/A  

Pro forma weighted average members’ units outstanding:(3)

        

Basic and diluted

       N/A         N/A  

Comprehensive loss:

        

Net loss

   $ (31,041   $ (20,915   $ (48,170   $ (59,080

Other comprehensive (loss) income:

        

Foreign currency translation adjustments

     (2,262     (51     2,242       (5
  

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive loss

   $ (33,303   $ (20,966   $ (45,928   $ (59,085
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Includes stock-based compensation as follows:

 

     Six Months Ended
June 30
     Years Ended
December 31,
 
     2021      2020      2020      2019  
    

(in thousands)

 

Cost of revenues

   $ 211      $ 34      $ 241      $ 53  

Sales and marketing

     540        427        922        689  

Research and development

     465        333        668        723  

General and administrative

     1,635        1,629        3,267        4,049  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total stock-based compensation

   $ 2,851      $ 2,423      $ 5,098      $ 5,514  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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(2)

Includes depreciation expense as follows:

 

     Six Months Ended
June 30,
     Years Ended
December 31, 
 
     2021      2020      2020      2019  
     (in thousands)  

Cost of revenues

   $ 596      $ 653      $ 1,307      $ 1,179  

Sales and marketing

     609        621        1,257        1,055  

Research and development

     486        588        1,162        926  

General and administrative

     357        376        763        573  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total depreciation expense

   $ 2,048      $ 2,238      $ 4,489      $ 3,733  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(3)

The unaudited pro forma basic and diluted net loss per share is computed by dividing pro forma net loss by pro forma weighted-average common shares outstanding. For the six months ended June 30, 2021, pro forma net loss is computed by decreasing net loss by $             of interest expense, net of tax, that would not have been incurred if the offering had occurred on January 1, 2020. For the year ended December 31, 2020, pro forma net loss is computed by decreasing net loss by $             of interest expense, net of tax, that would not have been incurred if the offering had occurred on January 1, 2020. In addition, pro forma net loss is adjusted for equity-based compensation costs of $             and $            , for the six months ended June 30, 2021 and the year ended December 31, 2020, respectively, related to the IPO Grants. For both the six months ended June 30, 2021 and the year ended December 31, 2020, pro forma weighted average common shares outstanding is computed by giving effect to the Corporate Conversion and increasing the weighted average common shares outstanding by                , which represents the $             million in outstanding borrowings described in “Use of Proceeds” being repaid with the proceeds of this offering divided by the public offering price per share. This pro forma data is presented for informational purposes only and does not purport to represent what our net loss or net loss per share actually would have been had the Corporate Conversion, the offering and use of proceeds therefrom occurred on January 1, 2020 or to project our net loss or net loss per share for any future period.

 

     June 30, 2021      December 31, 2020     December 31, 2019  
     Actual     Pro Forma as
Adjusted (1)(2)
     Actual     Actual  
     (in thousands)  

Consolidated Balance Sheet Data:

         

Cash and cash equivalents

   $ 43,448     $                      $ 43,883   $ 34,242

Total assets

     1,469,762          1,493,046       1,383,162  

Working capital

     (49,080        (37,810     (20,992

Long-term debt-net

     553,196          552,134       456,751  

Members’ equity

     889,768          884,027       855,093  

Preferred stock

     —            —         —    

Common stock

     —            —         —    

Total members / stockholders’ equity

     699,897          731,338       746,915  

 

(1)

The pro forma as adjusted column reflects: (i) the pro forma adjustments following (a) the completion of the Corporate Conversion and (b) the filing and effectiveness of our restated certificate of incorporation in Delaware, which will occur immediately prior to the completion of this offering; (ii) equity-based compensation costs related to the IPO Grants; (iii) the sale of                 shares of our common stock in this offering at an assumed initial public offering price per share of $             (the midpoint of the estimated offering price range set forth on the cover page of this prospectus), after deducting the underwriting discount and estimated offering expenses payable by us; and (iv) the application of the net proceeds from this offering as set forth under the section titled “Use of Proceeds.”


 

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(2)

The pro forma as adjusted information discussed above is illustrative only and will depend on the actual initial public offering price and other terms of this offering determined at pricing. Each $1.00 increase or decrease in the assumed initial public offering price per share of $                (the midpoint of the estimated offering price range set forth on the cover page of this prospectus), would increase or decrease, as applicable, each of our pro forma as adjusted cash and cash equivalents, total assets, working capital, and total members’ deficit by approximately $                million, assuming the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the underwriting discount and estimated offering expenses payable by us. Similarly, each 1.0 million share increase or decrease in the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, would increase or decrease, as applicable, each of our pro forma as adjusted cash and cash equivalents, total assets, working capital, and total members’ deficit by approximately $                million, assuming no change in the assumed initial public offering price per share and after deducting the underwriting discount and

Non-GAAP Financial Metrics

In addition to our results determined in accordance with GAAP, we believe the non-GAAP measure of Free Cash Flow is useful in assessing the liquidity of our business and Non-GAAP Gross Profit and Adjusted EBITDA are useful in evaluating our operating performance. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance and assists in comparisons with other companies, some of which use similar non-GAAP information to supplement their GAAP results. The non-GAAP financial information is presented for supplemental informational purposes only, and should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly-titled non-GAAP measures used by other companies. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.

Free Cash Flow

Free Cash Flow is a supplemental measure of liquidity that is not made under GAAP and that does not represent, and should not be considered as, an alternative to cash flow from operations, as determined by GAAP. We define Free Cash Flow as net cash provided by (used in) operating activities less cash used for purchases of property and equipment and capitalized software development costs.

We use Free Cash Flow as one measure of the liquidity of our business. We believe that Free Cash Flow is a useful indicator of liquidity that provides information to management and investors about the amount of cash generated from our operations that, after the purchases of property and equipment and capitalized software development costs, can be used for strategic initiatives, including investing in our business and selectively pursuing acquisitions and strategic investments. We further believe that historical and future trends in Free Cash Flow, even if negative, provide useful information about the amount of cash generated (or consumed) by our operating activities that is available (or is not available) to be used for strategic initiatives. For example, if Free Cash Flow is negative, we may need to access cash reserves or other sources of capital to invest in strategic initiatives. We also believe that the use of Free Cash Flow enables us to more effectively evaluate our liquidity period-over-period and relative to our competitors.


 

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A reconciliation of Free Cash Flow to net cash provided by (used in) operations, the most directly comparable GAAP measure, is as follows:

 

     Six Months Ended
June 30,
    Years Ended
December 31,
 
     2021     2020     2020     2019  
    

(in thousands)

 

Net cash provided by (used in) operating activities

   $ 5,677     $ 14,500     $ 23,087     $ (7,645

Less:

        

Purchases of property and equipment

     (757     (1,019     (1,933     (10,425

Capitalized software development costs

     (3,080     (3,064     (5,578     (5,406
  

 

 

   

 

 

   

 

 

   

 

 

 

Free Cash Flow

   $ 1,840     $ 10,417     $ 15,576     $ (23,476
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

   $ (4,229   $ (6,796   $ (105,611   $ (73,119

Net cash (used in) provided by financing activities

   $ (1,744   $ 72     $ 91,552     $ 65,280  

Cash paid for interest

   $ 20,753     $ 12,884     $ 31,014     $ 39,803  

Non-GAAP Gross Profit

Non-GAAP Gross Profit is a supplemental measure of operating performance that is not prepared in accordance with GAAP and that does not represent, and should not be considered as, an alternative to gross profit, as determined in accordance with GAAP. We define Non-GAAP Gross Profit as gross profit, adjusted for depreciation and amortization, stock-based compensation expense, acquisition-related expense and severance expense.

We use Non-GAAP Gross Profit to understand and evaluate our operating performance and trends and to prepare and approve our annual budget. We believe Non-GAAP Gross Profit is a useful measure to us and to our investors to assist in evaluating our operating performance because it provides consistency and direct comparability with our past financial performance and between fiscal periods, as the metric eliminates the effects of variability of depreciation and amortization, stock-based compensation expense, which are non-cash expenses, as well as acquisition-related expense and severance expense that may fluctuate for reasons unrelated to overall operating performance.

Non-GAAP Gross Profit has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Because of these limitations, Non-GAAP Gross Profit should not be considered as a replacement for gross profit, as determined by GAAP, or as a measure of our profitability. We compensate for these limitations by relying primarily on our GAAP results and using Non-GAAP Gross Profit only for supplemental purposes.

A reconciliation of Non-GAAP Gross Profit to gross profit, the most directly comparable GAAP measure, is as follows:

 

     Six Months Ended
June 30 ,
     Years ended
December 31,
 
     2021      2020      2020      2019  
    

(in thousands)

 

Gross profit

   $ 102,301      $ 95,660      $ 193,655      $ 163,163  

Depreciation and amortization

     2,637        1,523        3,662        1,991  

Stock-based compensation

     211        34        241        53  

Acquisition-related expense(1)

     224        71        119        66  

Severance(2)

            624        624         
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-GAAP Gross Profit

   $ 105,373      $ 97,912      $ 198,301      $ 165,273  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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(1)

Represents the recognized expense associated with time-based retention bonuses provided to employees acquired through acquisitions.

(2)

Represents expense incurred as a result of our headcount reductions during the second quarter of 2020 in response to the impacts of the COVID-19 pandemic. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—COVID-19” for more details.

Adjusted EBITDA

Adjusted EBITDA is a supplemental measure of operating performance that is not prepared in accordance with GAAP and that does not represent, and should not be considered as, an alternative to net loss, as determined in accordance with GAAP. We define Adjusted EBITDA as net loss, adjusted for interest and other expense, net, income tax benefit, depreciation and amortization, stock-based compensation, acquisition-related expense, severance expense, corporate rebranding expense, use tax expense, loss on lease exit and related expense, asset impairment and corporate adjustments.

We use Adjusted EBITDA to understand and evaluate our operating performance and trends, to prepare and approve our annual budget, and to develop short-term and long-term operating plans. We believe that Adjusted EBITDA facilitates comparison of our operating performance on a consistent basis between periods, and when viewed in combination with our results prepared in accordance with GAAP, helps provide a broader picture of factors and trends affecting our results of operations.

Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Because of these limitations, Adjusted EBITDA should not be considered as a replacement for net loss, as determined by GAAP, or as a measure of our profitability. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only for supplemental purposes.

A reconciliation of Adjusted EBITDA to net loss, the most directly comparable GAAP measure, is as follows:

 

     Six Months Ended
June 30,
    Years ended
December 31,
 
     2021     2020     2020     2019  
    

(in thousands)

 

Net loss

   $ (31,041   $ (20,915   $ (48,170   $ (59,080

Interest and other expense, net

     22,134       19,522       39,261       40,467  

Income tax benefit

     (9,760     (8,294     (16,708     (21,149

Depreciation and amortization

     31,558       27,676       56,536       51,532  

Stock-based compensation

     2,851       2,423       5,098       5,514  

Acquisition-related expense(1)

     765       998       8,064       2,544  

Severance(2)

           2,625       2,625        

Corporate rebranding(3)

                 607        

Use tax expense(4)

                 351        

Loss on lease exit and related expense(5)

                       1,225  

Asset impairment(6)

                       226  

Corporate adjustments(7)

     701                    
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 17,208     $ 24,035     $ 47,664     $ 21,279  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Represents the due diligence and transaction expenses for acquisitions and the recognized expense associated with time-based retention bonuses provided to employees acquired through acquisitions.


 

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(2)

Represents expense incurred as a result of our headcount reductions during the second quarter of 2020 in response to the impacts of the COVID 19 pandemic. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—COVID-19” for more details.

(3)

Represents the total expense recognized in connection with updating our brand identity during the fourth quarter of 2020.

(4)

Represents expense incurred in 2020 relating to back taxes found to be owed as a result of a New Jersey State tax audit, which concluded in 2020.

(5)

Represents the lease exit charge associated with our former corporate headquarters. The majority of the $1.2 million charge incurred during 2019 related to a cash settlement for the early lease termination.

(6)

Represents an impairment charge of our capitalized software costs.

(7)

Represents certain professional and consulting costs associated with our efforts to become a public company.


 

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RISK FACTORS

Risks Related to the COVID-19 Pandemic

Economic downturns and market conditions beyond our control, including as a result of the COVID-19 pandemic, could materially adversely affect our business, operating results, financial condition and prospects.

Our business depends on global economic conditions, the overall demand for global talent acquisition software and applications and on the economic health of customers that benefit from our talent acquisition software and applications. Unstable market conditions make it difficult for our customers and us to accurately forecast and plan future business activities, and could cause our customers to reduce or delay their spending with us. Economic downturns or unstable market conditions may cause customers to decrease their talent acquisition budgets, which could reduce spending through our platform and adversely affect our business, financial condition and results of operations. As we explore new countries to expand our business, economic downturns or unstable market conditions in any of those countries could result in our investments not yielding the returns we anticipate.

Presently, the COVID-19 pandemic has resulted in severe market disruptions and a global economic slowdown for certain goods and services. The severity, magnitude and duration of the current COVID-19 pandemic is uncertain and rapidly changing. The COVID-19 pandemic has resulted in governmental authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders and shutdowns. These measures have impacted and may further impact all or portions of our facilities, workforce and operations, the behavior of our end consumers and the operations of our respective vendors and suppliers. Our results of operations could be materially adversely affected in the future if such measures were to continue or new measures are imposed. For example, additional countries, including Canada, the United Kingdom, or U.K., and France, among others, have gone back into lockdown, implemented curfews or increased further nationwide restrictions over concerns of increasing COVID-19 transmission rates. Concern over the impact of COVID-19 may delay the purchasing decisions of certain prospective and current customers and has resulted in an increase in down-sells and customer attrition. While governmental authorities have taken measures to try to contain the COVID-19 pandemic, there is considerable uncertainty regarding such measures and potential future measures. There is no certainty that measures taken by governmental authorities will be sufficient to mitigate the risks posed by the COVID-19 pandemic or to prevent a resurgence in the infection rates, and there is uncertainty regarding the effectiveness of the vaccines against new strains or variants of COVID-19 and the general availability of COVID-19 vaccines, which could impact our ability to perform critical functions.

In response to disruptions caused by the COVID-19 pandemic, we have implemented a number of measures designed to protect the health and safety of our workforce and position us to maintain our healthy financial position. These measures include restrictions on business travel, the institution of work-from-home policies and the implementation of strategies for workplace safety at our facilities to the limited extent that they remain open and our employees need to access them. We are following the guidance from local public health officials and government agencies with respect to such facilities, including implementation of enhanced cleaning measures, social distancing guidelines and wearing of masks. We will continue to incur increased costs for our operations during this pandemic that are difficult to predict with certainty. In particular, our remote work arrangements for employees, coupled with stay-at-home orders and quarantines, pose challenges for those employees and our IT systems, and extended periods of remote work arrangements could strain our business continuity plans, introduce operational risk, including cybersecurity and IT systems management risks. As a result, our business, results of operations, cash flows or financial condition may be affected by COVID-19 related disruptions and could continue to be adversely impacted in the future. There is no assurance the measures we have taken or may take in the future will be successful in managing the uncertainties caused by the COVID-19 pandemic.

As a result of the COVID-19 pandemic, we have delayed office openings, postponed certain investments and reduced the size of our workforce. In addition, as a result of the COVID-19 pandemic, we may (i) decide to postpone or cancel planned investments in our business in response to changes in our business or (ii) experience

 

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difficulties in recruiting or retaining personnel, each of which may impact our ability to respond to our customers’ needs and fulfill contractual obligations. In addition, we rely upon third parties for certain critical inputs to our business and platform, such as data integrations with proprietary platforms, data centers and technology infrastructure. Any disruptions to services provided to us by third parties that we rely upon to provide our talent acquisition software and services, including as a result of COVID-19 or other actions outside of our control, could significantly impact the continued performance of our platform.

The COVID-19 pandemic has also significantly increased economic and demand uncertainty globally, as well as record levels of unemployment in the United States, or the U.S. As a result, the COVID-19 pandemic has caused an economic slowdown, and it is possible that it could cause a global recession. The economic uncertainty of the COVID-19 pandemic has and could again lead to a general decrease in consumer spending and decrease in consumer confidence. Our sales, results of operations and cash flows depend on the overall demand for our talent acquisition software and applications. Some of our customers have experienced and may continue to experience financial hardships that, to date, have resulted in minimal instances of delayed or uncollectible payments, though this could increase in the future. Additionally, certain industry sectors that comprise part of our client base and spend heavily on talent acquisition, may see prolonged financial difficulty that may result in further delays or reductions in talent acquisition spending. To add to the uncertainty, the pace and nature of any economic recovery is unclear after this unprecedented shutdown of the economy. As a result, we may be susceptible to increased customer churn as a result of the current COVID-19 pandemic.

The severity, magnitude and duration of the current COVID-19 pandemic is uncertain, rapidly changing, and hard to predict and depends on events beyond our knowledge or control. These and other impacts of the COVID-19 pandemic could have the effect of heightening many of the other risks described in this “Risk Factors” section, such as those relating to our reputation, product sales, results of operations or financial condition. We might not be able to predict or respond to all impacts on a timely basis to prevent near- or long- term adverse impacts to our results. As a result, we cannot at this time predict the impact of the COVID-19 pandemic with certainty, but it could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Risks Related to Our Business and Strategy

The markets in which we participate are intensely competitive, and if we do not compete effectively, our operating results could be adversely affected.

The market for talent acquisition software is highly competitive, rapidly evolving and fragmented. We believe the principal competitive factors in our market include product features, reliability, performance and effectiveness; integration with a wide variety of third-party applications and systems; modern and intuitive technology and user experience; ability to innovate and rapidly respond to customer needs; breadth and depth of application functionality; adherence to industry standards and certifications; strength of sales and marketing efforts; quality of customer support; brand awareness and reputation; size and composition of customer base and level of user adoption; and price and cost of ownership.

Many of our competitors and potential competitors are larger and have greater brand name recognition, much longer operating histories, larger marketing budgets and significantly greater resources than we do. These competitors are able to devote greater resources to the development, promotion and sale of their products and services. This may allow our competitors to respond more effectively than us to new or emerging technologies and changes in market conditions. Furthermore, our current or potential competitors may be acquired by, or merge with, third parties with greater available resources and the ability to initiate or withstand substantial price competition. In addition, many of our competitors have established marketing relationships, access to larger customer bases and major distribution agreements with consultants, system integrators and resellers. Our competitors may also establish cooperative relationships among themselves or with third parties that may further enhance their offerings or resources. Any of these events could disrupt our operations, reduce our revenue or harm our business generally.

 

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We face competition from traditional human capital management, or HCM, companies, companies primarily focused on offering applicant tracking systems and providers of point solutions for specific use cases such as for recruitment marketing. These companies include, without limitation, Oracle and SAP. It is also possible that companies, such as IBM and Google, that currently provide cloud applications or technologies in different target markets, may develop applications or acquire companies that operate in our target markets, including, without limitation, candidate relationship management, applicant tracking systems, AI, talent analytics and internal mobility solutions, and some potential customers may elect to develop their own internal applications. Some large businesses may be hesitant to adopt cloud applications such as ours and prefer to upgrade the more familiar applications offered by these vendors that are deployed on-premise, such as Oracle and SAP. Our competitors could offer talent acquisition solutions on a standalone basis at a low price or bundled as part of a larger product sale.

If our competitors’ products, services or technologies become more accepted than our products, if they are successful in bringing their products or services to market earlier than ours, or if their products or services are more technologically capable than ours, our revenues could be adversely affected. In addition, some of our competitors may offer their products and services at a lower price. Pricing pressures and increased competition could result in reduced sales, reduced margins, losses or a failure to maintain or improve our competitive market position, any of which could adversely affect our business and operating results.

The loss of a significant portion of our customers, or a failure to renew our subscription agreements with a significant portion of our customers, could have a material adverse effect on our business, financial condition, and results of operations.

The loss of a significant portion of our customers, or a failure of some of them to renew their contracts with us, could have a significant impact on our revenues, reputation, and our ability to obtain new customers. Acquisitions of our customers could lead to cancellation of our contracts with them or by the acquiring companies, thereby reducing the number of our existing and potential customers. Acquisitions of our partners involved in referring or reselling our solutions could also result in a reduction in the number of our current and potential customers, as our partners may no longer facilitate the adoption of our applications. A failure to retain a significant portion of our customers, or a failure to renew our subscription agreements with a significant portion of customers, could have a material adverse effect on our business, financial condition, and results of operations.

If for any reason we are not able to develop enhancements and new features, keep pace with technological developments or respond to future disruptive technologies, our business will be harmed.

Our future success will depend on our ability to adapt and innovate while ensuring our solutions remain easy to adopt, deploy and maintain. To attract new customers and increase revenue from existing customers, we will need to enhance and improve our existing products and introduce new features. The success of any enhancement or new feature depends on several factors, including timely completion, introduction, and market acceptance. If we are unable to enhance our existing products to meet customer needs or successfully develop or acquire new features or products, or if such new features or products fail to be successful or are not user-friendly, our business and operating results will be adversely affected.

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

Finally, our ability to grow is subject to the risk of future disruptive technologies. If new technologies emerge that are able to deliver talent acquisition software and applications at lower prices, more efficiently, or more conveniently, such technologies could adversely impact our ability to compete.

 

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Even if demand for talent acquisition products and services increases generally, there is no guarantee that demand for SaaS products like ours will increase to a corresponding degree.

The widespread adoption of our products depends not only on strong demand for talent acquisition products and services generally, but also for products and services delivered via a SaaS business model in particular. There are still a significant number of organizations that have adopted no talent acquisition functions at all. It is unclear whether such organizations will ever adopt such functions and, if they do, whether they will desire a SaaS talent acquisition solution similar to ours. As a result, we cannot guarantee that our SaaS talent acquisition solutions will achieve and sustain the high level of market acceptance that is critical for the success of our business.

If the market for enterprise cloud computing develops slower than we expect or declines, it could have a material adverse effect on our business, financial condition, and results of operations.

The enterprise cloud computing market is not as mature as the market for on-premise enterprise software, and it is uncertain whether cloud computing will achieve and sustain high levels of customer demand and market acceptance. Our success will depend to a substantial extent on the widespread adoption of cloud computing in general, and of talent acquisition solutions in particular. Many enterprises have invested substantial personnel and financial resources to integrate traditional enterprise software into their businesses and therefore may be reluctant or unwilling to migrate to cloud computing. It is difficult to predict customer adoption rates and demand for our applications, the future growth rate and size of the cloud computing market, or the entry of competitive applications. The expansion of the cloud computing market depends on a number of factors, including the cost, performance, and perceived value associated with cloud computing, as well as the ability of cloud computing companies to address security and privacy concerns. If we or other cloud computing providers experience security incidents, loss of customer data, disruptions in delivery, or other problems, the market for cloud computing applications as a whole, including our applications, may be negatively affected. If cloud computing does not achieve widespread adoption or there is a reduction in demand for cloud computing caused by a lack of customer acceptance, technological challenges, weakening economic conditions, security or privacy concerns, competing technologies and products, reductions in corporate spending, or otherwise, it could have a material adverse effect on our business, financial condition, and results of operations.

To date, we have derived a substantial majority of our subscription revenues from our iCIMS Talent Cloud products. Our efforts to increase the use of our iCIMS Talent Cloud products and our other solutions may not succeed, and may reduce our revenue growth rate.

To date, our iCIMS Talent Cloud products account for most of our revenue. Any factor adversely affecting sales of these products, including application release cycles, market acceptance, product competition, performance and reliability, reputation, price competition, and economic and market conditions, could adversely affect our business and operating results. Although we intend to continue to invest in building additional products, features and functionality that expand our capabilities and facilitate the extension of our platform to new use cases, any impairments to revenue earned from our most lucrative products could hurt our overall financials and operations.

Defects in our solutions or breaches of warranties could affect our reputation, result in significant costs to us and impair our ability to sell our products and related services.

The technologies underlying our solutions are inherently complex and may contain material defects or errors, which may cause performance problems and may result in our breach of warranties contained in our agreements with customers. The costs incurred in correcting any defects may be substantial and could adversely affect our operating results. Although we continually test our products and solutions for defects and work with customers through our customer support organization to identify and correct errors, defects in our products and

 

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solutions are likely to occur in the future. Any defects, errors, disruptions in service, cyber-attacks or other performance problems with our software and solutions, whether in connection with the day-to-day operation, upgrades or otherwise, could lead to:

 

   

lost or delayed market acceptance and sales of our products;

 

   

early termination of customer agreements or loss of customers;

 

   

delays in payment to us by our customers;

 

   

credits or refunds to customers;

 

   

our breach of warranties contained in our agreements with customers;

 

   

lawsuits and litigation, including warranty and service claims or negligence claims brought against us;

 

   

diversion of development resources;

 

   

injury to our reputation and brand;

 

   

increased maintenance and warranty costs or financial concessions; and

 

   

increased insurance costs.

While our customer agreements typically contain limitations and disclaimers that purport to limit our liability for damages related to defects in our products, such limitations and disclaimers may not be enforced by a court or other tribunal or otherwise effectively protect us from such claims.

If we fail to properly manage our technical operations infrastructure, experience service outages or delays in the deployment of our applications, or our applications fail to perform properly, we may be subject to liabilities and our business reputation, financial condition and operating results may be adversely affected.

We have experienced significant growth in the number of users, transactions and data that our operations infrastructure supports. We seek to maintain sufficient excess capacity in our operations infrastructure to meet the needs of all of our customers and users, as well as our own needs, and to ensure that our services and solutions are accessible within an acceptable load time. We also seek to maintain excess capacity to facilitate the rapid provision of new customer deployments and the expansion of existing customer deployments. In addition, we need to properly manage our technological operations infrastructure in order to support version control, changes in hardware and software parameters, updates, the evolution of our applications and to reduce infrastructure latency associated with dispersed geographic locations. However, the provision of new hosting infrastructure requires significant lead time. If we do not accurately predict our infrastructure requirements, we may experience service outages. Furthermore, if our operations infrastructure fails to scale, we may experience delays in providing services as we seek to obtain additional capacity, and no assurance can be made that we will be able to secure such additional capacity on the same or similar terms as we currently have, which could result in a significant increase in our operating costs. Furthermore, any failure to scale and secure additional capacity could result in delays in new feature rollouts, reduce the demand for our applications, result in customer and end user dissatisfaction and adversely affect our business and operating results.

We and our third-party service providers have experienced, and may in the future experience, system disruptions, outages and other performance problems, including the failure of our applications to perform properly. These problems may be caused by a variety of factors, including infrastructure changes, vendor issues, software defects, viruses and other malware, worms, security attacks (internal and external), cyberattacks and other data security incidents, fraud, spikes in customer usage, power or telecommunications failures, employee or insider malfeasance or improper employee or contractor conduct, programming errors and other human errors, phishing schemes, threats of ransomware events and denial-of-service issues. In some instances, we may not be able to identify the cause or causes of these performance problems within an acceptable period of time. Because of the large amount of data that we collect, store, transmit and process in our systems, it is possible that these issues could result in data loss or corruption, or cause the data to be incomplete or contain inaccuracies that our

 

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customers and other users regard as significant. Furthermore, the availability or performance of our applications could also be adversely affected by our customers’ and other users’ inability to access the Internet. For example, our customers and other users access our applications through their Internet service providers. If a service provider fails to provide sufficient capacity to support our applications or otherwise experiences service outages, such failure could interrupt our customers’ and other users’ access to our applications, which could adversely affect their perception of our applications’ reliability and our revenues.

Our customer agreements typically provide for monthly service level commitments. If we are unable to meet the stated service level commitments or suffer extended periods of unavailability for our applications as a result of the foregoing or otherwise, we may be contractually obligated to issue service credits or refunds to customers for prepaid and unused subscription services, our customers may make warranty or other claims against us, or we could face contract terminations, which would adversely affect our attrition rates. Any extended service outages could result in customer losses and adversely affect our reputation, business and operating results.

Furthermore, our errors and omissions insurance may be inadequate or may not be available in the future on acceptable terms, or at all. In addition, such policy may not cover all claims made against us and defending a suit, regardless of its merit, could be costly and divert management’s attention. We also cannot ensure that any limitation of liability or indemnity provisions in our contracts, including with vendors and service providers, for a security lapse or breach or other security incident would be enforceable or adequate or would otherwise protect us from any liabilities or damages with respect to any particular claim. Any of the foregoing could adversely affect our business, financial condition and results of operations.

If we fail to develop widespread brand awareness cost-effectively, our business may suffer.

We believe that developing and maintaining widespread positive awareness of our brand is critical to achieving widespread acceptance of our applications, retaining and attracting customers, and hiring and retaining employees. However, brand promotion activities may not generate the customer awareness or increased revenues we anticipate, and even if they do, any increase in revenues may not offset the significant expenses we incur in building our brand. In addition, positions we take on social and ethical issues from time to time may impact our ability to attract or retain customers, and any perceived changes to our public commitments to sustainability, equality and ethical use could adversely impact our brand, reputation and relationships with our customers and other users.

If we fail to successfully promote and maintain our brand, we may fail to attract or retain customers necessary to realize a sufficient return on our brand-building efforts, or to achieve the widespread brand awareness that is critical for broad customer adoption of our applications. Additionally, the loss of one or more of our key customers, or a failure to renew our subscription agreements with one or more of our key customers, could significantly impair our ability to market our applications which, in turn, could have a negative impact on our revenues, reputation and our ability to obtain new customers. In addition, if our brand is negatively impacted, it may be more difficult to hire and retain employees.

If our goodwill or other intangible assets become impaired, we may be required to record a significant charge to earnings.

We are required to test goodwill for impairment at least annually or earlier if events or changes in circumstances indicate the carrying value may not be recoverable. As of June 30, 2021 and December 31, 2020, we had recorded a total of $935.0 million and $936.5 million of goodwill, respectively, and $363.0 million and $390.4 million of other intangible assets, respectively. An adverse change in domestic or global market conditions, particularly if such change has the effect of changing one of our critical assumptions or estimates made in connection with the impairment testing of goodwill or intangible assets, could result in a change to the estimation of fair value, resulting in an impairment charge to our goodwill or other intangible assets. Any such material charges may have a negative impact on our operating results or financial condition.

 

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Our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our business.

Our quarterly operating results, including the levels of our revenues, operating margin, profitability, cash flow, unearned revenue and remaining subscription services revenue performance obligations, may vary significantly in the future and period-to-period comparisons of our operating results may not be meaningful. Accordingly, the results of any one quarter should not be relied upon as an indication of future performance. Our quarterly financial results may fluctuate as a result of a variety of factors, many of which are outside of our control and, as a result, may not fully reflect the underlying performance of our business. Fluctuation in quarterly results may negatively impact the value of our securities. Factors that may cause fluctuations in our quarterly financial results include, without limitation, those listed below:

 

  (i)

the extent to which new customers are attracted to our products, services and applications to satisfy their talent acquisition needs;

 

  (ii)

the timing and rate at which we sign agreements with new customers;

 

  (iii)

our access to service providers and partners when we outsource customer service projects;

 

  (iv)

our ability to manage the quality and completion of the customer implementations performed by partners;

 

  (v)

the timing and duration of our customer implementations, which is often outside of our direct control;

 

  (vi)

our ability to provide, or partner with effective partners to provide, resources for customer implementations and consulting projects;

 

  (vii)

the extent to which we retain existing customers and satisfy their requirements;

 

  (viii)

the extent to which existing customers renew their subscriptions to our products and the timing of those renewals;

 

  (ix)

the extent to which existing customers purchase or discontinue the use of additional products and add or decrease the number of users;

 

  (x)

the extent to which our customers request enhancements to underlying features and functionality of our products;

 

  (xi)

the addition or loss of large customers, including through acquisitions or consolidations;

 

  (xii)

the number and size of new customers, as well as the number and size of renewal customers in a particular period;

 

  (xiii)

the mix of customers among large, mid-sized and small organizations;

 

  (xiv)

changes in our pricing policies or those of our competitors;

 

  (xv)

seasonal factors affecting demand for our products or potential customers’ purchasing decisions;

 

  (xvi)

the financial condition and creditworthiness of our customers;

 

  (xvii)

the amount and timing of our operating expenses, including those related to the maintenance, expansion and restructuring of our business, operations and infrastructure;

 

  (xviii)

changes in the operational efficiency of our business;

 

  (xix)

the timing and success of our new product and service introductions;

 

  (xx)

the timing of expenses for the development of new products and technologies, including enhancements to our products;

 

  (xxi)

our ability to aggregate large data sets into meaningful insights to drive increased demand for our products;

 

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  (xxii)

continued strong demand for talent acquisition software and applications in the U.S. and globally;

 

  (xxiii)

the success of current and new competitive products and services by our competitors;

 

  (xxiv)

other changes in the competitive dynamics of our industry, including consolidation among competitors, customers or strategic partners;

 

  (xxv)

our ability to manage our existing business and future growth, including in terms of additional headcount, additional customers, incremental users and new geographic regions;

 

  (xxvi)

expenses related to our network and data centers, and the expansion of such networks and data centers;

 

  (xxvii)

the effects of, and expenses associated with, acquisitions of third-party technologies or businesses and any potential future charges for impairment of goodwill resulting from those acquisitions;

 

  (xxviii)

equity issuances;

 

  (xxix)

business disruptions, costs and events related to shareholder activism;

 

  (xxx)

legal or political changes in local or foreign jurisdictions that decrease demand for, or restrict our ability to sell or provide, our products;

 

  (xxxi)

fluctuations in foreign currency exchange rates;

 

  (xxxii)

general economic, industry and market conditions; and

 

  (xxxiii)

various factors related to disruptions in our SaaS hosting network infrastructure, defects in our products, privacy and data security considerations, and exchange rate fluctuations, each of which is described elsewhere in these risk factors.

Because of how we recognize revenue, a significant downturn in our business may not be immediately reflected in our operating results.

Generally, we recognize revenue from subscription agreements monthly over the terms of these agreements, which is typically two to three years for our talent acquisition software. As a result, a significant portion of the revenue we report in each quarter is generated from customer agreements entered into during previous periods. Consequently, a decline in new subscriptions in any one quarter may not significantly impact our revenue and financial performance in that quarter, but will negatively affect our revenue, or rate of revenue growth and financial performance in future quarters.

In addition, if subscription agreements expire and are not renewed in the same quarter, our revenue and financial performance in that quarter and subsequent quarters will be negatively affected. However, the revenue impact may not be immediately reflected in our operating results to the extent there is an offsetting increase in revenue from services contracts performed in that same quarter. We may be unable to adjust our fixed costs in response to reduced revenue. Accordingly, the effect of significant declines in sales and market acceptance of our products may not be reflected in our short-term operating results.

The expenses associated with generating customer agreements are generally incurred up front but the resulting subscription revenue is generally recognized over the life of the agreements; therefore, increased growth in the number of our customers will result in our recognition of more costs than revenue during the early periods covered by such agreements, even in cases where the agreements are expected to be profitable for us over their full terms.

 

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Forecasts of our business growth and profitability may prove to be inaccurate, and even if the markets in which we compete achieve the forecasted growth, we cannot assure you our business will grow at similar rates, or at all.

Our forecasts are subject to significant uncertainty and are based on assumptions and estimates which may not prove to be accurate. These assumptions and estimates include the timing and value of agreements with our customers, variability in the service delivery periods for our customers, impact of foreign currency exchange rate fluctuations, expected growth in our markets and related costs to support the growth of our business. Our assumptions and estimates related to our business growth and profitability, including the performance of our core business and emerging businesses and the demand for our products in the Americas, Europe, the Middle East and Africa (EMEA), APAC and other regions, may prove to be inaccurate. Even if the markets experience the forecasted growth, we may not grow our business at similar rates, or at all. Our growth is subject to many factors, including our success in implementing our business strategy, which is subject to many risks and uncertainties.

Certain of our operating results and financial metrics are difficult to predict as a result of seasonality.

We have historically experienced seasonality in terms of when we enter into customer agreements for our products. We sign a higher percentage of agreements with new customers, and renewal agreements with existing customers, in the fourth quarter of each year. In addition, within a given quarter, often a significant portion of our agreements are signed towards the end of the quarter. This seasonality is reflected to a much lesser extent and sometimes is not immediately apparent in our revenue, due to the fact that we generally recognize subscription revenue over the term of the customer agreement, which is generally two to three years. We expect this seasonality to continue, which may cause fluctuations in certain of our operating results and financial metrics, and thus difficulties in predictability.

Because a growing part of our business consists of sales of applications to manage complex operating environments for our customers, we may experience longer sales cycles and longer deployments. Some customers demand more configuration and integration services, and require increased compliance and initial support costs, which could have a material adverse effect on our business, financial condition and results of operations in a given period.

A growing portion of our customer base requires applications that manage complex operating environments. Our ability to increase revenues and to maintain profitability depends, in large part, on widespread acceptance of our applications by businesses and other organizations. As we target our sales efforts at these customers, we face greater costs, longer sales cycles and less predictability in completing some of our sales. For some of our customers, the customer’s decision to use our applications may be an enterprise-wide decision and, therefore, these types of sales require us to provide greater levels of education regarding the use and benefits of our applications. Our typical sales cycles range from three to twelve months, and we expect that this lengthy sales cycle may continue or increase as customers adopt our applications. Longer sales cycles could have a material adverse effect on our business, financial condition and results of operations in a given period.

The time it takes to implement a new customer will vary depending on the number and type of applications, the complexity and scale of the customers’ business, the configuration requirements and other factors, many of which are beyond our control. Therefore, at any given time, an increasing percentage of our customers may be in the process of implementing our applications, particularly during periods of rapid growth. Some customers may opt for phased roll outs, which further lengthens the time for us to see profits from such contracts.

Some of our customers may demand more configuration and integration services, which increase our upfront investment in sales and deployment efforts. Additionally, customers may require increased compliance and initial support costs during the onboarding process. As a result of these factors, we must devote a significant amount of sales support and professional services resources to individual customers, increasing the cost and time required to complete sales. The increased costs associated with completing sales and the implementation process for these customers could have a material adverse effect on our business, financial condition and results of operations.

 

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The nature of our business requires the application of complex revenue and expense recognition rules. Changes in financial accounting standards or practices may cause adverse, unexpected financial reporting fluctuations and affect our reported operating results.

The accounting rules and regulations that we must comply with are complex and subject to interpretation by the Financial Accounting Standards Board, or FASB, the SEC and various bodies formed to promulgate and interpret appropriate accounting principles. In addition, many companies’ accounting disclosures are being subjected to heightened scrutiny by regulators and the public. A change in accounting standards or practices can have a significant effect on our reported results and may even affect our reporting of transactions completed before the change is effective. New accounting pronouncements and varying interpretations of accounting pronouncements have occurred and may occur in the future. Changes to existing rules or the questioning of current practices may adversely affect our reported financial results or the way we conduct our business.

We have acquired, and may in the future acquire, other companies, employee teams or technologies, which could divert our management’s attention, result in additional dilution to our stockholders, subject us to hidden costs and liabilities and otherwise disrupt our operations and adversely affect our operating results.

We have acquired, and may in the future acquire, other companies, employee teams or technologies to complement or expand our applications, enhance our technical capabilities, obtain personnel or otherwise offer growth opportunities. For example, during the fourth quarter of fiscal year 2020, we acquired both Altru Labs, Inc., or Altru, and Easyrecrue S.A.S., or Easyrecrue. The pursuit of acquisitions may divert the attention of management and cause us to incur various expenses in identifying, investigating and pursuing suitable acquisitions, whether or not they are consummated.

We may not be able to integrate acquired personnel, operations and technologies successfully, or at all, or effectively manage the combined operations following any acquisition. We also may not achieve the anticipated benefits from an acquisition due to a number of factors, including:

 

   

the inability to integrate or benefit from an acquisition in a profitable manner;

 

   

acquisition-related costs, liabilities or tax impacts, some of which may be unanticipated;

 

   

difficulty in integrating the intellectual property, technology infrastructure and operations of the acquired business, including the difficulty in addressing security issues of the acquired business;

 

   

difficulty in integrating and retaining the personnel of the acquired business, including integration of the culture of the acquired company and iCIMS;

 

   

difficulty in leveraging the data of the acquired business if it includes personal data;

 

   

ineffective or inadequate controls, procedures or policies at the acquired company;

 

   

multiple product lines or service offerings, as a result of our acquisitions, that are offered, priced and supported differently;

 

   

difficulties and additional expenses associated with synchronizing product offerings, customer relationships and contract portfolio terms and conditions between iCIMS and the acquired business;

 

   

potential unknown liabilities or risks associated with the acquired businesses, including those arising from existing contractual obligations or litigation matters;

 

   

adverse effects on our existing business relationships with business partners and customers as a result of the acquisition;

 

   

potential write-offs of acquired assets and potential financial and credit risks associated with acquired customers;

 

   

inability to maintain relationships with key customers, suppliers and partners of the acquired business;

 

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difficulty in predicting and controlling the effect of integrating multiple acquisitions concurrently;

 

   

lack of experience in new markets, products or technologies;

 

   

difficulty in integrating operations and assets of an acquired foreign entity with differences in language, culture, or country-specific regulatory risks;

 

   

diversion of management’s attention from other business concerns;

 

   

dilutive issuances of equity securities or the issuance of debt, which could adversely affect our operating results;

 

   

use of resources that are needed in other parts of our business; and

 

   

use of substantial portions of our available cash to consummate the acquisition.

Once an acquisition is closed, we may still discover hidden costs, resource demands and potential liabilities that were not evident throughout the due diligence process, particularly when the due diligence process is on an accelerated timeline. Although we have begun utilizing representation and warranty insurance and regularly use standard indemnity provisions, if we are unable to successfully assert a claim, if a claim is not covered or if these inherited costs prove greater than expected, our operations as a whole may be adversely affected. In addition, a significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill and other intangible assets, which must be assessed for impairment at least annually. In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process, which could adversely affect our business, operating results and financial position.

Certain estimates of market opportunity, forecasts of market growth, and our operating metrics included in this prospectus may prove to be inaccurate.

Market opportunity estimates and growth forecasts are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. The estimates and forecasts in this prospectus relating to the size and expected growth of our target market may prove to be inaccurate. Even if the markets in which we compete meet the size estimates and growth forecasted in this prospectus, our business could fail to grow at similar rates, if at all. These estimates are calculated using internal data and are subject to a number of assumptions and extrapolations, and as a result, the actual market opportunity and growth forecasts may be different than our disclosed numbers.

We have a history of losses, and we cannot be certain that we will achieve or sustain profitability.

We have a history of losses. We experienced net losses of $31.0 million for the six months ended June 30, 2021, $48.2 million in 2020 and $59.1 million in 2019. At June 30, 2021 and December 31, 2020, our accumulated deficit was $193.6 million and $162.6 million, respectively, and total members’ equity was $699.9 million and $731.3 million, respectively. Although our operating losses have decreased in each of the last two years, it is possible that we may continue to incur operating losses in the future as a result of expenses associated with the continued development and expansion of our business. Our expenses include among others, sales and marketing, research and development, consulting and support services, costs related to our acquisitions and the integration of businesses we acquire, and other costs relating to the development, marketing, and sale and service of our products that may not generate revenue until later periods, if at all. Any failure to increase revenue or manage our cost structure as we implement initiatives to grow our business could prevent us from sustaining profitability. In addition, our ability to achieve sustained profitability is subject to a number of the risks and uncertainties discussed below, many of which are beyond our control. We cannot be certain that we will be able to sustain profitability on a quarterly or annual basis.

 

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Risks Related to the Economy and Current Events

Adverse economic conditions in our industry or the global markets, or reductions in consumer spending, could limit our ability to grow our business and negatively affect our operating results.

Our operating results may vary based on the impact of changes in our industry or the global economy on us or our customers. The U.S. and other key international economies have at times experienced cyclical downturns that have resulted in a significant weakening of the economy, limited availability of credit, a reduction in business confidence and activity, and other difficulties that may affect one or more of the industries to which we sell our services. In addition, developments such as the U.K. exit from the European Union, or the EU, referred to as “Brexit,” evolving trade policies between the U.S. and China or other international trade partners, conflicts in the Middle East and elsewhere, and the ongoing COVID-19 pandemic have created many economic and political uncertainties that have impacted worldwide markets. These global economic and political conditions may impact our business in a number of ways. The revenue growth and potential profitability of our business depends on demand for enterprise application software generally and for talent acquisition software in particular. We sell our talent acquisition software and applications primarily to large, mid-sized and small business organizations whose businesses fluctuate based on general economic and business conditions. In addition, a portion of our revenue is attributable to the number of users of our products at each of our customers, which in turn is influenced by the employment and hiring patterns of our customers and potential customers. To the extent that economic uncertainty or weak economic conditions cause our customers and potential customers to freeze or reduce their headcount, demand for our products may be negatively affected. Additionally, economic downturns have historically resulted in overall reductions in spending on information technology and talent acquisition software as well as pressure from customers and potential customers for extended billing terms. If economic, political or market conditions deteriorate, or if there is uncertainty around these conditions, our customers and potential customers may elect to decrease their information technology and talent acquisition budgets by deferring or reconsidering product purchases. Such actions could negatively affect our ability to expand our revenue and profitability, and in turn require us to reduce or limit our ability to invest in growing and sustaining a competitive workforce and product solution.

Also, Brexit has created economic and political uncertainty, including volatility in the value of foreign currencies. The impact of Brexit may not be fully realized for several years or more. This uncertainty may cause some of our customers or potential customers to curtail spending and may ultimately result in new regulatory, operational and cost challenges to our U.K. and global operations. In addition, the COVID-19 pandemic has caused additional uncertainty in the global economy. These adverse conditions could result in reductions in sales of our applications, longer sales cycles, reductions in subscription duration and value, slower adoption of new technologies and increased price competition. Any of these events would likely have an adverse effect on our business, operating results and financial position.

Catastrophic events may disrupt our business.

We rely on our network and third-party infrastructure and enterprise applications, internal technology systems, and our website for our development, marketing, operational support, hosted services and sales activities. We also rely on Amazon Web Services, or AWS, Microsoft Azure, and Google GCP distributed computing infrastructure platforms that are located in a wide variety of regions. In the event of a major earthquake, hurricane, or other natural disaster or a catastrophic event such as fire, power loss, telecommunications failure, vandalism, civil unrest, cyber-attack, geopolitical instability, war, terrorist attack, pandemics or other public health emergencies (such as the COVID-19 pandemic), or the effects of climate change (such as drought, flooding, wildfires, increased storm severity and sea level rise), we may be unable to continue our operations and may endure system interruptions, delays in our product development, lengthy interruptions in our services, breaches of data security and loss of critical data, all of which could cause reputational harm or otherwise have an adverse effect on our business and operating results.

 

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Risks Related to Laws and Regulations

Unfavorable laws, regulations, interpretive positions or standards governing new and evolving technologies that we incorporate into our products and services could result in significant cost and compliance challenges and adversely affect our business and operating results.

Some of our products and services currently utilize or will utilize new and evolving technologies such as machine learning, or ML, and artificial intelligence, or AI. While existing laws and regulations may apply to these types of technologies, the overall regulatory environment governing these types of technologies is still currently undeveloped and likely to evolve as government interest in these technologies increases. Regulation of these technologies also varies greatly among international, federal, state and local jurisdictions and is subject to significant uncertainty. Governments and agencies may in the future change or amend existing laws, or adopt new laws, regulations or guidance, or take other actions which may severely impact the permitted uses of these technologies. Any failure by us to comply with applicable laws, regulations, guidance or other rules could result in costly litigation, penalties or fines. In addition, these regulations could establish and further expand our obligations to customers, individuals and other third parties with respect to these types of products and services, limit the countries in which such products and services may be used, restrict the way we structure and operate our business and reduce the types of customers and individuals who can use our products and services. Increased regulation and oversight of products or services which utilize or rely on these new technologies may result in costly compliance burdens or otherwise increase our operating costs, detrimentally affecting our business. These new technologies could subject us to additional litigation brought by private parties, which could be costly, time-consuming and distracting to management and could result in substantial expenses and losses.

In addition, as with many innovations, ML and AI present additional risks and challenges that could affect their adoption and therefore our business. For example, the development of ML and AI present emerging ethical issues, and if we enable or offer solutions on this front that are controversial, due to their impact, or perceived impact, on human rights, privacy, employment or in other social contexts, we may experience brand or reputational harm, competitive harm or legal liability.

Evolving regulation of the Internet, changes in the infrastructure underlying the Internet, or interruptions in Internet access may adversely affect our financial condition by increasing our expenditures and causing customer dissatisfaction.

As Internet commerce continues to evolve, regulation by federal, state or foreign agencies may increase. We are particularly sensitive to these risks because the Internet is a critical component of our business model and our iCIMS Talent Cloud. In addition, taxation of services provided over the Internet or other charges for accessing the Internet may be imposed by government agencies or private organizations. Changes in laws or regulations that adversely affect the growth, popularity or use of the Internet, or impact the way that Internet service providers treat Internet traffic, including laws impacting net neutrality and laws requiring local storage of certain types of data in foreign jurisdictions, may negatively increase our operating costs or otherwise impact our business. Any regulation imposing greater fees for Internet use or restricting information exchanged over the Internet could result in a decline in the use of the Internet and the viability of Internet-based services, which could harm our business.

In addition, the rapid and continual growth of traffic on the Internet has resulted at times in slow connection and download speeds among Internet users. Our business expansion may be harmed if the Internet infrastructure cannot handle our customers’ demands or if hosting capacity becomes insufficient. If our customers become frustrated with the speed at which they can utilize our products over the Internet, our customers may discontinue the use of our talent acquisition software and choose not to renew their contracts with us. Further, the performance of the Internet has also been adversely affected by cybersecurity incidents and include, but are not limited to, power or telecommunications failures, viruses, worms, hacking, security attacks (internal and external), cyberattacks and other data security incidents, social engineering (including phishing attacks),

 

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ransomware, denial-of-service attacks and other similar malicious programs, as well as other forms of damage to portions of its infrastructure, which have resulted in a variety of Internet outages, interruptions and other delays. These service interruptions could diminish the overall attractiveness of our products to existing and potential users and could cause demand for our products to suffer.

Privacy concerns and compliance with or changes in U.S. or foreign laws, rules and regulations may reduce the effectiveness of our applications, result in significant costs and compliance challenges, increase potential liabilities and materially and adversely affect our business, financial condition, operating results and prospects.

Our customers can use our applications to collect, use, and store personal or identifying information regarding a variety of individuals in connection with their operations, including but not limited to their employees, contractors, students, job applicants, customers and suppliers. Additionally, individuals using our talent acquisition software and applications may store, manage and share with certain organizations credentials such as employment history, education, skills and compensation information. We are subject to a variety of federal, state, local, and international laws, directives, rules and regulations, as well as contractual obligations, relating to the collection, use, retention, security, disclosure, transfer, and other processing of personal data and other data. National, state and local governments and agencies in the countries in which our customers operate have adopted, are considering adopting, or may adopt laws, rules and regulations regarding the collection, use, storage, transfer, processing, protection and disclosure of personal data obtained from consumers and other individuals, which could impact our ability to offer our services in certain jurisdictions or our customers’ ability to deploy our solutions globally. Privacy and data protection laws are particularly stringent, and the costs of compliance with and other burdens imposed by such laws, rules, regulations and standards may limit the use and adoption of our services, reduce overall demand for our services, lead to significant fines, penalties or liabilities for noncompliance, or slow the pace at which we close sales transactions, any of which could harm our business. Even the perception of privacy concerns, whether or not valid, may inhibit the adoption, effectiveness or use of our applications. Moreover, if we or our subprocessors fail to adhere to adequate data protection practices around the usage of, access to and processing of our customers’ and other users’ personal data or fail to report a data breach or other loss of data within timeframes mandated by law or our customer contracts, we may be liable for certain losses, and it may damage our reputation and brand. These laws, rules and regulations evolve frequently and their scope may continually change, through new legislation, amendments to existing legislation and changes in enforcement, and may be inconsistent from one jurisdiction to another. As a result, implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future. Although we endeavor to comply with our published policies and documentation, we may at times fail to do so or be alleged to have failed to do so. The publication of our privacy policy and other documentation that provide promises and assurances about privacy and security can subject us to potential state and federal action if they are found to be deceptive, unfair, or misrepresentative of our actual practices. Any failure by us or other parties with whom we do business to comply with this documentation or with federal, state, local or international regulations could result in proceedings against us by governmental entities, private parties or others. Further, due to the frequent changes in laws, rules and regulations, as well as the various forms of agreements acquired through acquisition, despite privacy and security processes we may inadvertently process personal data beyond what is permitted in agreements with customers resulting in potentially significant fines, penalties or liabilities for such noncompliance.

Internationally, virtually every jurisdiction in which we operate has established its own data security and privacy legal framework with which we or our customers must comply, including but not limited to the European Union, or the EU. The EU’s data protection landscape is currently unstable, resulting in possible significant operational costs for internal compliance and risk to our business. In 2016, the EU adopted a new regulation governing data privacy called the General Data Protection Regulation, or GDPR, which became effective May 25, 2018. The GDPR establishes new requirements and changes from previously existing EU law, including more robust obligations on data processors and heavier documentation requirements for data protection compliance programs by companies applicable to the collection, storage and other handling and processing of

 

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personal data. Among other requirements, the GDPR regulates transfers of personal data subject to the GDPR to third countries that have not been found to provide adequate protection to such personal data, including the United States. While we have taken steps to mitigate the impact on us with respect to transfers of data, such as implementing standard contractual clauses, the efficacy and longevity of these transfer mechanisms remains uncertain. The GDPR defines “personal data” broadly, and it enhances data protection obligations for data controllers of such data and for service providers processing the data. The GDPR also introduced numerous privacy-related changes for companies operating in the EU, including greater rights of access and deletion of personal data, to the individuals about whom the personal data relates, greater control for data subjects (including, for example, the “right to be forgotten”), increased data portability for EU consumers, data breach notification requirements and increased fines. In particular, the GDPR imposes penalties for non-compliance of up to the greater of €20 million or 4% of total worldwide annual revenue of the noncompliant company. Such penalties are in addition to any civil litigation claims by customers and data subjects. The GDPR requirements apply not only to third-party transactions, but also to transfers of information between us and our subsidiaries, including employee information. Customers, particularly in the EU, are seeking assurances from their suppliers, including us, that their collection, storage and other handling and processing of personal data of EU nationals is in accordance with the GDPR. If we are unable to provide adequate assurances to such customers, demand for our applications could be adversely affected. In addition, we must continue to seek assurances from our subprocessors that they are handling personal data in accordance with GDPR requirements in order to meet our own obligations under the GDPR.

In addition to the GDPR, the European Commission has another draft regulation in the approval process that focuses on a person’s right to conduct a private life (in contrast to the GDPR, which focuses on protection of personal data). The proposed legislation, known as the Regulation on Privacy and Electronic Communications, or the ePrivacy Regulation, would replace the current ePrivacy Directive. Originally planned to be adopted and implemented at the same time as the GDPR, the ePrivacy Regulation continues to be delayed and is still going through the European legislative process. While the new legislation contains protections for those using communications services (for example, protections against online tracking technologies), the timing of its proposed enactment following the GDPR means that additional time and effort may need to be spent addressing differences between the ePrivacy Regulation and the GDPR. New rules related to the ePrivacy Regulation are likely to include enhanced consent requirements in order to use communications content and communications metadata, which may negatively impact our platform and products and our relationships with our customers.

Complying with the GDPR and the ePrivacy Regulation, when it becomes effective, may cause us to incur substantial operational costs or require us to change our business practices. Despite our efforts to bring practices into compliance with the GDPR and before the effective date of the ePrivacy Regulation, we may not be successful in our efforts to achieve compliance either due to internal or external factors such as resource allocation limitations or a lack of third-party service provider cooperation. Non-compliance could result in proceedings against us by governmental entities, customers, data subjects or others. We may also experience difficulty retaining or obtaining new European or multi-national customers due to the legal requirements, compliance cost, potential risk exposure, and uncertainty for these entities, and we may experience significantly increased liability with respect to these customers pursuant to the terms set forth in our engagements with them.

In addition, the other bases on which we and our customers rely for the transfer of data, such as standard contractual clauses, continue to be subjected to regulatory and judicial scrutiny, as we saw most recently in 2020 with the invalidation of the EU-U.S. Privacy Shield Framework by the Court of Justice of the European Union, or the CJEU. The EU-U.S. Privacy Shield Framework provided one mechanism for lawful cross-border transfers of personal data between the EU and the U.S. While the decision did not invalidate the use of standard contractual clauses, another mechanism for making lawful cross-border transfers, the decision has called the validity of standard contractual clauses into question under certain circumstances, and has made the legality of transferring personal data from the EU to the U.S. or various other jurisdictions outside of the EU more uncertain. Specifically, the CJEU stated that companies must now assess the validity of standard contractual clauses on a case by case basis, taking into consideration whether the standard contractual clauses provide sufficient

 

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protection in light of any access by the public authorities of the third country to where the personal data is transferred, and the relevant aspects of the legal system of such third country. On June 4, 2021, the European Commission adopted new standard contractual clauses, which became effective on June 27, 2021, which impose additional obligations on companies relating to data transfers outside of the European Economic Area, or the EEA, including the obligation to conduct a transfer impact assessment and, depending on a party’s role in the transfer, to implement additional security measures and to update internal privacy practices. While the new standard contractual clauses have provided additional guidance relating to the ongoing use of standard contractual clauses, the CJEU’s decision has increased uncertainty surrounding data transfers from the EU to third countries that may not offer the same level of protection for data subjects’ rights as the EU. The uncertainty, and its eventual resolution, may increase our costs of compliance, impede our ability to transfer data and conduct our business, and harm our business or results of operations. If we, our customers or our third-party service providers are unable to transfer data between and among countries and regions in which we operate, it could decrease demand for our applications, require us to restrict our business operations, and impair our ability to maintain and grow our customer base and increase our revenue. The costs of compliance with, and other burdens imposed by, privacy laws, rules and regulations that are applicable to the businesses of our customers may adversely affect our customers’ ability and willingness to process, handle, store, use and transmit demographic and personal data, which in turn could limit the use, effectiveness and adoption of our software and applications and reduce overall demand.

Further, the United Kingdom’s vote in favor of exiting the EU, often referred to as Brexit, and ongoing developments in the United Kingdom have created uncertainty with regard to data protection regulation in the United Kingdom. As of January 1, 2021, following the expiry of transitional arrangements agreed to between the United Kingdom and EU, data processing in the United Kingdom is governed by a United Kingdom version of the GDPR (combining the GDPR and the United Kingdom’s Data Protection Act 2018), exposing us to two parallel regimes, each of which authorizes similar fines and other potentially divergent enforcement actions for certain violations. With respect to transfers of personal data from the EEA to the United Kingdom, the European Commission adopted an adequacy decision for the United Kingdom on June 28, 2021, finding the United Kingdom ensures an adequate level of data protection. Following the adoption of the adequacy decision, there will be increasing scope for divergence in application, interpretation and enforcement of the data protection law as between the United Kingdom and EEA. Other countries have also passed or are considering passing laws requiring local data residency or restricting the international transfer of data.

Within the United States, laws in this area are also complex and developing rapidly. We expect that there will continue to be new proposed and adopted laws, regulations and industry standards concerning privacy, data protection and information security in the U.S. and other jurisdictions in which we operate. Many state legislatures have adopted legislation that regulates how businesses operate online, including measures relating to privacy, data security and data breaches. For example, in June 2018 California enacted the California Consumer Privacy Act, or CCPA, which became effective on January 1, 2020 and, among other things, requires covered companies to provide certain disclosures to California residents and afford such residents data protection rights, including the ability to access and delete their personal data, opt out of certain sales of personal data and receive detailed information about how their personal data is used. The CCPA gives California consumers certain rights similar to those provided by the GDPR, and customers and other users may seek similar assurances from suppliers regarding compliance. The CCPA provides for civil penalties for violations, as well as a private right of action for certain data breaches that result in the loss of certain personal data, that may increase data breach litigation. Moreover, the California Privacy Rights Act, or CPRA, was approved by California voters in the election on November 3, 2020. The CPRA, which becomes effective on January 1, 2023, imposes additional obligations on companies covered by the legislation and will significantly modify and expand the CCPA, including by expanding California residents’ rights with respect to certain sensitive personal data. The CPRA also creates a new state agency, the California Privacy Protection Agency, that will be vested with authority to implement and enforce the CCPA and the CPRA. These new laws and this new agency, and any regulations promulgated thereunder, remain unclear and may create further uncertainty and require us to incur additional costs and expenses in an effort to comply. The CCPA has prompted a number of proposals for new federal and

 

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state-level privacy legislation, such as in Nevada, New Hampshire, Washington, Illinois and Nebraska, as well as in Virginia, which signed such legislation, the Virginia Consumer Data Protection Act, or VCDPA, into law on March 2, 2021 with an effective date of January 1, 2023 and most recently in Colorado, which signed such legislation, the Colorado Privacy Act, or CPA, into law on July 8, 2021with an effective date of July 1, 2023. In New York, the Stop Hacks and Improve Data Security Act, or the SHIELD Act, was signed into law in July 2019 and became effective on March 21, 2020. The SHIELD Act requires companies owning or licensing computerized data that includes the private information of a resident of New York to implement and maintain a written information security program that contains appropriate and reasonable administrative, technical and physical safeguards to protect the security, confidentiality, and integrity of the private information. The VCDPA , the CPA, the SHIELD Act and such other proposed legislation, if enacted, may add additional complexity, variation in requirements, restrictions and potential legal risk, require additional investment of resources in compliance programs, impact strategies and the availability of previously useful data and could result in increased compliance costs and/or changes in business practices and policies.

In addition, because our platform allows us to send and receive text messages and other mobile telephone communications, we are required to comply with laws and regulations in the U.S. and internationally that govern marketing and advertising practices, including the U.S. Telephone Consumer Protect Act of 1991, or TCPA and the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, or the CAN-SPAM Act. The TCPA, as interpreted and implemented by the Federal Communications Commission, or FCC, and federal and state courts, imposes significant restrictions on the utilization of telephone calls and text messages to residential and mobile telephone numbers as a means of communication, particularly if the prior express consent of the person being contacted has not been obtained, and in the case of marketing calls, prior express written consent of consumers may be required to override certain activities prohibited under the TCPA. Violations of the TCPA may be enforced by the FCC, by state attorneys general, or by others through litigation, including class actions. Furthermore, several provisions of the TCPA, as well as applicable rules and orders, are open to multiple interpretations, and compliance may involve fact-specific analyses. In addition, because the scope and interpretation of the TCPA, and other laws that are or may be applicable to making calls and delivering text messages to consumers, continue to evolve and develop, we or our vendors inadvertently could fail to comply or be alleged, with or without merit, to have failed to comply with the TCPA or other similar laws, including the CAN-SPAM Act. Any failure by us, or the third parties on which we rely, to adhere to, or successfully implement, appropriate processes and procedures in response to existing or future laws and regulations could result in legal and monetary liability, fines and penalties, negative publicity associated with class action litigation and/or costs associated with modifying our solutions and business strategies or damage to our reputation in the marketplace, any of which could have a material adverse effect on our business, financial condition and results of operations.

In the United States, many state legislatures, government bodies and regulatory agencies have adopted legislation and regulations that regulate how businesses operate online, including measures relating to privacy, data security and data breaches. Additionally, some statutory and regulatory requirements in the United States include obligations for companies to notify individuals of security breaches involving particular personal data, which could result from breaches experienced by us or our service providers. Laws in all 50 states and other U.S. territories require businesses to provide notice to individuals whose personal data has been disclosed as a result of a data breach. Such laws are not always consistent, and compliance in the event of a widespread data breach is costly and may be challenging. States are also constantly amending existing laws, requiring attention to frequently changing requirements, and we expect these changes to continue.

Beyond government activity, privacy advocacy and other industry groups have established or may establish various new, additional or different self-regulatory standards that may place additional burdens on us. These and other industry standards may legally or contractually apply to us, or we may elect to comply with such standards or to facilitate our clients’ compliance with such standards. Our customers may expect us to meet voluntary certifications or adhere to other standards established by third parties. We expect that there will continue to be new proposed laws and regulations concerning privacy, data protection and information security, and we cannot

 

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yet determine the impact such future laws, regulations, and standards may have on our business. Furthermore, we expect that existing laws, regulations and standards may be interpreted in new and differing manners in the future and may be inconsistent among jurisdictions. In addition, there are a number of other legislative proposals in the EU and the U.S., at both the federal and state level, as well as other jurisdictions, that could impose additional and potentially conflicting obligations in areas affecting our business. Future laws, amendments, regulations, standards, contractual and other obligations, and changes in the interpretation of existing laws, regulations, standards, contractual and other obligations could result in increased regulation, increased costs of compliance and penalties for non-compliance, be applied in a manner that is inconsistent with our data management practices, our privacy, data protection or data security policies or procedures or the features of our technology and limitations on data collection, use, retention, security, disclosure, transfer and other processing for iCIMS, our customers and our third-party service providers.

Since the interpretation and application of many privacy and data protection laws (including the GDPR, CCPA and SHIELD Act), commercial frameworks and standards are uncertain, it is possible that these laws, frameworks and standards may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the features of our solutions. If so, in addition to the possibility of fines, lawsuits, regulatory investigations, imprisonment of company officials and public censure, other claims and penalties, significant costs for remediation, damage to our reputation, breach of contract claims and other claims and penalties, we could be required to fundamentally change our business activities and practices or modify our solutions and technology, which could have an adverse effect on our business. We may be unable to make such changes or modifications in a commercially reasonable manner, or at all, and our ability to develop new software or provide new services could be limited. Any of the foregoing could reduce demand for our applications, damage our reputation and materially and adversely affect our business, financial condition, operating results and prospects. Any inability to adequately address privacy, data protection or information security-related concerns, even if unfounded, or to successfully negotiate privacy, data protection or information security-related contractual terms with customers, or to comply with applicable privacy, data protection and information security laws, regulations, and policies, could impair our ability to deliver a global solution, result in additional cost and liability to us, damage our reputation and brand, inhibit sales, and adversely affect our business, financial condition, results of operation and prospects.

Data localization requirements in certain jurisdictions in which we operate may increase data center operating costs or require changes to our solutions or business model.

In some jurisdictions in which we operate, such as Russia and China, laws and regulations have been passed or are under consideration, which may require us to locally host at least an instance of the data collected in that jurisdiction, and in some cases may apply restrictions to the export or transfer of that data across borders. Such data localization laws and regulations may increase our overall data center operating costs by requiring duplicative local facilities, network infrastructure and personnel, and by potentially increasing the resources required to process governmental requests for access to that data. This may also increase our exposure to governmental requests for censorship and data breaches in general. Further, we may be forced to adjust our solutions to comply with these privacy laws and may see a decrease in demand if we are unable to effectively engineer our solutions to comply. We continue to explore strategies to limit such risks related to data collected in those jurisdictions, but cannot guarantee that our efforts will be successful.

Risks Related to Information Technology and Intellectual Property

If our security measures are breached or unauthorized access to customer or user data is otherwise obtained, our applications may be perceived as not being secure, customers and end users may reduce the use of or stop using our applications, and we may incur significant liabilities.

Our solutions involve the collection, processing, storage and transmission of our customers’ sensitive and proprietary information, including personal or identifying information regarding our customers, their employees,

 

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customers and suppliers, as well as sensitive business and personal data. Our systems and those of our partners and third-party service providers could be vulnerable to hardware and cybersecurity issues. Our operations are dependent upon the ability to protect our or our third-party service providers’ computer equipment and systems against telecommunications failure or a similar catastrophic event. Cybersecurity incidents are increasing in frequency and evolving in nature and include, but are not limited to, installation of malicious software, ransomware, viruses, social engineering (including phishing attacks), denial-of-service or other attacks, breach by intentional or negligent conduct on the part of employees or other internal sources, unauthorized access to data and other electronic security breaches. Concerns about security increase when we transmit information (including personal data) electronically. Electronic transmissions can be subject to attack, interception, loss or corruption. In addition, computer viruses and malware can be distributed and spread rapidly over the Internet and could infiltrate our systems or those of our buyers, sellers and other partners. Infiltration of our systems or those of our partners could in the future lead to, disruptions in systems, accidental or unauthorized access to or disclosure, loss, destruction, disablement or encryption of, use or misuse of or modification of confidential or otherwise protected information (including personal data) and the corruption of data.

Any accidental unauthorized access to or disclosure, loss, disablement or encryption of, acquisition, use or misuse of or modification of data, processing or destruction of this data, or unavailability of data that we or our partners could experience or the perception that one has occurred or may occur, could expose us to regulatory actions, litigation, investigations, remediation obligations, damage to our reputation and brand, supplemental disclosure obligations, loss of customer, consumer and partner confidence in the security of our applications, destruction of information, indemnity obligations, impairment to our business and resulting fees, costs, expenses, loss of revenues and other potential liabilities. Moreover, there could be public announcements regarding any such incidents and any steps we take to respond to or remediate such incidents, and if securities analysts or investors perceive these announcements to be negative, it could have a substantial adverse effect on the price of our Class A common stock. We devote financial and personnel resources to implement and maintain security measures. While we have security measures in place that are designed to protect against these risks, preserve the integrity of customer and personal data and prevent data loss, misappropriation and other security breaches, our security measures may be compromised as a result of intentional misconduct, including by computer hackers, employees, contractors or vendors, as well as software bugs, human error, technical malfunctions or other malfeasance.

Cybersecurity threats and attacks are often targeted at companies such as ours and we and our vendors have experienced, and from time to time in the future may experience, cybersecurity attacks and other data security incidents. Such threats and attacks may take a variety of forms ranging from individual hackers and groups of hackers to sophisticated organizations, including state-sponsored actors. Techniques to compromise IT systems have become more complex over time and are often not identified until they are exploited. Key cybersecurity risks range from viruses, worms and other malicious software programs, including phishing attacks, to “mega breaches” targeted against cloud services and other hosted software, programming errors and other human errors and threats of ransomware events and denial-of-service attacks, any of which can result in unauthorized access to, misuse, modification, loss or destruction of and disclosure of confidential information and intellectual property, defective products, production downtimes, and compromised data. Techniques used to obtain unauthorized access, disable or degrade services or sabotage systems are becoming increasingly complex and sophisticated and change frequently, which can make such events difficult to detect for long periods of time. Further, defects in the design or manufacture of the hardware, software or applications we procure from third parties to develop our products and services could compromise our IT systems. As a result, we may be unable to anticipate or prevent such techniques. In addition, we may be required to expend significant capital and other resources to protect against, and alleviate problems caused by, such incidents, regardless of whether they affect our systems or networks, or the systems or networks of our third-party service providers.

Our products operate in conjunction with and are dependent on a broad range of products, components and third-party vendors and tech stack services, and a vulnerability in any of them can expose us to a security breach. In addition, our customers and their third-party service providers may not have adequate security measures in

 

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place to protect their data that is stored in our solution, and because we do not control our customers or their service providers, we cannot prevent vulnerabilities in their security measures from being exploited. To the extent we or our systems rely on our partners or third-party service providers, through either a connection to, or an integration with, those third-parties’ systems, the risk of cybersecurity attacks and loss, corruption, or unauthorized publication of our information or the confidential information of consumers and employees may increase. Third-party risks may include lax security measures, data location uncertainty, and the possibility of data storage in inappropriate jurisdictions where laws or security measures may be inadequate. Although we generally have agreements relating to cybersecurity and data privacy in place with our partners and third-party service providers, they are limited in nature and we cannot assure you that such agreements will prevent the accidental or unauthorized access to or disclosure, loss, destruction, disablement or encryption of, use or misuse of or modification of data (including personal data) or enable us to obtain adequate or any reimbursement from our partners or third-party service providers in the event we should suffer any such incidents.

Although we have developed systems and processes that are designed to protect our data, our customer data and other user data, to prevent data loss and to prevent or detect security breaches, there can be no assurance that such measures will be effective against all cybersecurity threats.

Furthermore, we have acquired companies, products, services and technologies over the years. Although we devote significant resources to address any known security issues with respect to such acquisitions, we may still inherit additional risks when we integrate these companies within iCIMS. In addition, if a high-profile security breach occurs with respect to an industry peer, our customers and potential customers may generally lose trust in the security of our platform in particular, or in cloud applications for enterprises in general.

Finally, the impacts of the COVID-19 pandemic and the shift to a remote workforce may exacerbate these risks. With our employees primarily working from their homes or other locations outside of the office, there is increased potential that unauthorized third parties may have access to sensitive company or customer information. For instance, if our employees were to use a non-secure internet network, conduct their work in a non-secure environment or even fail to take appropriate precautions within their own home, there is a greater likelihood that an unauthorized person or entity could obtain access to ours or our clients’ sensitive information. While our telecommuting and security policies and protocols attempt to address these added data privacy threats inherent to a work-from-home environment, there is no guarantee they will prove fully effective.

Any or all of these issues could negatively affect our ability to attract new customers, cause existing customers to elect to terminate or not renew their subscriptions, result in reputational damage, cause us to pay remediation costs and/or issue service credits or refunds to customers for prepaid and unused subscription services, require us to compensate our customers or other users for certain losses or result in lawsuits, regulatory fines or other action or liabilities, which could adversely affect our business and operating results. These risks may increase as we continue to grow and collect, process, store and transmit increasingly large amounts of data.

Our services present the potential for identity theft, embezzlement or other similar illegal behavior by our employees with respect to third parties.

The services offered by us generally require or involve collecting personal data of our customers and/or their employees, such as their full names, birth dates, addresses, employer records and social security numbers. This information can be used by criminals to commit identity theft, to impersonate third parties, or to otherwise gain access to the data or funds of an individual. If any of our employees take, convert or misuse such personal data, funds or other documents or data, we could be liable for damages, and our reputation could be damaged or destroyed. Moreover, if we fail to adequately prevent third parties from accessing personal data and/or business information and using that information to commit identity theft, we might face legal liabilities and other losses that could have a material adverse effect on our business, financial condition and results of operations.

If we fail to adequately obtain, maintain, protect and enforce our intellectual property and proprietary rights, or if our intellectual property and proprietary rights are not sufficiently broad, our business, competitive

 

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advantage and brand could be impaired and we may lose valuable assets, generate reduced revenue and incur costly litigation to protect our rights.

Our success is dependent, in part, upon protecting our intellectual property and other proprietary rights, including proprietary technology. We rely on a combination of patents, copyrights, trademarks, service marks, trade secret and other intellectual property laws in the United States and similar laws in other countries and contractual restrictions designed to establish and protect our intellectual property and proprietary rights used in our business and in our products and services. However, the steps we have taken to obtain, maintain, protect and enforce our intellectual property and proprietary rights may be inadequate. There can be no assurance that these protections will be available in all cases or will be adequate to prevent our competitors or other third parties from copying, reverse engineering, accessing or otherwise obtaining and using our technology, intellectual property or proprietary rights or products without our permission. Further, there can be no assurance that our competitors will not independently develop technologies that are substantially equivalent or superior to our technology or design around our intellectual property and proprietary rights. In each case, our ability to compete could be significantly impaired.

Although we enter into confidentiality and invention assignment agreements with our employees, consultants and third parties engaged in the development of intellectual property on our behalf and enter into confidentiality agreements with the parties with whom we have strategic relationships and business alliances and other third parties, including customers and other third-party service providers, we cannot guarantee that we have entered into such agreements with each party that has or may have had access to our proprietary information, know-how and trade secrets. Moreover, no assurance can be given that these agreements will be effective in controlling access to, distribution, use, misuse, misappropriation, reverse engineering or disclosure of our products and proprietary information, know-how and trade secrets. Further, these agreements do not prevent our competitors or other third parties from independently developing products, services or technologies that are substantially equivalent or superior to our products. These agreements may be breached, and we may not have adequate remedies for any such breach. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret or know-how is difficult, expensive, and time-consuming, and the outcome is unpredictable. In addition, trade secrets and know-how can be difficult to protect and some courts inside and outside the United States are less willing or unwilling to protect trade secrets and know-how. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor or other third party, we would have no right to prevent them from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor or other third party, our competitive position could be materially and adversely harmed.

In addition, we will not be able to obtain, maintain, protect and enforce our intellectual property or other proprietary rights if we are unable to enforce our rights or if we do not detect infringement, unauthorized use or misappropriation or other violations of our intellectual property and proprietary rights. Despite our precautions, it may be possible for unauthorized third parties to copy our products and use information that we regard as proprietary to create products and services that compete with ours. Some license provisions protecting against unauthorized use, copying, transfer and disclosure of our licensed products may be unenforceable under the laws of certain jurisdictions and foreign countries. The laws of some foreign countries, including countries in which our products are sold, do not protect intellectual property and proprietary rights to the same extent as the laws of the U.S., and mechanisms for enforcement of intellectual property and proprietary rights may be inadequate. Any of our intellectual property rights may be challenged or circumvented by others or invalidated or held unenforceable through administrative process or litigation in the U.S., or in foreign jurisdictions. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming and distracting to management, and could result in the impairment or loss of portions of our intellectual property. To the extent we expand our international activities, our exposure to infringement, misappropriation, unauthorized copying, misuse and other violation of our products, intellectual property and proprietary information may increase. Furthermore, many of our current and potential competitors have the ability to dedicate substantially greater resources to enforce their intellectual property and proprietary rights than we do. Accordingly, despite our

 

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efforts, we may not be able to prevent third parties from infringing, misappropriating or otherwise violating our intellectual property and proprietary rights.

If we fail to obtain, secure, maintain, protect and enforce our intellectual property and proprietary rights, we may lose valuable assets, generate reduced revenue and incur costly litigation to protect our rights, which could seriously harm our brand and adversely impact our business.

We may be sued by third parties for alleged infringement, misappropriation or other violation of their intellectual property or proprietary rights, and we could suffer significant litigation, the outcome of which would be uncertain, incur licensing expenses or be prevented from selling certain products and solutions.

Our commercial success depends, in part, on our ability to develop and commercialize our products and services and use our technology without infringing, misappropriating or otherwise violating the intellectual property or proprietary rights of third parties. There is considerable patent and other intellectual property development activity in our industry. Our competitors, as well as a number of other entities and individuals, may own or claim to own intellectual property relating to our industry. From time to time, third parties may claim that we are infringing, misappropriating or otherwise violating their intellectual property rights or other proprietary rights. We may become subject to preliminary or provisional rulings in the course of any such litigation, including potential preliminary injunctions requiring us to cease some or all of our operations. Similarly, if any litigation to which we are a party is resolved adversely, we may be subject to preliminary or provisional rulings in the course of any such litigation, including being found to be infringing, misappropriating or otherwise violating such rights and/or potential preliminary injunctions requiring us to cease some or all of our operations. If a third party is able to obtain an injunction preventing us from accessing such third-party intellectual property rights, or if we cannot license or develop alternative technology for any infringing aspect of our business, we would be forced to limit or stop sales of our products and platform capabilities or cease business activities related to such intellectual property. In particular, parties commonly referred to as “patent trolls” may own or claim to own intellectual property relating to our industry. In the future, these parties may claim that our applications and underlying technology infringe, misappropriate or otherwise violate their intellectual property rights, even if we are unaware of the intellectual property rights that others may claim cover some or all of our technology or services.

We may be required to spend significant resources in order to monitor and protect our intellectual property rights, and some violations may be difficult or impossible to detect. Actions we may take to enforce our intellectual property rights may be expensive and divert management’s attention away from the ordinary operation of our business, and could result in the impairment or loss of portions of our intellectual property. Our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property rights, and, if such defenses, counterclaims, and countersuits are successful, we could lose valuable intellectual property rights. Any claims or litigation, even if not meritorious, could cause us to incur significant expenses and divert management’s attention from our operations and, if successfully asserted against us, could require that we pay a substantial damage award, including treble damages and attorneys’ fees if we are found to have willfully infringed a patent or other intellectual property right, pay ongoing royalty payments, prevent us from offering our services, require us to change our products, technology or business practices, or require that we comply with other unfavorable terms. Further, in order to avoid such expenses, we could face pressure to settle claims we may believe to be meritless and frivolous. We could also be required to develop non-infringing technology, stop activities or services that use or contain the infringing intellectual property, which could require significant time, effort and expense, and ultimately not be successful, or obtain a license, which may not be available on commercially reasonable terms and may require us to pay substantial license, royalty and/or other payments. We may be unable to develop non-infringing solutions or obtain a license on commercially reasonable terms, or at all. Any license may also be non-exclusive, which would potentially allow other parties, including our competitors, to access the same technology.

 

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It may be necessary for us to initiate administrative proceedings or other litigation in order to determine the scope, enforceability or validity of third-party intellectual property or proprietary rights. We may also decide to settle or otherwise resolve such proceedings or litigation on terms that are unfavorable to us. Even if we were to prevail in such a dispute, any litigation regarding our intellectual property and proprietary rights, regardless of whether third-party claims have merit, could be costly and time-consuming and divert the attention of our management and key personnel from our business operations. Some third parties may be able to sustain the costs of complex litigation more effectively than we can because they have substantially greater resources. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of shares of our common stock. Furthermore, from time to time we may introduce or acquire new products, including in areas where we historically have not competed, which could increase our exposure to patent and other intellectual property claims. We may also be obligated to indemnify our customers or business partners or pay substantial settlement costs, including royalty payments, in connection with any such claim or litigation and to obtain licenses, modify applications or refund fees, if they become subject to third-party claims relating to the infringement, misappropriation or other violation of a third party’s intellectual property rights that we license or otherwise provide, which could be costly. Any of the foregoing could materially and adversely affect our business, operating results and financial condition.

We incorporate technology from third parties into our platform, and our inability to maintain rights to such technology would harm our business and results of operations.

We license software and other technology from third parties that we incorporate into or integrate with our platform. We cannot be certain that our licensors are not infringing the intellectual property rights of third parties or that our licensors have sufficient rights to the licensed intellectual property in all jurisdictions in which we offer our platform. Some of our agreements with our licensors may be terminated for convenience by them, or otherwise provide for a limited term. If we are unable to continue to license any of this technology for any reason, our ability to develop and sell access to our platform containing such technology could be harmed. Similarly, if we are unable to license necessary technology from third parties now, or in the future, on commercially reasonable terms or at all, we may be forced to acquire or develop alternative technology, which we may be unable to do in a commercially feasible manner, or at all, and we may be required to use alternative technology of lower quality or performance standards, which would adversely affect our business, financial condition, operating results, cash flows and prospects.

Some of our applications utilize open source software, and any failure to comply with the terms of one or more of these open source licenses could adversely affect our ability to protect our proprietary software, subject us to litigation and negatively affect our business.

Some of our applications include and incorporate software licensed under open source licenses, which may include, by way of example, Apache, MIT, and GNU. In addition to risks related to general license requirements, usage of open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on the origin of the software or other contractual protections regarding infringement claims or code quality, as it is generally freely accessible, usable and modifiable, and is made available to the general public on an “as-is” basis under the terms of a non-negotiable license. By the terms and conditions of certain open source licenses, we could be required to release the source code of our proprietary software, and to make our proprietary software available to the public, if we combine our proprietary software with open source software in a certain manner, and often require that modifications or derivative works to open source software continue to be licensed under open source licenses. Certain open source licenses mandate that proprietary software, when combined in specific ways with open source software, become subject to the open source license. The terms of various open source licenses have not been interpreted by U.S. or foreign courts, and there is a risk that such licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to provide and market our applications. In the event our portions of our proprietary software are determined to have breached or failed to fully comply with all the terms

 

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and conditions of an open source software license, or if an author or other third party that distributes such open source software were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to publicly release, in source code form, the affected portions of our proprietary source code, to incur significant legal expenses defending against such allegations, could be subject to significant damages, be enjoined from the operation of our platform or other liability, be required to seek costly licenses from third parties to continue providing our platform on terms that are not economically feasible, re-engineer all or a portion of our technologies, to discontinue or delay the provision of our platform if re-engineering could not be accomplished on a timely basis or otherwise be limited in the licensing of our technologies, each of which could reduce or eliminate the value of our technologies and services. Many of the risks associated with usage of open source software cannot be eliminated and any of the foregoing could negatively affect our business, financial condition, results of operations and prospects, and could help our competitors develop products that are similar to or better than ours.

We have indemnity provisions in various agreements with our customers and other third parties potentially expose us to substantial liability for intellectual property infringement, misappropriation and other violation 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 third-party claims of intellectual property infringement, misappropriation or other violation of a third party’s intellectual property rights or damages caused by us to property or persons or other liabilities relating to or arising from our products, services or other contractual obligations. The term of these indemnity provisions generally survives termination or expiration of the applicable agreement. In addition, from time to time, we are requested by customers to indemnify them for breach of confidentiality or violation of applicable law, with respect to personal data. If any such indemnification obligations are triggered, we could face substantial liabilities or be forced to make changes to our products, enter into license agreements, which may not be available on commercially reasonable terms or at all, or terminate our agreements with customers and other third parties and provide refunds. In addition, even claims that ultimately are unsuccessful could result in expenditures of management’s time and other resources. Large indemnity payments could harm our business, operating results and financial condition. Although we contractually limit our liability with respect to such obligations, some of these agreements provide for uncapped liability and the existence of any dispute may have adverse effects on our customer relationships and reputation, and we may incur substantial liability related to them. In addition, provisions regarding limitation of liability in our agreements with customers other third parties may not be enforceable in some circumstances or jurisdictions or may not protect us from claims and related liabilities and costs. Furthermore, any legal claims from customers and other third parties and the existence of a dispute with a customer or other third party may have adverse effects on our customer relationships and reputation.

We may not be able to protect and enforce our trademarks and trade names, or build name recognition in our markets of interest, which could harm our competitive position.

If we apply to register trademarks in the U.S. and other countries, our applications may not be allowed for registration in a timely fashion or at all, and our registered trademarks may not be enforced. Furthermore, the steps that we have already taken to protect our intellectual property may not be sufficient or effective. Even if we do detect violations, we may need to engage in litigation to enforce our rights. In addition, the registered or unregistered trademarks or trade names that we own may be challenged, infringed, circumvented, declared generic, lapsed or determined to be infringing on or dilutive of other marks. We may not be able to protect our rights in these trademarks and trade names, which may make it more difficult to build name recognition.

In addition, opposition or cancellation proceedings may in the future be filed against our trademark applications and registrations, and our trademarks may not survive such proceedings. In addition, third parties may file first for our trademarks in certain countries. If they succeed in registering such trademarks, and if we are not successful in challenging such third-party rights, we may not be able to use these trademarks to market our

 

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products in those countries. If we do not secure registrations for our trademarks, we may encounter more difficulty in enforcing them against third parties than we otherwise would. If we are unable to establish name recognition based on our trademarks and trade names, we may not be able to compete effectively, which could have a material adverse effect on our business, financial condition, operating results, cash flows and prospects.

Risks Related to Our Operations

If we fail to retain key employees and recruit qualified technical and sales personnel, our business could be harmed.

Our success and future growth depend largely upon the continued services of our executive officers, other members of senior management and other key employees. From time to time, there may be changes in our executive management team and to other key employee roles resulting from organizational changes or the hiring or departure of executives or other employees, which could have a serious adverse effect on our business and operating results.

In addition, because our future success is dependent on our ability to continue to enhance and introduce new software and services, we are heavily dependent on our ability to attract and retain qualified engineers with the requisite education, background and industry experience. As we expand our business and permeate international markets, our continued success will also depend, in part, on our ability to attract and retain qualified sales, marketing and operational personnel capable of supporting a larger and more diverse customer base. We are operating in an increasingly competitive market for talent, and, consistent with global economic and industry trends, we have recently experienced increased employee attrition. The loss of the services of a significant number of our engineers or sales people could be disruptive to our development efforts or business relationships. In addition, if any of our key employees join a competitor or decide to otherwise compete with us, we may experience a material disruption of our operations and development plans, which may cause us to lose customers or increase operating expenses as the attention of our remaining senior managers is diverted to recruit replacements for the departed key employees.

Furthermore, foreign nationals who are not U.S. citizens or permanent residents constitute an important part of our U.S. workforce, particularly in the areas of engineering and product development. Our ability to hire and retain these highly skilled workers and their ability to remain and work in the U.S. are impacted by laws and regulations, as well as by procedures and enforcement practices of various government agencies. Changes to U.S. immigration and work authorization laws and regulations, including those recently implemented in the U.S., can be significantly affected by political forces and levels of economic activity. In addition, we will continue to face similar immigration hurdles based on the laws, regulations and policies of the international localities in which we operate. These and any further legislative or administrative changes to immigration or visa laws and regulations, including on an international basis, may impair our ability to hire or retain personnel who are not citizens or permanent residents of the countries in which we maintain operations, increase our operating expenses or negatively impact our ability to deliver our products and services, which may materially adversely affect our business or our ability to expand our operations, including internationally.

We must also continue to retain and motivate existing employees through our compensation practices, company culture and career development opportunities. As COVID-19 continues to transform the daily realities of the modern workforce, we will have to continuously adapt to stay competitive with other technology companies that may offer the compensation and benefits requisite for urban living, without the requirement that employees commute. Conversely, the advent of the remote workforce has exposed a global pool of talent, never before available. If we fail to capitalize on remote working conditions, to remain a competitive employer, to attract new personnel or to retain our current personnel, our business and future growth prospects could be adversely affected.

 

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If we fail to maintain and evolve our purpose-driven culture of innovation, curiosity, passion, customer commitment and employee empathy that we believe are integral to our success, our business will be harmed.

We believe that our success can best be attributed to our purpose-driven culture, as reflected in our core competencies of innovation, curiosity, passion, customer commitment and employee empathy. We also believe that our commitment to our culture, as well as our commitment to building products and services that help provide our customers with information regarding their own workforce and corporate culture, is part of the reason why our customers choose us. As we continue to grow, both organically and through acquisitions of employee teams, and develop the infrastructure associated with being a public company, we will need to maintain our culture among a larger number of employees who are dispersed throughout various geographic regions. Any failure to both maintain and advance our culture could adversely affect our future success, including our ability to retain and recruit personnel, to achieve our corporate objectives, and to quickly develop and deliver new and innovative products.

Our business depends substantially on the level of our customer satisfaction and specifically on customers renewing their agreements with us, purchasing additional products from us, or adding additional users. Any significant decline in our customer satisfaction rates, customer renewal rates or the rates at which our customers purchase additional products or add additional users would harm our future operating results.

In order for us to improve our operating results, it is important that our customer satisfaction remains high, that our customers renew their agreements with us when the initial contract term expires, and that they also purchase additional products or add additional users. Our customers have no obligation to renew their subscriptions after the initial subscription period, and there is no assurance that our customers will renew their subscriptions at the same or a higher level of service, if at all. Every year, some of our customers elect not to renew their agreements with us.

Moreover, certain of our customers have the right to cancel their agreements for convenience, subject to certain notice requirements and, in some cases, early termination fees. Our customer renewal rates may decline or fluctuate as a result of a number of factors, including their satisfaction or dissatisfaction with our products, our customer service, our pricing, the prices of competing products or services, mergers and acquisitions affecting our customer base, reduced hiring by our customers, or reductions in our customers’ spending levels. If our customers do not renew their subscriptions, renew on less favorable terms, fail to purchase additional products or fail to add new users, our revenue may decline and our operating results may be harmed.

Any failure to offer high-quality technical and professional support services by us or our partners may adversely affect our relationships with our customers and could have a material adverse effect on our business, financial condition and results of operations.

In cases where our third-party service providers are engaged either by us or by a customer directly to deploy a product for a customer, our third-party service providers need to have a substantial understanding of such customer’s business so they can configure the product in a manner that complements its existing business processes and integrates the product into its existing systems. It may be difficult for us to manage the timeliness of these deployments and the allocation of personnel and resources by our customers. Failure to successfully manage customer deployments by us or our third-party service providers could harm our reputation and cause us to lose existing customers, face potential customer disputes or limit the rate at which new customers purchase our products.

Once our applications are deployed, our customers depend on our support organization to resolve technical issues relating to our applications. We may be unable to respond quickly enough to accommodate short-term increases in customer demand for support services. We also may be unable to modify the format of our support services to compete with changes in support services provided by our competitors. Increased customer demand for these services, without corresponding revenues, could increase costs and have an adverse effect on our results of operations. In addition, our sales process is highly dependent on our applications and business reputation and on positive recommendations from our existing customers. Any failure to maintain high-quality technical

 

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support, or a market perception that we do not maintain high-quality support, could adversely affect our reputation and our ability to sell our applications to existing and prospective customers, which could have a material adverse effect on our business, financial condition and results of operations.

Our growth depends in part on the success of our strategic relationships with third parties.

We anticipate that we will continue to depend on various third-party relationships in order to grow our business. In addition to growing our indirect sales channels, we intend to pursue additional relationships with other third parties, such as technology and content providers and implementation consultants. Identifying, negotiating and documenting relationships with third parties requires significant time and resources, as does integrating third-party content and technology. Our agreements with distributors and providers of technology, content and consulting services are typically non-exclusive and do not prohibit them from working with our competitors or from offering competing services. Our competitors may be effective in providing incentives to third parties to favor their products or services or to prevent or reduce subscriptions to our products. In addition, these distributors and providers may not perform as expected under our agreements, and we have had and may in the future have, disagreements or disputes with such distributors and providers, which could negatively affect our brand and reputation. Additionally, distributors, vendors or providers may withdraw from the market or radically change their cost structures, which may impact our ability to provide our services, may cause us to be unable to replace the key provider, may affect our ability to continue the relationship with the third-party or materially increase our costs. A global economic slowdown could also adversely affect the businesses of our distributors and it is possible that they may not be able to devote the resources we expect to our relationships with such distributors.

If we are unsuccessful in establishing or maintaining our relationships with these third parties, our ability to compete in the marketplace or to grow our revenue could be impaired and our operating results could suffer. Even if we are successful, we cannot guarantee that these relationships will result in improved operating results.

We rely on third-party computer hardware and software that may be difficult to replace or could cause errors or failures of our service.

In addition to the software we develop, we rely on computer hardware, purchased or leased, and software licensed from third parties in order to deliver our solutions. This hardware and software may not continue to be available on commercially reasonable terms, if at all. Any loss of the right to use any of this hardware or software could result in delays in our ability to provide our solutions until equivalent technology is either developed by us or, if available, identified, obtained and integrated. In addition, errors or defects in third-party hardware or software used in our solutions could result in errors or a failure of our products, which could harm our business.

Our growth depends on our ability to successfully integrate our applications with a variety of third-party technologies.

We need to continuously modify and enhance our applications to keep pace with changes in third-party internet-related hardware, iOS, Android, other mobile-related technologies and other third-party software, communication, browser and database technologies. We must also appropriately balance the application capability demands of our current customers with the capabilities required to address the broader market. Furthermore, uncertainties about the timing and nature of new network platforms or technologies, or modifications to existing platforms or technologies, could increase our product development expenses. Any failure of our applications to operate effectively with future network platforms and other third-party technologies could reduce the demand for our applications, result in customer and end user dissatisfaction, and adversely affect our business and operating results. We may experience difficulties in managing improvements to our systems, processes and controls or in connection with third-party software, which could materially impair our ability to provide solutions or professional services to our customers in a timely manner, cause us to lose customers, limit us to smaller deployments of our solutions or increase our technical support costs.

 

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We depend on data centers and computing infrastructure operated by third parties, and any disruption in these operations could adversely affect our business and operating results.

We currently host our applications and serve our customers from data centers, including locations in the U.S., Canada, Germany and the Netherlands. While we control and have access to our servers and all of the components of our network that are located in these data centers, we do not control certain aspects of these facilities, including their operation, disaster recovery, system management procedures and security, and our review processes for such providers may be insufficient to identify, prevent or mitigate adverse effects. The owners and operators of our current and future hosting facilities do not guarantee that our customers’ access to our solutions will be uninterrupted, error-free or secure. The owners of these data center facilities have limited or no obligation to renew their agreements with us on commercially reasonable terms, or at all. If we are unable to renew these agreements on commercially reasonable terms, or if any of these data center operators are acquired or cease to do business, we may be required to transfer our servers and other infrastructure to new data center facilities, and we may incur significant costs and experience possible service interruptions in connection with doing so.

In addition, we also rely upon third-party hosted infrastructure partners globally, including AWS, to serve customers and operate certain aspects of our services, such as environments for development testing, training, sales demonstrations and production usage. Any disruption of or interference at our hosted infrastructure partners would impact our operations and our business could be adversely impacted.

Our business requires the ongoing availability and uninterrupted operation of internal and external transaction processing systems and services. We or our third-party providers may experience website disruptions, outages and other performance problems. These problems may be caused by a variety of factors, including infrastructure changes, human or software errors, viruses, security attacks, fraud, spikes in client usage and denial of service issues. In some instances, we may not be able to identify the cause or causes of these performance problems within an acceptable period of time. Problems faced by these data center operators or hosted infrastructure partners, with the telecommunications network providers with whom we or they contract or with the systems by which our telecommunications providers allocate capacity among their customers, including us, could adversely affect the experience of our customers or other users. These data center operators or hosted infrastructure partners could decide to close their facilities or cease operations without adequate notice. In addition, any financial difficulties, such as bankruptcy, faced by these data center operators, our hosted infrastructure partners or any of the other 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.

Additionally, if these data center operators or hosted infrastructure partners are unable to keep up with our needs for capacity, this could have an adverse effect on our business. Any changes in third-party service levels at these data centers or at our hosted infrastructure partners or any errors, defects, disruptions or other performance problems with our applications or the infrastructure on which they run could adversely affect our reputation and may damage our customers’ or end users’ stored files or result in lengthy interruptions in our services. Interruptions in our services may adversely affect our reputation and operating results, cause us to issue refunds or service credits to customers for prepaid and unused subscription services, subject us to potential liabilities, result in contract terminations or adversely affect our renewal rates.

Furthermore, prolonged interruption in the availability, or reduction in the speed or other functionality, of our products or services could materially harm our reputation and business. Frequent or persistent interruptions in our products and services could cause clients to believe that our products and services are unreliable, leading them to switch to our competitors or to avoid our products and services, and could permanently harm our reputation and business.

 

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We have experienced rapid growth, and if we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service and operational controls, or adequately address competitive challenges.

We have experienced, and are continuing to experience, a period of rapid growth in our customers, headcount and operations. We anticipate that we will continue to expand our customer base, headcount and operations both domestically and abroad. This growth has placed, and future growth will place, a significant strain on our management, administrative, operational and financial infrastructure. Our success will depend in part on our ability to manage this growth effectively and to scale our operations without diminishing the level of service we provide. To manage the expected growth of our operations and personnel, including in connection with the talent economy, we will need to continue to improve our operational, financial and management controls as well as our reporting systems and procedures. We will also have to anticipate the necessary expansion of our relationship management, implementation, local and enterprise-wide customer service and other personnel to support our growth and achieve high levels of customer service and satisfaction. Failure to effectively manage growth could result in harm to our corporate culture, difficulty or delays in deploying customers, declines in quality or customer satisfaction, difficulties retaining and competing for customers, increases in costs, impediments to introducing new features, or other operational difficulties, and any of these difficulties could adversely impact our business performance and operating results.

Our principal asset is our interest in iCIMS, Inc., and we are, and expect to continue to be, dependent upon the results of operations and cash flows of iCIMS, Inc. and its consolidated subsidiaries and distributions we receive from iCIMS, Inc.

We are, and we expect to continue to be, a holding company with no material assets other than our ownership of the capital stock of iCIMS, Inc. and other subsidiaries, which we control. As such, we will have no independent means of generating revenue or cash flow, and our ability to pay our taxes and operating expenses or declare and pay dividends in the future, if any, will be dependent upon the results of operations and cash flows of iCIMS, Inc. and other subsidiaries, and distributions we receive therefrom. There can be no assurance that our direct and indirect subsidiaries will generate sufficient cash flow to distribute funds to us or that applicable state law and contractual restrictions, including negative covenants in any existing or future debt instruments, will permit such distributions. In addition, in the event that our Board were to approve a sale of all of our direct and indirect interests in iCIMS, Inc. and other subsidiaries, your equity interest would be in a holding company with no material assets other than those assets and other consideration received in such transaction.

Risks Related to Our International Operations

Sales to customers outside the U.S. and our international presence exposes us to risks inherent in global operations.

A key element of our growth strategy is to develop a worldwide customer base. Operating globally requires significant resources and management attention and will subject us to regulatory, economic and political risks that are different from those in the U.S. Our international expansion efforts may not be successful in creating demand for our applications outside of the U.S. or in effectively selling subscriptions to our applications in all of the markets we enter. In addition, we will face risks in doing business on a global scale that could adversely affect our business, including:

 

   

the need to localize and adapt our applications for specific countries, including translation into foreign languages, localization of contracts for different legal jurisdictions and associated expenses;

 

   

the need for a go-to-market strategy that aligns application management efforts and the development of supporting infrastructure;

 

   

stricter data privacy laws including requirements that customer data be stored and processed in a designated territory and obligations on us as a data processor;

 

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difficulties in appropriately staffing and managing foreign operations and providing appropriate compensation for local markets;

 

   

ensuring compliance with foreign employment and labor laws for our international workforce;

 

   

difficulties in leveraging executive presence and company culture globally;

 

   

different pricing environments, longer sales cycles, longer trade receivables payment cycles and collections issues;

 

   

new and different sources of competition;

 

   

potentially weaker protection for intellectual property and other proprietary or legal rights than in the U.S. and practical difficulties in enforcing intellectual property and other proprietary rights;

 

   

laws, customs and business practices favoring local competitors;

 

   

restrictive governmental actions focused on cross-border trade, such as import and export restrictions, duties, quotas, tariffs, trade disputes and barriers or sanctions that may prevent us from offering certain portions of our products or services to a particular market, may increase our operating costs or may subject us to monetary fines or penalties in case of unintentional noncompliance due to factors beyond our control;

 

   

compliance challenges related to the complexity of multiple, conflicting and changing governmental laws and regulations, including employment, tax, privacy, intellectual property and data protection laws and regulations;

 

   

increased compliance costs related to government regulatory reviews or audits, including those related to international cybersecurity requirements;

 

   

increased financial accounting and reporting burdens and complexities;

 

   

restrictions on the transfer of funds;

 

   

ensuring compliance with export controls, economic sanctions and anti-corruption laws, including the Foreign Corrupt Practices Act and UK Bribery Act;

 

   

the effects of currency fluctuations on our revenues and expenses and customer demand for our services;

 

   

the cost and potential outcomes of any international claims or litigation;

 

   

adverse tax consequences and tax rulings; and

 

   

unstable economic and political conditions.

Any of the above factors may negatively impact our ability to sell our applications and offer services globally, reduce our competitive position in foreign markets, increase our costs of global operations and reduce demand for our applications and services from global customers. Additionally, the majority of our international costs are denominated in local currencies and we anticipate that over time an increasing portion of our sales contracts outside the U.S. may be denominated in local currencies. Therefore, fluctuations in the value of the U.S. dollar and foreign currencies may impact our operating results when translated into U.S. dollars. Such fluctuations may also impact our ability to predict our future results accurately.

We have made significant investments in our operations to support additional growth, such as acquiring other companies or their assets and establishing and broadening our international operations in order to expand our business and execute our international operations strategy. We have made substantial investments in recent years to increase our international operations, and we expect to continue to invest to grow our international sales and global brand awareness. We have completed multiple acquisitions in past years and expect these acquisitions will continue to increase our operating expenses in future periods. These investments may not yield increased revenue, and even if they do, the increased revenue may not offset the amount of the investments. We also expect to continue to pursue acquisitions in order to expand our presence in current markets or new markets, many or all

 

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of which may increase our operating costs more than our revenue. As a result of any of these factors, our operating income could fluctuate and may continue to decline as a percentage of revenue relative to our prior annual periods.

Risks Related to Taxes

We are a multinational organization faced with increasingly complex tax issues in many jurisdictions, and we could be obligated to pay additional taxes in various jurisdictions.

As a multinational organization, we are subject to taxation in several jurisdictions around the world with increasingly complex tax laws, the application of which can be uncertain. The amount of taxes we pay in these jurisdictions could increase substantially as a result of changes in the applicable tax principles, including increased tax rates, new tax laws or revised interpretations of existing tax laws and precedents, which could have a material adverse effect on our liquidity and operating results. In addition, the authorities in these jurisdictions could review our tax returns and impose additional tax, interest and penalties, and the authorities could claim that various withholding requirements apply to us or our subsidiaries or assert that benefits of tax treaties are not available to us or our subsidiaries, any of which could have a material impact on us and our operating results. If we are selected for future examinations and it is asserted that we have taken incorrect tax positions, we could be subject to additional taxes, interest and penalties.

Income tax accounting often involves complex issues, and judgment is required in determining our worldwide provision for income taxes. We are regularly subject to tax audits in these jurisdictions. We regularly assess the likely outcomes of these audits to determine the appropriateness of our tax reserves as well as our future tax liabilities. In addition, the application of withholding tax, value added tax, goods and services tax, sales tax and other non-income taxes is not always clear and we may be subject to audits relating to such withholding or non-income taxes. We believe that our tax positions are reasonable and our tax reserves are adequate to cover any potential liability. However, tax authorities in these jurisdictions may challenge our position. If any of these tax authorities successfully challenge our positions, we may be liable for additional tax, penalties and interest in excess of any reserves established, which may have a significant impact on our results and operations and future cash flow.

The December 2017 comprehensive tax reform law could adversely affect our business and financial condition.

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law. The Tax Act significantly revised the Internal Revenue Code of 1986, as amended (the “Code”). The Tax Act, as amended by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, among other things, contained significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax deduction for interest expense to 30% of adjusted taxable income, limitations on the deductibility of executive compensation, limitation of the deduction for net operating losses generated in taxable years beginning after December 31, 2017 to 80% of current year taxable income for taxable years beginning after December 31, 2020, elimination of carrybacks of net operating losses arising in taxable years ending after December 31, 2020, one time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject to certain important exceptions), immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits. It is uncertain if and to what extent various states will conform to the Tax Act. The Tax Act’s revised international rules, including rules regarding “global intangible low-taxed income,” “foreign derived intangible income” and the “base erosion anti-avoidance tax,” are highly complex and may affect our financial condition as additional interpretive guidance is issued.

Our ability to use net operating loss carryforwards to reduce future tax payments may be subject to limitations.

Our federal and state net operating loss carryforwards generated in taxable years ending on or prior to December 31, 2017, could expire unused and be unavailable to offset future income tax liabilities. Under the Tax

 

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Act, as amended by the CARES Act among other things, federal net operating losses incurred in taxable years ending after December 31, 2017 may be carried forward indefinitely, but are limited to 80% of current year taxable income for taxable years beginning after December 31, 2020. In addition, under Sections 382 and 383 of the Code, as amended, if a corporation undergoes an “ownership change” (generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period), the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes (such as research tax credits) to offset its post-change income may be limited. We may experience ownership changes in the future and subsequent shifts in our stock ownership. In addition, it is possible that we have experienced one or more ownership changes in the past. As a result, we may be limited in the portion of net operating loss carryforwards that we can use in the future to offset taxable income for U.S. federal income tax purposes.

Risks Related to Being a Public Company

We are an “emerging growth company” and we expect to elect to comply with reduced public company reporting requirements, which could make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we are eligible for certain exemptions from various public company reporting requirements. These exemptions include, but are not limited to, (i) not being required to comply with the auditor attestation requirements of Section 404 of Sarbanes-Oxley, (ii) reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements, (iii) exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved and (iv) not being required to provide audited financial statements for the year ended December 31, 2018, or five years of Selected Consolidated Financial Data, in this prospectus. We could be an emerging growth company for up to five years after the first sale of our common stock pursuant to an effective registration statement under the Securities Act, which fifth anniversary will occur in 2026. However, if certain events occur prior to the end of such five-year period, including if we become a “large accelerated filer,” our annual gross revenue exceeds $1.07 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period, we would cease to be an emerging growth company prior to the end of such five-year period. We have made certain elections with regard to the reduced disclosure obligations regarding executive compensation in this prospectus and may elect to take advantage of other reduced disclosure obligations in future filings. As a result, the information that we provide to holders of our common stock may be different than you might receive from other public reporting companies in which you hold equity interests. We cannot predict if investors will find our common stock less attractive as a result of our reliance on these exemptions. If some investors find our common stock less attractive as a result of any choice we make to reduce disclosure, there may be a less active trading market for our common stock and the market price for our common stock may be more volatile.

Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We intend to take advantage of the longer phase-in periods for the adoption of new or revised financial accounting standards under the JOBS Act until we are no longer an emerging growth company. Our election to use the phase-in periods permitted by this election may make it difficult to compare our financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the longer phase-in periods permitted under the JOBS Act and who will comply with new or revised financial accounting standards. If we were to subsequently elect instead to comply with public company effective dates, such election would be irrevocable pursuant to the JOBS Act.

The requirements of being a public company may strain our resources and distract our management, which could make it difficult to manage our business, particularly after we are no longer an “emerging growth company”.

As a public company, we will incur legal, accounting and other expenses that we did not previously incur. We will become subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the

 

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Exchange Act, and the Sarbanes-Oxley Act, the listing requirements of the NASDAQ and other applicable securities rules and regulations. Compliance with these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources, particularly after we are no longer an “emerging growth company”. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business, financial condition and results of operations. The Sarbanes-Oxley Act requires, among other things, that we establish and maintain effective internal controls and procedures for financial reporting. Furthermore, the need to establish the corporate infrastructure demanded of a public company may divert our management’s attention from implementing our growth strategy, which could prevent us from improving our business, financial condition and results of operations. We have made, and will continue to make, changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a public company. However, the measures we take may not be sufficient to satisfy our obligations as a public company. In addition, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to incur substantial costs to maintain the same or similar coverage. These additional obligations could have a material adverse effect on our business, financial condition and results of operations.

In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time-consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve overtime as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of our management’s time and attention from sales-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and could have a material adversely effect on our business, financial condition and results of operations.

As a result of becoming a public company, we will be obligated to develop and maintain proper and effective internal control over financial reporting in order to comply with Section 404 of the Sarbanes-Oxley Act. We may not complete our analysis of our internal control over financial reporting in a timely manner, or these internal controls may not be determined to be effective, which may adversely affect investor confidence in us and, as a result, the value of our common stock.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with the generally accepted accounting principles in the U.S., or GAAP. We are in the very early stages of the costly and challenging process of compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404 of the Sarbanes-Oxley Act. We may not be able to complete our evaluation, testing and any required remediation prior to becoming a public company or in a timely manner thereafter. If we are unable to assert that our internal control over financial reporting is effective, we could lose investor confidence in the accuracy and completeness of our financial reports, which would cause the price of our common stock to decline, and we may be subject to investigation or sanctions by the SEC.

We will be required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting as of the end of the fiscal year that coincides with the filing of our second annual report on Form 10-K. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over

 

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financial reporting. We will also be required to disclose changes made in our internal control and procedures on a quarterly basis. However, our independent registered public accounting firm will not be required to report on the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act until the later of the year following our first annual report required to be filed with the SEC, or the date we are no longer an “emerging growth company” as defined in the JOBS Act if we take advantage of the exemptions contained in the JOBS Act. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating.

Additionally, the existence of any material weakness or significant deficiency would require management to devote significant time and incur significant expense to remediate any such material weaknesses or significant deficiencies and management may not be able to remediate any such material weaknesses or significant deficiencies in a timely manner. The existence of any material weakness in our internal control over financial reporting could also result in errors in our financial statements that could require us to restate our financial statements, cause us to fail to meet our reporting obligations and cause shareholders to lose confidence in our reported financial information, all of which could materially and adversely affect our business and stock price. To comply with the requirements of being a public company, we may need to undertake various costly and time-consuming actions, such as implementing new internal controls and procedures and hiring accounting or internal audit staff, which may adversely affect our business, financial condition and results of operations.

Our management team has limited experience managing a public company.

Many members of our management team have limited experience managing a publicly traded company, interacting with public company investors and complying with the increasingly complex laws, rules and regulations that govern public companies. As a public company, we will be subject to significant obligations relating to reporting, procedures and internal controls, and our management team may not successfully or efficiently manage such obligations. These obligations and scrutiny will require significant attention from our management and could divert their attention away from the day-to-day management of our business, which could adversely affect our business, financial condition and results of operations.

Risks Related to Our Indebtedness

Our indebtedness, if any, could adversely affect our business and growth prospects.

On September 12, 2018, our indirect subsidiaries, Cersei Parent Holdings, LLC and iCIMS, Inc., and certain of their subsidiaries entered into a credit agreement with various lenders, or the Credit Agreement, providing us with a term facility in the aggregate principal amount of $400.0 million, or the Term Loan Facility, and the ability to draw additional funds through a revolving facility, or the Revolving Credit Facility, of up to $25.0 million, with a maturity date of September 12, 2024. In June 2019, we amended the Credit Agreement and increased the Term Loan Facility borrowing by an additional $65.0 million to fund the acquisition of Jibe, Inc., or Jibe. In November 2020, we further amended the Credit Agreement and increased the Term Loan Facility by an additional $70.0 million to fund the acquisition of Easyrecrue. The Revolving Credit Facility was undrawn at inception and through December 9, 2020 until we withdrew $25.0 million to fund the acquisition of Altru.

All obligations under the Credit Agreement are secured by first-priority perfected security interests in substantially all of our assets and the assets of our domestic subsidiaries, subject to permitted liens and other exceptions. Our indebtedness, or any additional indebtedness we may incur, could require us to divert funds identified for other purposes for debt service and impair our liquidity position. If we cannot generate sufficient cash flow from operations to service our existing or future debt, we may need to refinance such debt, dispose of assets or issue equity to obtain necessary funds. In such event, we may not be able to take any of these actions on a timely basis, on terms satisfactory to us or at all.

 

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Our existing and future indebtedness, the cash flow needed to satisfy such debt and the covenants contained in our Credit Agreement, and the financing documentation governing any of our future indebtedness, could have important consequences, including:

 

   

limiting funds otherwise available for financing our capital expenditures by requiring us to dedicate a portion of our cash flows from operations to the repayment of debt and the interest on this debt;

 

   

limiting our ability to incur additional indebtedness;

 

   

limiting our ability to capitalize on significant business opportunities;

 

   

making us more vulnerable to rising interest rates; and

 

   

making us more vulnerable in the event of a downturn in our business.

Fluctuations in interest rates can increase borrowing costs. Increases in interest rates may directly impact the amount of interest we are required to pay and reduce earnings accordingly. In addition, developments in tax policy, such as the disallowance of tax deductions for interest paid on outstanding indebtedness, could have an adverse effect on our liquidity and our business, financial conditions and results of operations. Further, our Credit Agreement contains customary affirmative and negative covenants and certain restrictions on operations that could impose operating and financial limitations and restrictions on us, including restrictions on our ability to enter into particular transactions and to engage in other actions that we may believe are advisable or necessary for our business. Our Term Loan Facility is also subject to mandatory prepayments in certain circumstances, including a requirement to make a prepayment with a certain percentage of our excess cash flow. This excess cash flow payment, and other future required prepayments, will reduce our cash available for investment in our business.

Interest rates under the Credit Agreement are based partly on the London interbank offered rate, or LIBOR, the basic rate of interest used in lending between banks on the London interbank market and is widely used as a reference for setting the interest rate on loans globally. LIBOR is currently expected to be phased out by the middle of 2023. The U.S. Federal Reserve has begun publishing a Secured Overnight Funding Rate which is currently intended to serve as an alternative reference rate to LIBOR. If the method for calculation of LIBOR changes, if LIBOR is no longer available, or if lenders have increased costs due to changes in LIBOR, we may suffer from potential increases in interest rates on our borrowings. Further, we may need to renegotiate our Credit Agreement to replace LIBOR with the new standard that is established.

We expect to use cash flow from operations to meet current and future financial obligations, including funding our operations, debt service requirements and capital expenditures. The ability to make these payments depends on our financial and operating performance, which is subject to prevailing economic, industry and competitive conditions and to certain financial, business, economic and other factors beyond our control.

We are able to incur substantial additional indebtedness and may be able to make certain restricted payments, which could further exacerbate the risks associated with our current indebtedness.

We are able to incur significant additional indebtedness. Although our Credit Agreement contains restrictions on the incurrence of indebtedness and liens, these restrictions are subject to a number of important qualifications and exceptions, and the additional indebtedness and liens incurred in compliance with these restrictions could be substantial.

Our Credit Agreement permits us to incur certain additional indebtedness, including liabilities that do not constitute indebtedness as defined in the Credit Agreement. We may also consider investments in joint ventures or acquisitions, which may increase our indebtedness. In addition, the Credit Agreement does not restrict our ability to incur additional indebtedness outside of the credit group set forth in the Credit Agreement without regard to the restrictions set forth in the Credit Agreement. If new debt is added to our currently anticipated indebtedness levels, the related risks that we face could intensify.

 

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We may not be able to generate sufficient cash flow to service all of our indebtedness, and may be forced to take other actions to satisfy our obligations under such indebtedness, which may not be successful.

Our ability to make any future scheduled payments or to refinance any future outstanding debt obligations depends on our financial and operating performance, which will be affected by prevailing economic, industry and competitive conditions (including the COVID-19 pandemic) as well as financial, business and other factors beyond our control. We may not be able to maintain a sufficient level of cash flow from operating activities to permit us to pay the principal, premium, if any, and interest on our indebtedness. Any failure to make payments of interest and principal on any of our future outstanding indebtedness on a timely basis would likely result in a reduction of our credit rating, which would also harm our ability to incur additional indebtedness.

If our cash flows and capital resources are insufficient to fund any of our future debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital or seek to restructure or refinance our indebtedness. Any such refinancing could be at higher interest rates and may require us to comply with more onerous covenants. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. In the absence of such cash flows and resources, we could face substantial liquidity problems and might be required to sell material assets or operations to attempt to meet our debt service obligations. Our Credit Agreement includes certain restrictions on our ability to conduct asset sales and/or use the proceeds from asset sales for general corporate purposes. We may not be able to consummate these asset sales to raise capital or sell assets at prices and on terms that we believe are fair and any proceeds that we do receive may not be adequate to meet any debt service obligations then due. If we cannot meet our debt service obligations, the holders of our indebtedness may accelerate such indebtedness and, to the extent such indebtedness is secured, foreclose on our assets. In such an event, we may not have sufficient assets to repay all of our indebtedness.

The terms of our Credit Agreement restrict our current and future operations, particularly our ability to respond to changes or to take certain actions.

Our Credit Agreement contains a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interests, including restrictions on our ability to:

 

   

incur certain additional indebtedness or other contingent obligations;

 

   

pay dividends on or make distributions in respect of capital stock or repurchase or redeem capital stock;

 

   

prepay, redeem or repurchase certain indebtedness;

 

   

make loans and investments;

 

   

sell, lease, assign, transfer or otherwise dispose of assets, including capital stock of restricted subsidiaries;

 

   

create liens;

 

   

enter into transactions with affiliates;

 

   

enter into agreements restricting the ability of our subsidiaries to pay dividends; and

 

   

consolidate, merge or sell all or substantially all of our assets.

You should read the discussion under the heading “Description of Certain Indebtedness” for further information about these and other applicable covenants.

The restrictive covenants in the Credit Agreement require us to maintain specified financial ratios and satisfy other financial condition tests to the extent applicable. Our ability to meet those financial ratios and tests can be affected by events beyond our control.

 

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A breach of the covenants or restrictions under the Credit Agreement could result in an event of default under such agreement. Such an event of default may allow the creditors to accelerate the related debt, which may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. In the event the holders of our indebtedness accelerate the repayment, we may not have sufficient assets to repay that indebtedness or be able to borrow sufficient funds to refinance it. Even if we are able to obtain new financing, it may not be on commercially reasonable terms or on terms acceptable to us. As a result of these restrictions, we may be:

 

   

limited in how we conduct our business;

 

   

unable to raise additional debt or equity financing to operate during general economic or business downturns; or

 

   

unable to compete effectively or to take advantage of new business opportunities.

These restrictions, along with similar restrictions that may be contained in agreements evidencing or governing other future indebtedness, may affect our ability to grow in accordance with our growth strategy.

We may be unable to refinance our indebtedness.

We may need to refinance all or a portion of our indebtedness before maturity. We cannot assure you that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all. There can be no assurance that we will be able to obtain sufficient funds to enable us to repay or refinance our debt obligations on commercially reasonable terms, or at all.

Our failure to raise additional capital or generate cash flows necessary to expand our operations and invest in new technologies in the future could reduce our ability to compete successfully and harm our results of operations.

We may need to raise additional funds, and we may not be able to obtain additional debt or equity financing on favorable terms or at all. If we raise additional equity financing, our security holders may experience significant dilution of their ownership interests. If we engage in additional debt financing, we may be required to accept terms that restrict our ability to incur additional indebtedness, force us to maintain specified liquidity or other ratios or restrict our ability to pay dividends or make acquisitions. If we need additional capital and cannot raise it on acceptable terms, or at all, we may not be able to, among other things:

 

   

develop and enhance our products;

 

   

continue to expand our product development, sales and marketing organizations;

 

   

hire, train and retain employees;

 

   

respond to competitive pressures or unanticipated working capital requirements; or

 

   

pursue acquisition opportunities.

In addition, our Credit Agreement also limits our ability to incur certain additional debt and therefore we may need to amend our Credit Agreement or issue additional equity to raise capital. If we issue additional equity, your interest in us will be diluted.

Risks Related to Ownership of Our Common Stock

Vista controls us, and its interests may conflict with ours or yours in the future.

Immediately following this offering, Vista will beneficially own approximately     % of our common stock, which means that, based on its percentage voting power held after the offering, Vista will control the vote of all

 

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matters submitted to a vote of our Board or shareholders, which will enable it to control the election of the members of the Board and all other corporate decisions. In addition, our bylaws will provide that Vista will have the right to designate the Chairman of the Board for so long as Vista beneficially owns at least 30% or more of the voting power of the then outstanding shares of our capital stock then entitled to vote generally in the election of directors. Even when Vista ceases to own shares of our stock representing a majority of the total voting power, for so long as Vista continues to own a significant portion of our stock, Vista will still be able to significantly influence the composition of our Board, including the right to designate the Chairman of our Board, and the approval of actions requiring shareholder approval. Accordingly, for such period of time, Vista will have significant influence with respect to our management, business plans and policies, including the appointment and removal of our officers, decisions on whether to raise future capital and amending our charter and bylaws, which govern the rights attached to our common stock. In particular, for so long as Vista continues to own a significant percentage of our stock, Vista will be able to cause or prevent a change of control of us or a change in the composition of our Board, including the selection of the Chairman of our Board, and could preclude any unsolicited acquisition of us. The concentration of ownership could deprive you of an opportunity to receive a premium for your shares of common stock as part of a sale of us and ultimately might affect the market price of our common stock.

In addition, in connection with this offering, we will enter into a director nomination agreement with Vista that provides Vista the right to designate: (i) all of the nominees for election to our Board for so long as Vista beneficially owns 40% or more of the total number of shares of our common stock it owns as of the date of this offering; (ii) a number of directors (rounded up to the nearest whole number) equal to 40% of the total directors for so long as Vista beneficially owns at least 30% and less than 40% of the total number of shares of our common stock it owns as of the date of this offering; (iii) a number of directors (rounded up to the nearest whole number) equal to 30% of the total directors for so long as Vista beneficially owns at least 20% and less than 30% of the total number of shares of our common stock it owns as of the date of this offering; (iv) a number of directors (rounded up to the nearest whole number) equal to 20% of the total directors for so long as Vista beneficially owns at least 10% and less than 20% of the total number of shares of our common stock it owns as of the date of this offering; and (v) one director for so long as Vista beneficially owns at least 5% and less than 10% of the total number of shares of our common stock it owns as of the date of this offering. The director nomination agreement will also provide that Vista may assign such right to a Vista affiliate. The director nomination agreement will prohibit us from increasing or decreasing the size of our Board without the prior written consent of Vista. See “Certain Relationships and Related Party Transactions—Related Party Transactions—Director Nomination Agreement” for more details with respect to the director nomination agreement. In addition, our amended and restated bylaws will provide that Vista has the right to designate the Chairman of the Board for so long as Vista beneficially owns at least 30% or more of the voting power. In connection with this offering, we will also grant customary demand and piggyback registration rights to Vista. See “Certain Relationships and Related Party Transactions—Registration Rights Agreement.”

Vista and its affiliates engage in a broad spectrum of activities, including investments in the information and business services industry generally. In the ordinary course of their business activities, Vista and its affiliates may engage in activities where their interests conflict with our interests or those of our other shareholders, such as investing in or advising businesses that directly or indirectly compete with certain portions of our business or are suppliers or customers of ours. Our certificate of incorporation to be effective in connection with the closing of this offering will provide that none of Vista, any of its affiliates or any director who is not employed by us (including any non-employee director who serves as one of our officers in both his director and officer capacities) or its affiliates will have any duty to refrain from engaging, directly or indirectly, in the same business activities or similar business activities or lines of business in which we operate. Vista also may pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us. In addition, Vista may have an interest in pursuing acquisitions, divestitures and other transactions that, in its judgment, could enhance its investment, even though such transactions might involve risks to you.

 

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Upon listing of our shares on the Nasdaq Global Select Market, we will be a “controlled company” within the meaning of the rules of NASDAQ and, as a result, we qualify for, and currently rely on, exemptions from certain corporate governance requirements. You will not have the same protections as those afforded to stockholders of companies that are subject to such governance requirements.

After completion of this offering, the Vista Funds will continue to control a majority of the voting power of our outstanding common stock. As a result, we will be a “controlled company” within the meaning of the corporate governance standards of NASDAQ. Under these rules, a company of which more than 50% of the voting power for the election of directors is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including:

 

   

the requirement that a majority of our Board consist of independent directors;

 

   

the requirement that we have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;

 

   

the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

 

   

the requirement for an annual performance evaluation of the nominating and corporate governance and compensation committees.

Following this offering, we intend to utilize these exemptions. As a result, we may not have a majority of independent directors on our Board, our Compensation and Nominating Committee may not consist entirely of independent directors and our Compensation and Nominating Committee may not be subject to annual performance evaluations. Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of                 .

An active, liquid trading market for our common stock may not develop, which may limit your ability to sell your shares.

Prior to this offering, there was no public market for our common stock. Although we have been approved to list our common stock on                  under the symbol “                ,” an active trading market for our shares may never develop or be sustained following this offering. The initial public offering price will be determined by negotiations between us and the underwriters and may not be indicative of market prices of our common stock that will prevail in the open market after the offering. A public trading market having the desirable characteristics of depth, liquidity and orderliness depends upon the existence of willing buyers and sellers at any given time, such existence being dependent upon the individual decisions of buyers and sellers over which neither we nor any market maker has control. The failure of an active and liquid trading market to develop and continue would likely have a material adverse effect on the value of our common stock. The market price of our common stock may decline below the initial public offering price, and you may not be able to sell your shares of our common stock at or above the price you paid in this offering, or at all. An inactive market may also impair our ability to raise capital to continue to fund operations by issuing shares and may impair our ability to acquire other companies or technologies by using our shares as consideration.

Provisions of our corporate governance documents could make an acquisition of us more difficult and may prevent attempts by our shareholders to replace or remove our current management, even if beneficial to our shareholders.

In addition to Vista’s beneficial ownership of                 % of our common stock after this offering, our certificate of incorporation and bylaws to be effective in connection with the closing of this offering and the

 

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Delaware General Corporation Law, or the DGCL, contain provisions that could make it more difficult for a third party to acquire us, even if doing so might be beneficial to our shareholders. Among other things:

 

   

these provisions allow us to authorize the issuance of undesignated preferred stock, the terms of which may be established and the shares of which may be issued without shareholder approval, and which may include supermajority voting, special approval, dividend, or other rights or preferences superior to the rights of shareholders;

 

   

these provisions provide for a classified board of directors with staggered three-year terms;

 

   

these provisions provide that, at any time when Vista beneficially owns, in the aggregate, less than 40% in voting power of our stock entitled to vote generally in the election of directors, directors may only be removed for cause, and only by the affirmative vote of holders of at least 66 2/3% in voting power of all the then-outstanding shares of our stock entitled to vote thereon, voting together as a single class;

 

   

these provisions prohibit shareholder action by written consent from and after the date on which Vista beneficially owns, in the aggregate, less than 35% in voting power of our stock entitled to vote generally in the election of directors;

 

   

these provisions provide that for as long as Vista beneficially owns, in the aggregate, at least 50% in voting power of our stock entitled to vote generally in the election of directors, any amendment, alteration, rescission or repeal of our bylaws by our shareholders will require the affirmative vote of a majority in voting power of the outstanding shares of our stock and at any time when Vista beneficially owns, in the aggregate, less than 50% in voting power of all outstanding shares of our stock entitled to vote generally in the election of directors, any amendment, alteration, rescission or repeal of our bylaws by our shareholders will require the affirmative vote of the holders of at least 66 2/3% in voting power of all the then-outstanding shares of our stock entitled to vote thereon, voting together as a single class; and

 

   

these provisions establish advance notice requirements for nominations for elections to our Board or for proposing matters that can be acted upon by shareholders at shareholder meetings; provided, however, at any time when Vista beneficially owns, in the aggregate, at least 10% in voting power of our stock entitled to vote generally in the election of directors, such advance notice procedure will not apply to it.

Our certificate of incorporation to be effective in connection with the closing of this offering will contain a provision that provides us with protections similar to Section 203 of the DGCL, and will prevent us from engaging in a business combination with a person (excluding Vista and any of its direct or indirect transferees and any group as to which such persons are a party) who acquires at least 15% of our common stock for a period of three years from the date such person acquired such common stock, unless board or shareholder approval is obtained prior to the acquisition. See “Description of Capital Stock—Anti-Takeover Effects of Our Certificate of Incorporation and Our Bylaws”. These provisions could discourage, delay or prevent a transaction involving a change in control of our company. These provisions could also discourage proxy contests and make it more difficult for you and other shareholders to elect directors of your choosing and cause us to take other corporate actions you desire, including actions that you may deem advantageous, or negatively affect the trading price of our common stock. In addition, because our Board is responsible for appointing the members of our management team, these provisions could in turn affect any attempt by our shareholders to replace current members of our management team.

These and other provisions in our certificate of incorporation, bylaws and Delaware law could make it more difficult for shareholders or potential acquirers to obtain control of our Board or initiate actions that are opposed by our then-current Board, including delay or impede a merger, tender offer or proxy contest involving our company. The existence of these provisions could negatively affect the price of our common stock and limit opportunities for you to realize value in a corporate transaction.

For information regarding these and other provisions, see “Description of Capital Stock”.

 

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Our certificate of incorporation will designate the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation that may be initiated by our shareholders, which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us.

Pursuant to our certificate of incorporation to be effective in connection with the closing of this offering, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our shareholders, (3) any action asserting a claim against us arising pursuant to any provision of the DGCL, our certificate of incorporation or our bylaws or (4) any other action asserting a claim against us that is governed by the internal affairs doctrine; provided that for the avoidance of doubt, the forum selection provision that identifies the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation, including any “derivative action,” will not apply to suits to enforce a duty or liability created by Securities Act, the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. Our certificate of incorporation will further provide that any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock is deemed to have notice of and consented to the provisions of our certificate of incorporation described above. See “Description of Capital Stock—Exclusive Forum”. The forum selection clause in our certificate of incorporation may have the effect of discouraging lawsuits against us or our directors and officers and may limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us. Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business, financial condition and results of operations.

If you purchase shares of common stock in this offering, you will suffer immediate and substantial dilution of your investment.

The initial public offering price of our common stock is substantially higher than the pro forma net tangible book value per share of our common stock. Therefore, if you purchase shares of our common stock in this offering, you will pay a price per share that substantially exceeds our pro forma net tangible book value per share after this offering. Based on an assumed initial public offering price of $                 per share, the mid-point of the price range set forth on the cover page of this prospectus, you will experience immediate dilution of $                 per share, representing the difference between our pro forma net tangible book value per share after giving effect to this offering and the initial public offering price. In addition, purchasers of common stock in this offering will have contributed     % of the aggregate price paid by all purchasers of our common stock but will own only approximately     % of our common stock outstanding after this offering. See “Dilution” for more detail.

Our management will have significant flexibility in using the net proceeds of this offering, and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately.

We intend to use the net proceeds of this offering to                  and the remainder for general corporate purposes, including working capital. We may also use a portion of the net proceeds to acquire or invest in businesses, products and technologies that we believe will complement our business.

However, depending on future developments and circumstances, we may use some of the proceeds for other purposes. We do not have more specific plans for the net proceeds from this offering, other than                  as described above. Therefore, our management will have significant flexibility in applying most of the net proceeds we receive from this offering. The net proceeds could be applied in ways that do not improve our operating results. The actual amounts and timing of these expenditures will vary significantly depending on a number of factors, including the amount of cash used in or generated by our operations. See “Use of Proceeds.”

 

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Our operating results and stock price may be volatile, and the market price of our common stock after this offering may drop below the price you pay.

Our quarterly operating results are likely to fluctuate in the future. In addition, securities markets worldwide have experienced, and are likely to continue to experience, significant price and volume fluctuations. This market volatility, as well as general economic, market or political conditions, could subject the market price of our shares to wide price fluctuations regardless of our operating performance. Our operating results and the trading price of our shares may fluctuate in response to various factors, including:

 

   

market conditions in our industry or the broader stock market;

 

   

actual or anticipated fluctuations in our quarterly financial and operating results;

 

   

introduction of new products or services by us or our competitors;

 

   

issuance of new or changed securities analysts’ reports or recommendations;

 

   

sales, or anticipated sales, of large blocks of our stock;

 

   

additions or departures of key personnel;

 

   

regulatory or political developments;

 

   

litigation and governmental investigations;

 

   

changing economic conditions, including impacts from COVID-19;

 

   

investors’ perception of us;

 

   

events beyond our control such as weather and war; and

 

   

any default on our indebtedness.

These and other factors, many of which are beyond our control, may cause our operating results and the market price and demand for our shares to fluctuate substantially. Fluctuations in our quarterly operating results could limit or prevent investors from readily selling their shares and may otherwise negatively affect the market price and liquidity of our shares. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the company that issued the stock. If any of our shareholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business, which could significantly harm our profitability and reputation.

A significant portion of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of our common stock to drop significantly, even if our business is doing well.

Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. After this offering, we will have                outstanding shares of common stock based on the number of shares outstanding as of                 . This includes the shares that we are selling in this offering, which may be resold in the public market immediately. Following the consummation of this offering, substantially all shares that are not being sold in this offering will be subject to a 180-day lock-up period provided under lock-up agreements executed in connection with this offering described in “Underwriters” and restricted from immediate resale under the federal securities laws as described in “Shares Eligible for Future Sale”. All of such shares will, however, be able to be resold after the expiration of the lock-up period, as well as pursuant to customary exceptions thereto or upon the waiver of the lock-up agreement by Morgan Stanley & Co. LLC and J.P. Morgan Securities LLC on behalf of the underwriters. In connection with this offering, we will grant customary demand and piggyback registration rights to Vista. See “Certain Relationships and Related Party

 

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Transactions—Registration Rights Agreement.” We also intend to register shares of common stock that we may issue under our equity compensation plans. As of                 , options to purchase                  shares of common stock and                  shares of restricted common stock were outstanding under our equity incentive plans, and an additional                  shares of common stock were reserved for future issuance under our equity incentive plans. Once we register these shares, they can be freely sold in the public market upon issuance, subject to the lock-up agreements. As restrictions on resale end, the market price of our stock could decline if the holders of currently restricted shares sell them or are perceived by the market as intending to sell them.

Because we have no current plans to pay regular cash dividends on our common stock following this offering, you may not receive any return on investment unless you sell your common stock for a price greater than that which you paid for it.

We do not anticipate paying any regular cash dividends on our common stock following this offering. Any decision to declare and pay dividends in the future will be made at the discretion of our Board and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions and other factors that our Board may deem relevant. In addition, our ability to pay dividends is, and may be, limited by covenants of existing and any future outstanding indebtedness we or our subsidiaries incur, including under our credit facilities. Therefore, any return on investment in our common stock is solely dependent upon the appreciation of the price of our common stock on the open market, which may not occur. See “Dividend Policy” for more detail.

If securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding our shares or if our results of operations do not meet their expectations, our stock price and trading volume could decline.

The trading market for our shares will be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not have any control over these analysts. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. Moreover, if one or more of the analysts who cover us downgrade our stock, or if our results of operations do not meet their expectations, our stock price could decline.

We may issue shares of preferred stock in the future, which could make it difficult for another company to acquire us or could otherwise adversely affect holders of our common stock, which could depress the price of our common stock.

Our certificate of incorporation will authorize us to issue one or more series of preferred stock. Our Board will have the authority to determine the preferences, limitations and relative rights of the shares of preferred stock and to fix the number of shares constituting any series and the designation of such series, without any further vote or action by our shareholders. Our preferred stock could be issued with voting, liquidation, dividend and other rights superior to the rights of our common stock. The potential issuance of preferred stock may delay or prevent a change in control of us, discouraging bids for our common stock at a premium to the market price, and materially adversely affect the market price and the voting and other rights of the holders of our common stock.

 

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FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that are subject to risks and uncertainties. All statements other than statements of historical fact included in this prospectus are forward-looking statements. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “will,” “should,” “can have,” “likely” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. For example, all statements we make relating to our estimated and projected costs, expenditures, cash flows, growth rates and financial results or our plans and objectives for future operations, growth initiatives, or strategies are forward-looking statements. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we expected, including:

 

   

the impact on our operations and financial condition from the effects of the current COVID-19 pandemic;

 

   

the competitiveness of the markets in which we operate;

 

   

the potential loss of customers or subscription revenue;

 

   

our ability to keep pace with technological developments and enhance our solutions;

 

   

market demand for enterprise cloud computer software as well as SaaS products like ours;

 

   

our dependence on a substantial majority of our subscription revenues from our iCIMS Talent Cloud products;

 

   

risks associated with defects in our solutions or breaches of warranties;

 

   

the impact of interruptions or performance problems associated with our technology or infrastructure;

 

   

our ability to maintain, enhance and protect our brand;

 

   

risks associate with impairments to our goodwill or other intangible assets;

 

   

fluctuations in our quarterly results;

 

   

risks caused by delays in upturns or downturns in our sales being reflected in our financial position and results of operations;

 

   

seasonality of our sales and customer growth;

 

   

our management of longer sales cycles and deployments due to the complex operating environments of our customers;

 

   

changes in financial accounting standards or practices affecting our revenue recognition procedures;

 

   

risks and uncertainties associated with acquisition activity;

 

   

the accuracy of estimates concerning market opportunity and market growth;

 

   

we have a history of losses, and we cannot be certain that that we will achieve or sustain profitability;

 

   

the impact of general and specific adverse economic trends;

 

   

the impact of any catastrophic events;

 

   

risks associated with unfavorable laws, regulations and interpretations governing new and developing technologies;

 

   

the evolution of Internet regulations, infrastructure and accessibility;

 

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changes in privacy laws and regulations applicable to our business;

 

   

our ability to safeguard ours and our customers data;

 

   

our ability to comply with data localization requirements;

 

   

risks relating to illegal behavior by any of our employees;

 

   

our ability to obtain, maintain, protect and enforce intellectual property rights under our current and new solutions;

 

   

risks related to future litigation;

 

   

our ability to maintain rights to technology integrated into third party platforms;

 

   

our ability to utilize open source software without jeopardizing our proprietary software;

 

   

the risks associated with indemnity provisions in some of our agreements;

 

   

our ability to obtain, maintain, protect and enforce intellectual property protection for our current and future solutions;

 

   

our ability to retain and recruit key employees and qualified technical and sales personnel;

 

   

our ability to maintain and evolve our purpose-driven culture of innovation, curiosity, passion, customer commitment and employee empathy;

 

   

the satisfaction of our customers and the corresponding effect on renewals, additional purchases and addition of new users;

 

   

ours and our partners’ ability to offer high-quality technical and professional support services;

 

   

the success of our strategic relationships with third parties;

 

   

our continued use third-party computer hardware and software;

 

   

our ability to successfully integrate our applications with a variety of third-party technologies;

 

   

the risk of disruptions to third-party data centers and computing infrastructures on which we rely;

 

   

our ability to manage our growth effectively;

 

   

our dependence on iCIMS, Inc. as our principal asset;

 

   

risks inherent to our sales and operations outside the United States;

 

   

changes in tax laws and their application to our business;

 

   

risks associated with our status as an “emerging growth company”;

 

   

our ability to develop and maintain proper and effective internal control over financial reporting;

 

   

our management team’s limited experience managing a public company; and

 

   

other factors disclosed in the section entitled “Risk Factors” and elsewhere in this prospectus.

We derive many of our forward-looking statements from our operating budgets and forecasts, which are based on many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ materially from our expectations, or cautionary statements, are disclosed under the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this prospectus. All written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by these cautionary statements as well as other cautionary statements that are made from time to time in our other SEC filings and public communications. You should evaluate all forward-looking statements made in this prospectus in the context of these risks and uncertainties.

 

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We caution you that the important factors referenced above may not contain all of the factors that are important to you. In addition, we cannot assure you that we will realize the results or developments we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our operations in the way we expect. The forward-looking statements included in this prospectus are made only as of the date hereof. We undertake no obligation to update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

 

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MARKET AND INDUSTRY DATA

Unless otherwise indicated, information in this prospectus concerning economic conditions, our industry, our markets and our competitive position is based on a variety of sources, including information from independent industry analysts and publications, as well as our own estimates and research. This information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. While we believe the information presented in this prospectus is generally reliable, forecasts, assumptions, expectations, beliefs, estimates and projects involve risk and uncertainties and are subject to change based on various factors, including those described under “Forward-Looking Statements” and “Risk Factors.”

Certain information in the text of this prospectus is contained in independent industry publications. The sources of these independent industry publications are provided below:

 

   

Korn Ferry, Future of Work: The Global Talent Crunch, May 2018

 

   

World Economic Forum, The Future of Jobs Report 2020, October 2020

 

   

U.S. Bureau of Labor and Statistics

 

   

Gartner, Market Guide for Talent Acquisition Applications, 11 June 2020

 

   

IDC Marketscape – Worldwide Modern Talent Acquisition Suites for Large Enterprises, 2020 Vendor Assessment, September 2020

 

   

United States Census Bureau

 

   

S&P Capital IQ database, ©2021: S&P Global Market Intelligence

 

   

IDC, Worldwide Talent Acquisition Technologies and Services Forecast, 2020–2024, July 2020

 

   

A commissioned study conducted by Forrester Consulting, Total Economic Impact of the iCIMS Talent Cloud, September 2020

 

   

Acadian Advisory, 2019 Recruiting Technology Market Overview, March 2019

 

   

A commissioned study conducted by Information Services Group, Inc., iCIMS Total Addressable Market for Talent Software, April 2021

 

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USE OF PROCEEDS

We estimate that our net proceeds from this offering will be approximately $                million (or approximately $                 million if the underwriters’ option to purchase additional shares is exercised in full), assuming an initial public offering price of $                per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, after deducting the underwriting discount and estimated offering expenses payable by us.

The principal purposes of this offering are to increase our capitalization and financial flexibility, create a public market for our common stock and enable access to the public equity markets for us and our shareholders. We expect to use approximately $                 million of the net proceeds of this offering (or $                million of the net proceeds of this offering if the underwriters exercise their option to purchase additional shares in full) to repay outstanding borrowings under our Credit Agreement and the remainder of such net proceeds will be used for general corporate purposes. The indebtedness under our Credit Agreement matures on September 12, 2024. At this time, other than repayment of indebtedness under our Credit Agreement, we have not specifically identified a large single use for which we intend to use the net proceeds and, accordingly, we are not able to allocate the net proceeds among any of these potential uses in light of the variety of factors that will impact how such net proceeds are ultimately utilized by us. Pending use of the proceeds from this offering, we intend to invest the proceeds in a variety of capital preservation investments, including short-term, investment-grade and interest-bearing instruments.

We may also use a portion of our net proceeds to acquire or invest in complementary businesses, products, services or technologies. However, we do not have agreements or commitments for any acquisitions or investments at this time.

Each $1.00 increase or decrease in the assumed initial public offering price of $                per share, which is the midpoint of the estimated public offering price range set forth on the cover page of this prospectus, would increase or decrease the net proceeds to us from this offering by approximately $                million, assuming the number of shares offered, as set forth on the cover page of this prospectus, remains the same, and after deducting the underwriting discount and estimated offering expenses payable by us.

Each 1,000,000 increase or decrease in the number of shares offered would increase or decrease the net proceeds to us from this offering by approximately $                 million, assuming that the assumed initial public offering price per share for the offering remains at $                , which is the midpoint of the estimated public offering price range set forth on the cover page of this prospectus, and after deducting the underwriting discount and estimated offering expenses payable by us.

Borrowings under the Credit Agreement bear interest at a rate per annum, at the borrower’s option, equal to an applicable margin, plus, (a) for alternate base rate borrowings, the highest of (i) the rate last quoted by The Wall Street Journal as the “prime rate” in the United States, (ii) the Federal Funds Rate in effect on such day plus 1/2 of 1.00% and (iii) the Adjusted LIBO Rate for a one month interest period on such day; provided that the alternate base rate can in no event be lower than 1.00% and (b) for eurodollar borrowings, the Adjusted LIBO Rate determined by the greater of (i) the LIBO Rate for the relevant interest period divided by 1 minus the statutory reserves (if any) and (ii) 1.00%.

The applicable margin for borrowings under the Credit Agreement is (a) for alternate base rate borrowings, (i) 5.50% so long as the total leverage ratio is greater than 6.50 to 1.00, (ii) 4.50% so long as the total leverage ratio is less than or equal to 6.50 to 1.00 and greater than 5.75 to 1.00 or (iii) 4.00% so long as the total leverage ratio is less or equal to 5.75 to 1.00 and (b) for eurodollar borrowings, (i) 6.50%% so long as the total leverage ratio is greater than 6.50 to 1.00, (ii) 5.50% so long as the total leverage ratio is less than or equal to 6.50 to 1.00 and greater than 5.75 to 1.00 or (iii) 5.00% so long as the total leverage ratio is less or equal to 5.75 to 1.00; provided, that the step downs in interest rate are applicable prior to September 30, 2021 only if elected by the borrower in writing. The total leverage ratio is determined in accordance with the terms of the Credit Agreement.

 

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The contract interest rate on the Term Loan Facility was 7.5% per annum as of June 30, 2021. The effective interest rate was 7.9% per annum as of June 30, 2021. The effective interest rate was higher than the contract rate due to amortization of debt issuance costs related to the Term Loan Facility. The Term Loan Facility does not require periodic principal payments.

As of June 30, 2021, the interest rate for the Revolving Credit Facility was 7.5% per annum. The borrower is also required to pay a commitment fee on the average daily undrawn portion of the Revolving Credit Facility of 0.375%-0.50% per annum (varying based on the leverage ratio tiers applicable to the applicable margin as described above), a letter of credit fronting fee of 0.125% per annum and a letter of credit participation fee equal to the applicable margin for eurodollar revolving loans on the actual daily amount of the letter of credit exposure.

 

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DIVIDEND POLICY

We currently intend to retain all available funds and any future earnings to fund the development and growth of our business and to repay indebtedness and, therefore, we do not anticipate paying any cash dividends in the foreseeable future. Additionally, our ability to pay dividends on our common stock is limited by restrictions on the ability of our subsidiaries to pay dividends or make distributions to us. Any future determination to pay dividends will be at the discretion of our Board, subject to compliance with covenants in current and future agreements governing our and our subsidiaries’ indebtedness, and will depend on our results of operations, financial condition, capital requirements and other factors that our Board may deem relevant. Additionally, our Credit Agreement place restrictions on the ability of our subsidiaries to pay cash dividends or make distributions to us. See the section titled “Description of Indebtedness.”

 

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CAPITALIZATION

The following table describes our cash and cash equivalents and capitalization as of June 30, 2021, as follows:

 

   

of iCIMS Holding LLC on an actual basis;

 

   

of iCIMS Holding Corp. on an as adjusted basis, after giving effect to the Corporate Conversion; and

 

   

of iCIMS Holding Corp. on a pro forma as adjusted basis and after giving effect to the Corporate Conversion, Stock-based compensation expenses related to the IPO Grants and our sale of                 shares of common stock in this offering and the application of the net proceeds from this offering as set forth under “Use of Proceeds,” assuming an initial public offering price of $                per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus, and after deducting the underwriting discount and estimated offering expenses payable by us.

The pro forma as adjusted information set forth in the table below is illustrative only and will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this table in conjunction with our consolidated financial statements and the related notes, “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Corporate Conversion” included elsewhere in this prospectus.

 

    As of June 30, 2021  
    Actual     As Adjusted      Pro Forma as
Adjusted
 
    (dollars in thousands)  

Cash and cash equivalents

  $ 43,448     $       $    
 

 

 

   

 

 

   

 

 

 

Total debt, including current portion:

     

Term Loan Facility(1)

    528,196      
     

Revolving Credit Facility(2)

    25,000      
 

 

 

   

 

 

   

 

 

 

Total long term debt

    553,196      

Members’ deficit / shareholders’ equity:

     

Members’ capital, no par value, 927,733 members’ units authorized, 878,254 and 877,150 members’ units issued and outstanding, respectively, actual; no members’ units authorized, issued or outstanding as adjusted and pro forma as adjusted

    889,768      

Preferred stock, $0.001 par value; no shares authorized, issued or outstanding, actual; 50,000,000 shares authorized and no shares issued or outstanding, as adjusted and pro forma as adjusted(3)

         

Common stock, no shares issued and outstanding, actual; 500,000,000 shares authorized,                      shares issued and outstanding, as adjusted; 500,000,000 shares authorized,                      shares issued and outstanding, pro forma as adjusted(3)

         

Additional paid-in capital

    5,057      

Treasury units, 1,104 members’ units, actual; no members’ units as adjusted and pro forma as adjusted

    (1,324    

Accumulated other comprehensive income

    (25    

Accumulated deficit

    (193,579    
 

 

 

   

 

 

   

 

 

 

Total members’ deficit / shareholders’ equity

    699,897      
 

 

 

   

 

 

   

 

 

 

Total capitalization

  $ 1,296,541     $                   $                
 

 

 

   

 

 

   

 

 

 

 

(1)

Net of deferred financing costs of $6.8 million.

 

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(2)

As of June 30, 2021, we had $25.0 million drawn under the Revolving Credit Facility and had no undrawn capacity.

(3)

As adjusted to reflect the conversion of our outstanding members’ units into shares of our common stock in conjunction with the Corporate Conversion. Pro forma as adjusted shares of common stock outstanding includes                 % of the vested RSUs or             shares from the IPO Grants.

A $1.00 increase or decrease in the assumed initial public offering price of $                per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease each of cash and cash equivalents, additional paid-in capital, total shareholders’ equity and total capitalization on pro forma as adjusted basis by approximately $                million, assuming the number of shares offered, as set forth on the cover page of this prospectus, remains the same, and after deducting the underwriting discount and estimated offering expenses payable by us.

Each 1,000,000 increase or decrease in the number of shares of common stock offered in this offering would increase or decrease each of cash and cash equivalents, additional paid-in capital, total shareholders’ equity (deficit) and total capitalization on pro forma as adjusted basis by approximately $                million, based on an assumed initial public offering price of $                per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting the underwriting discount and estimated offering expenses payable by us.

Except as otherwise indicated, the above discussion and table are based on                shares of our common stock outstanding as of June 30, 2021 and excludes:

 

   

                million shares of common stock reserved for future issuance under our 2021 Plan and the 2021 ESPP, which will be adopted in connection with this offering (exclusive of shares reserved in respect of the IPO Grants, as defined below);

 

   

                shares of common stock issuable upon vesting and settlement of restricted stock units, or RSUs, to be issued upon the closing of this offering to certain of our executive and non-executive employees, or the IPO RSU Grants, assuming an initial public offering price of $                 per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus. The IPO RSU Grants vest 25% each year and become fully vested after four years of service;

 

   

                shares of common stock issuable upon vesting and settlement of stock options to be issued upon the closing of this offering to certain executives, or the IPO Option Grants, assuming an initial public offering price of $                 per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus. The options vest 25% after the first year, and in equal installments quarterly thereafter over the next three years, fully vesting after four years of service; and

 

   

                shares of common stock issuable upon vesting and settlement of RSUs to be issued upon the closing of this offering to N. Steven Lucas, or the CEO RSU Grant (and, together with the IPO RSU Grants and the IPO Option Grants, the IPO Grants), assuming an initial public offering price of $                 per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus. The CEO RSU Grant vests partially over time and partially based on performance as follows: (a)                  of the RSUs vest over a period of four years, with 25% of such RSUs vesting on March 2, 2021 and the remaining 75% vesting quarterly thereafter; (b)                  of the RSUs vest on the occurrence of a Sale of the Company (defined in the iCIMS Holding LLC limited liability company agreement as the first to occur of a transaction or series of related or substantially concurrent transactions resulting in (i) the sale or transfer by the Company or its subsidiaries of all or substantially all (as defined under Delaware law) of their assets on a consolidated basis to a third party or a group of third parties acting in concert and (ii) (A) any consolidation, merger or reorganization of the Company with or into any other entity or entities or (B) any sale or transfer to any third party or group of third parties acting in concert of the Company’s units by the holders thereof, as a result of which any person or group (other than any member of Vista Equity Partners Management, LLC, it affiliates and any of their respective managed investment funds and portfolio companies (but excluding the Company and its subsidiaries), and their respective partners,members, directors, managers, employees, stockholders, agents, any successor by operation of law (including by merger or otherwise) of any such person, and

 

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any entity that acquires all or substantially all of the assets of any such person in a single transaction or series of related transactions) obtains possession of voting power (under ordinary circumstances) to elect a majority of the surviving entity’s board of managers (or equivalent governing body)) if certain specified investor return thresholds are satisfied, in each case, subject to Mr. Lucas’ continued employment through each applicable vesting date; and (c)                  of the RSUs vest if the common stock of the Company trades above $                 for                  consecutive trading days.

 

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DILUTION

If you invest in our common stock in this offering, your interest will be diluted to the extent of the difference between the initial public offering price per share of our common stock in this offering and the pro forma as adjusted net tangible book value per share of our common stock immediately after this offering.

As of June 30, 2021, we had an as adjusted net tangible book value of $                million, or $                per share of common stock. As adjusted net tangible book value per share is equal to our total tangible assets, less total liabilities, divided by the number of outstanding shares of our common stock after giving effect to the Corporate Conversion.

After giving effect to the sale of shares of common stock in this offering, after deducting the underwriting discount and estimated offering expenses payable by us, and the application of the net proceeds of this offering to repay $                million of outstanding borrowings under our Credit Agreement as set forth under “Use of Proceeds,” at an assumed initial public offering price of $                per share, which is the midpoint of the price range set forth on the cover of this prospectus, our pro forma as adjusted net tangible book value as of June 30, 2021 would have been $                million, or $                per share of common stock. This represents an immediate increase in pro forma as adjusted net tangible book value of $                per share to our existing shareholders and an immediate dilution in pro forma as adjusted net tangible book value of $                per share to investors participating in this offering at the assumed initial public offering price. The following table illustrates this per share dilution:

 

Assumed initial public offering price per share

      $            

Historical as adjusted net tangible book value per share as of June 30, 2021

   $               
     

Increase in pro forma as adjusted net tangible book value per share attributable to the investors in this offering

     
  

 

 

    

Pro forma as adjusted net tangible book value per share after giving effect to this offering

     
     

 

 

 

Dilution in pro forma as adjusted net tangible book value per share to the investors in this offering

      $    
     

 

 

 

A $1.00 increase or decrease in the assumed initial public offering price of $                per share, which is the midpoint of the estimated public offering price range set forth on the cover page of this prospectus, would increase or decrease our pro forma as adjusted net tangible book value per share after this offering by $                , and would increase or decrease the dilution per share to the investors in this offering by $                , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the underwriting discount and estimated offering expenses payable by us. Similarly, each increase or decrease of one million shares in the number of shares of common stock offered by us would increase or decrease our pro forma as adjusted net tangible book value per share after this offering by $                and would increase or decrease dilution per share to investors in this offering by                 , assuming the assumed initial public offering price, which is the midpoint of the price range set forth on the cover page of this prospectus, remains the same and after deducting the underwriting discount and estimated offering expenses payable by us.

If the underwriters exercise their option to purchase additional shares in full, the pro forma as adjusted net tangible book value per share after this offering would be $                , and the dilution in as pro forma adjusted net tangible book value per share to new investors in this offering would be $                .

The following table presents, on a pro forma as adjusted basis as described above, as of June 30, 2021, after giving effect to (i) the completion of the Corporate Conversion prior to the completion of this offering and

 

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(ii) the differences between our existing shareholders and the investors purchasing shares of our common stock in this offering, with respect to the number of shares purchased, the total consideration paid to us, and the average price per share paid by our existing shareholders or to be paid to us by investors purchasing shares in this offering at an assumed offering price of $                per share, which is the midpoint of the price range set forth on the cover page of this prospectus, before deducting the underwriting discount and estimated offering expenses payable by us.

 

     Shares Purchased     Total Consideration     Average
Price Per
Share
 
     Number      Percentage     Amount      Percentage  

Existing Shareholders

                   $                             $            

New Investors

            

Total

                   $                             $            

A $1.00 increase or in the assumed initial public offering price of $                per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease the total consideration paid by new investors by $                million and increase or decrease the percent of total consideration paid by new investors by                %, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and before deducting the underwriting discount and estimated offering expenses payable by us.

Except as otherwise indicated, the above discussion and tables assume no exercise of the underwriters’ option to purchase additional shares. After giving effect to sales of shares in this offering, assuming the underwriters’ option to purchase additional shares is exercised in full, our existing shareholders would own                % and our new investors would own                % of the total number of shares of our common stock outstanding after this offering.

In addition, to the extent we issue any additional stock options or any stock options are exercised, or we issue any other securities or convertible debt in the future, investors participating in this offering may experience further dilution.

Except as otherwise indicated, the above discussion and tables are based on                shares of our common stock outstanding as of June 30, 2021 after giving effect to the Corporate Conversion, and excludes:

 

   

                million shares of common stock reserved for future issuance under our 2021 Plan and the 2021 ESPP, which will be adopted in connection with this offering (exclusive of shares reserved in respect of the IPO Grants, as defined below);

 

   

                shares of common stock issuable upon vesting and settlement of restricted stock units, or RSUs, to be issued upon the closing of this offering to certain of our executive and non-executive employees, or the IPO RSU Grants, assuming an initial public offering price of $                 per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus. The IPO RSU Grants vest 25% each year and become fully vested after four years of service;

 

   

                shares of common stock issuable upon vesting and settlement of stock options to be issued upon the closing of this offering to certain executives, or the IPO Option Grants, assuming an initial public offering price of $                 per share, which is the midpoint of the estimated price range set forth on the cover page of this prospectus. The options vest 25% after the first year, and in equal installments quarterly thereafter over the next three years, fully vesting after four years of service; and

 

   

                shares of common stock issuable upon vesting and settlement of RSUs to be issued upon the closing of this offering to N. Steven Lucas, or the CEO RSU Grant (and, together with the IPO RSU Grants and the IPO Option Grants, the IPO Grants), assuming an initial public offering price of $                 per share, which is the midpoint of the estimated price range set forth on the cover page of

 

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this prospectus. The CEO RSU Grant vests partially over time and partially based on performance as follows: (a)                  of the RSUs vest over a period of four years, with 25% of such RSUs vesting on March 2, 2021 and the remaining 75% vesting quarterly thereafter; (b)                  of the RSUs vest on the occurrence of a Sale of the Company if certain specified investor return thresholds are satisfied, in each case, subject to Mr. Lucas’ continued employment through each applicable vesting date; and (c)                  of the RSUs vest if the common stock of the Company trades above $             for              consecutive trading days.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of financial condition and results of operations together with the section titled “Summary Consolidated Financial Data” and our consolidated financial statements and related notes included elsewhere in this prospectus. This discussion and analysis reflects our historical results of operations and financial position, and, except as otherwise indicated below, does not give effect to the completion of this offering. This discussion and other parts of this prospectus contain forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed in or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled “Risk Factors.” Please also see the section titled “Special Note Regarding Forward Looking Statements.”

The following discussion contains references to calendar year 2020 and 2019, which represents the consolidated financial results for our fiscal years ended December 31, 2020 and 2019. All references to 2020 refer to the fiscal year ended December 31, 2020 and references to 2019 refer to the fiscal year ended December 31, 2019. Unless we state otherwise or the context otherwise requires, the terms “we,” “us,” “our,” and “iCIMS” refer to “iCIMS Holding LLC.” The objective of this discussion and analysis is to disclose (i) material information relevant to an assessment of the financial condition and results of operations of iCIMS, including an evaluation of the amounts and certainty of cash flows from operations and from outside sources, (ii) material events and uncertainties known to management that are reasonably likely to cause reported financial information not to be indicative of future operating results or of future financial condition, including descriptions and amounts of matters that have had a material impact on reported operations as well as matters that are reasonably likely based on management’s assessment to have a material impact on future operations and (iii) material financial and statistical data that we believe will enhance an understanding of our financial condition, cash flows and other changes in financial condition, and results of operations.

Overview

Our purpose is to deliver the world’s leading Talent Cloud to empower organizations everywhere to hire the best talent and build their winning workforce.

We believe that the right talent, on the right team, transforms businesses, communities, and the world. Talent enables organizations to out-innovate competition, provide customer experiences that create brand ambassadors, and serve their local and global communities. We believe Talent Powers TransformationTM.

No asset matters more to a business than its people. We believe an integrated end-to-end software solution to attract talent, engage candidates, hire employees, and advance careers is more critical now than ever before. The iCIMS Talent Cloud enables the world’s best brands to build the pipeline that matters the most—their talent pipeline—and innovate, differentiate, and succeed through their talent.

 

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LOGO

We recognize the transformational power that funnel-based software technologies have had in areas such as Sales and Marketing, and believe that the same level of impact has been brought to talent with the iCIMS Talent Cloud.

The iCIMS Talent Cloud is a market-leading, mission-critical software platform that is designed to transform how organizations of all sizes and industries attract, engage, hire, and advance talent, helping such organizations build their talent pipeline and winning workforce in the talent economy. Unlike yesterday’s recruiting tools, we believe that iCIMS Talent Cloud is a system of engagement for our customers, focused on interactions between talent and organizational hiring teams. We think that legacy, rigid “one size fits all” approaches will be exchanged for dynamic, “consumer-level” experiences, personalized, and delivered how and where candidates, hiring managers, and recruiters require.

The core pillars of the iCIMS Talent Cloud are Applications, Platform and Ecosystem. Through our applications, we provide a full portfolio of business applications for recruiters and hiring managers to attract, engage, hire, and advance the best talent. We offer an open platform with an extensible application programming interface, or API, that unites talent data into dynamic candidate data profiles, creates seamless workflows across iCIMS Talent Cloud and third-party software, and leverages our AI-capabilities and analytics across the entire set of talent data. Lastly, our Ecosystem allows third-party products and service providers to integrate their offerings through our platform.

The iCIMS Talent Cloud enables our customers to hire at scale and build their winning workforce by delivering: better business performance, holistic talent experiences, flexible configuration, integrated and embedded solutions across the talent ecosystem, simple-to-use interfaces, expanded talent pipelines, and superior experience for candidates, recruiters, and hiring managers.

We believe that our market leadership position is based on the following key strengths: our leading end-to-end software platform, relentless focus on the talent experience, brand recognition and reputation, innovation leadership, robust partnerships and ecosystems, secure, scalable and extensible platform, and being industry agnostic and relevant for every business.

We sell to the following types of customers: enterprises (companies with greater than 2,500 employees) and commercial businesses (companies with up to 2,499 employees). Our go-to-market strategy leverages our account-based model in which marketing and sales teams work together to target best-fit accounts and turn them

 

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into customers. As of June 30, 2021 and 2020, our annual recurring revenue, or ARR, was $299.5 million and $258.7 million, representing a 15.8% growth for this period. As of December 31, 2020 and 2019, our ARR was $284.6 million and $246.1 million, representing a 15.6% growth for this period. As of June 30, 2021 and 2020, our ARR for enterprise accounts was $216.7 million and $181.2 million, representing a 19.5% growth for this period. As of December 31, 2020 and 2019, our ARR for enterprise accounts was $204.4 million and $169.3 million representing a 20.8% growth for this period. At the end of 2020, enterprise customers represented approximately 72% of our ARR. See “— Key Business Metrics” for a description and limitations of ARR. For the six months ended June 30, 2021 and 2020, our revenues were $138.4 million and $124.5 million, representing a 11.1% year-over-year growth rate. In 2020 and 2019, our revenues were $251.3 million and $214.2 million representing a 17.3% year-over-year growth rate. For the six months ended June 30, 2021 and 2020, our revenues for enterprise accounts were $97.0 million and $85.6 million, representing a 13.3% growth rate for this period. In 2020 and 2019, our revenues for enterprise accounts were $174.9 million and $141.0 million representing a 24.0% growth rate for this period.

Our focus on enterprise customers is a result of large companies having a greater need for dedicated talent tools given their increased complexity and challenges of hiring at scale—different types of workforces, across geographies, and candidates with diverse skills and backgrounds—to grow their business. Customers in this cohort have demonstrated an increased ability to purchase multiple products and have high stickiness to the iCIMS Talent Cloud.

Our customers include leading enterprises such as CommonSpirit Health, Dish Network, Emory University and Emory Healthcare, Enterprise Holdings, Finastra, Keurig Dr Pepper, Mercy Health, Sprouts Farmers Market, Uber and Wipro. In 2020, our customers included over 25% of the Fortune 500 and 40% of the Fortune 100. In 2020, our customers in the Fortune 500 accounted for less than 20% of our revenue, and our customers in the Fortune 100 accounted for less than 10% of our revenue.

Our Business Model

We sell our software solutions via a subscription model typically billed annually in advance. This results in a highly predictable recurring revenue model with long multiyear contracts, averaging 2.6 years across our customer base in 2020 and 2.3 years in 2019. Subscription revenue represents more than 95% of our total revenue in 2020, providing a high level of visibility into our future revenues.

Over the lifetime of the customer relationship, we have the opportunity to realize additional subscription revenue, both as our customers roll out our solutions more broadly within the organization and by selling additional iCIMS Talent Cloud applications to the existing customers that do not currently utilize our full software platform. We also incur the costs to manage the account, to retain customers, and to sell additional functionality. These costs, however, are significantly less than the costs initially incurred to acquire and to implement the customer, thereby increasing customer profitability the longer they stay on.

We also generate one-time services revenue from the implementation of our products and the training of our customer’s staff. Our customers are assigned an implementation team who are experienced in applying best practices and configuring the platform to customers’ preferences.

COVID-19

Throughout the COVID- 19 pandemic, we have proactively managed our business while prioritizing our customers, employees, and business continuity. We have implemented a number of measures designed to protect the health and safety of our workforce and to maintain our healthy financial position. We have adopted a robust business continuity plan and work-from-home policy for all of our employees with ongoing communications and scenario planning to quickly respond to the changing environment. In addition, we have implemented various policies and protocols for workplace safety at our facilities to the extent that they remain open and our employees

 

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need to access them. Our continuity plan has enabled us to operate without disruption to the functionality and operation of our products and support for our customers.

We benefit from a subscription revenue model based on recurring prices for products, number of employees, and services required by customers, limiting the impact to our revenue from fluctuations in metrics such as number of hires, applications, or postings. Throughout 2020, we were able to grow recurring revenue despite the challenges presented by the COVID-19 pandemic. However, as a result of the pandemic, we experienced moderately lower ARR growth during 2020. In addition, due to the impact of the pandemic on our customers’ businesses we saw an increase in down-sells and customer attrition, impacting our dollar-based net retention rates. See “—Key Business Metrics” for a description and limitations of ARR and dollar-based net retention rate.

As a way to mitigate the impacts of the COVID-19 pandemic, during the second and third quarter of 2020, we conducted an internal review of our cost structure, making adjustments that included the following, among others: reducing discretionary spend, reducing demand generation marketing investments, reducing our full-time employee headcount by approximately 10%, and choosing not to renew various lease offices to improve the strength of our business in the long term.

Furthermore, as a result of the COVID-19 pandemic, we were able to utilize assistance provided by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. In particular, we filed net operating loss carryback claims and recorded a $2.2 million income tax receivable in anticipation of the refund we expect to receive in 2021. We also elected the option to defer the payment of our share of payroll taxes that would have been due between March 27, 2020 and December 31, 2020.

We believe that our business is well-suited to navigate the current environment and continue to support our customers through our product offerings, services, and support. However, the severity, magnitude and duration of the current COVID-19 pandemic is uncertain, rapidly changing, and hard to predict and depends on events beyond our knowledge or control. These and other impacts of the COVID-19 pandemic could have the effect of heightening many of the other risks described in this “Risk Factors” section, such as those relating to our reputation, product sales, results of operations or financial condition. See “Risk Factors—Risks Related to the COVID-19 Pandemic”.

Key Factors Affecting Our Performance

Our historical financial performance has been, and we expect our financial performance in the future to be, driven by our ability to:

Drive new customer acquisition & expansion

Despite our success to date, we believe the market for dedicated talent acquisition software platforms remains largely underpenetrated. As a result, there is a vast opportunity to take our core capabilities to many more enterprise and commercial businesses around the world. Our ability to attract new customers is dependent upon a number of factors, including the effectiveness of our pricing and solutions, the features and pricing of our competitors’ offerings, the effectiveness of our marketing efforts, the effectiveness of our go-to-market team in selling, marketing and deploying our software. Sustaining our growth requires continued adoption of our platform by new customers. We intend to continue to invest in our brand awareness as we further penetrate our addressable markets. We intend to expand our customer base by continuing to make significant and targeted investments in sales and marketing to attract new customers and to drive broader awareness of our software solutions.

A company’s first exposure to iCIMS is typically through our applicant tracking system to manage the hiring process. Once a company begins to realize the benefits of our software platform, we often have an opportunity to expand into other use cases—going beyond hiring at scale and into employer branding, employee on-boarding, candidate relationship management, and other applications—thereby expanding our reach and

 

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stickiness with a customer. Our success is dependent on our ability to effectively demonstrate the additive value of our products, resulting in greater cross-selling opportunities within our current customer base.

Focus on large customers

Our go-to-market model is primarily based on the following types of customers: enterprises (companies with 2,500 employees or more) and commercial businesses (companies with up to 2,499 employees). Our focus on landing primarily enterprise customers that pay greater than $100,000 in ARR has been a key driver to our success. We believe that large companies have a greater need for dedicated talent tools given their increased complexity and challenges of hiring at scale to grow their business.

Our ability to continue attracting enterprise customers is dependent on our ability to expand our enterprise sales team and increase awareness of our software platform and its broad range of capabilities and our ability to effectively demonstrate the additive value of our software solutions. Our success will also depend on our ability to service these clients with best-in-class customer service to keep retention of our existing enterprise customers. We intend to expand our enterprise customer base by continuing to make significant and targeted investments in our enterprise sales team and after-sale product support teams to drive broader awareness and deliver excellent customer satisfaction.

Deliver product innovation

Businesses are increasingly realizing the value of having an end-to-end integrated talent platform. We believe we are well positioned to capitalize on this opportunity by introducing new products and applications to extend the functionality of our platform. Our success is dependent on our ability to sustain product innovation and technology leadership in order to maintain our competitive advantage. We believe that we have built a highly differentiated software platform and we intend to further extend the adoption of our platform through additional innovation. While sales of subscriptions to our iCIMS Talent Cloud products account for most of our revenue, we intend to continue to invest in building additional products, features and functionality that expand our capabilities and facilitate the extension of our software platform to new use cases. Our future success is dependent on our ability to successfully develop and market products to keep up with our customers’ demands and retain our market leadership position.

We selectively pursue acquisitions of complementary businesses, technologies and teams that would allow us to add new features and functionalities to our software platform, accelerate the pace of our innovation and expand into new geographies, industry verticals, and hiring types. Our ability to succeed depends on ability to find complementary businesses that help us achieve the above goals most effectively. There will be inherent risk in any mergers and acquisitions, or M&A, transaction, and our ability to navigate through the risks and challenges through our previous M&A experiences will allow us to reduce execution risk.

Penetrate underserved global market

As of year-end 2020, we derived 9% of our ARR and 5% of our revenue from customers outside the United States. We believe there is a substantial opportunity for us to increase our international customer base by leveraging and expanding investments in our technology, direct sales force, and strategic partnerships around the world. Our international growth in any region will depend on our ability to effectively implement our business processes and go-to-market strategy, our ability to adapt to market or cultural differences, the general competitive landscape, our ability to invest in our sales and marketing channels, and our brand awareness and perception. We plan to continue making investments in our international sales and marketing channels to take advantage of this market opportunity while refining our go-to-market approach based on local market dynamics. While we believe global demand for our platform will increase as international market awareness of iCIMS grows, our ability to conduct our operations internationally will require considerable management attention and resources and is subject to the particular challenges of supporting a growing business in an environment of multiple languages, cultures, customs, legal and regulatory systems (including with respect to data transfer and privacy), alternative dispute systems and commercial markets.

 

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Components of Results of Operations

Revenues

Our customers use our solutions to assist at every stage of the hiring talent journey, including attracting talented candidates, engaging and connecting top candidates, simplifying interview management, providing offers and onboarding with AI, and supporting internal mobility by making it easier for employees to find their next position.

We recognize revenues under Accounting Standard Codification, or ASC, 606, Revenues from Contracts with Customers, upon transfer of control of promised products and services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. See “Critical Accounting Policies—Revenue Recognition” for further details on our revenue recognition. We generate revenue from two sources that are considered separate performance obligations: (1) subscription and (2) professional services.

Subscription is comprised of subscription fees paid from customers utilizing our cloud-based solutions for a term typically ranging from two to three years, without allowing the customer to take possession of the software or transfer hosting to a third party. Subscription also includes support and maintenance, which includes when and if available software updates and technical support. We typically invoice our subscription fees annually in advance and recognize revenues ratably over the term of the applicable agreement, provided that all other revenue recognition criteria have been satisfied. We expect subscription revenues to increase over time as we expand our customer base and increase our customers’ adoption of our iCIMS Talent Cloud platform.

Professional services are mostly services related to the implementation of our cloud-based solutions. Professional services are often sold as part of new subscription contracts and are typically fulfilled by us. These services are priced on a fixed fee basis and generally invoiced in advance of the service being delivered. We recognize professional services revenues ratably over the performance period, ranging from four to seven months, which is the typical time to complete our implementation and aligns with the period the value is transferred to the customer. Over the long term, we expect professional services revenues as a percentage of total revenues will slightly decrease as the demand for our professional services is not expected to grow at the same rate as the demand for our subscription. We plan to increase our services capacity by leveraging third-party system integrators to provide implementation services to customers to support our expansion and growth strategies.

Cost of Revenues

Cost of revenues consists primarily of costs related to delivering, maintaining and supporting our cloud-based platform and delivering professional services and support. These costs include hosting and data center costs, salaries, benefits and equity-based compensation for our hosting and professional services staff, as well as general overhead and amortization of capitalized software costs. We allocate general overhead, such as applicable shared rent, depreciation and utilities, to cost of revenues based on relative headcount. The costs associated with providing professional services are recognized as such costs are incurred. Over the long term, we believe that the cost of revenues as a percentage of total revenues will decrease.

Gross Profit

Gross profit, or revenue less cost of revenue, has been and will continue to be affected by various factors, including the mix of our customers, the costs associated with supporting our cloud solution and the timing and costs associated with investments to expand our iCIMS Talent Cloud platform infrastructure. We expect our gross profit to increase in absolute dollars. We expect our gross margin to increase over time as we continue to increase our recurring revenues through the expansion of our customer base and the increase in customers’ adoption of our iCIMS Talent Cloud platform.

 

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Operating expenses

Sales and Marketing. Sales expense consists primarily of salaries, sales incentive compensation, benefits and equity-based compensation for our sales teams. Sales incentive compensation includes amortization of deferred commissions, as well as certain payments that are not considered incremental costs of obtaining a customer contract and therefore are expensed as incurred. Marketing expense usually is expensed as incurred and consists primarily of costs associated with branding, demand generation and other advertising, as well as salaries, benefits and equity-based compensation for our marketing teams. We allocate general overhead, such as applicable shared rent, depreciation and utilities, to sales and marketing expenses based on relative headcount. We expect sales and marketing expenses to continue to increase in absolute dollars as we expand our sales personnel and marketing efforts. See the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Sales and Marketing” included elsewhere in this prospectus for more information.

Research and Development. Research and development, or R&D, expense consists primarily of investigative activities the Company conducts to improve existing offerings and the development of new products and services. R&D expense consists primarily of compensation expense for R&D employees. All such costs are expensed as incurred, except for certain internal-use software costs, which may be capitalized. R&D expense also includes allocated general overhead, such as applicable shared rent, depreciation and utilities based on relative headcount. We expect R&D expense to increase in absolute dollars in the future as we intend to release new features and functionality designed to maximize the efficiency and effectiveness of the hiring process for our customers. See the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Research and Development” included elsewhere in this prospectus for more information.

General and Administrative. General and administrative expense consists primarily of personnel and related expenses for executive, legal, human resource, facilities, accounting and finance and information technology departments. In addition, general and administrative expenses include third-party professional fees, allocated overhead and other corporate expenses not allocated to other departments. We expect our general and administrative expenses to increase on an absolute dollar basis as our business grows. Also, following the completion of this offering, we expect to incur additional general and administrative expenses as a result of operating as a public company, including costs to comply with the rules and regulations applicable to companies listed on a national securities exchange, costs related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, and increased expenses for insurance, investor relations and professional services.

Amortization of intangible assets. Amortization of intangible assets relates to acquired intangible assets consisting primarily of customer relationships, non-compete agreements, developed technology and trademarks. Acquired intangible assets are carried at cost, less accumulated amortization. Acquired intangible assets are amortized on a straight-line basis over their estimated useful lives, which range from 1 to 14 years. The estimated useful lives are based on the expected period of benefit of the acquired intangible.

Interest and Other (Expense) Income

Interest expense, net. Interest expense, net consists primarily of interest payments on our outstanding borrowings under our existing credit facility as well as the amortization of associated deferred financing costs. See “Liquidity and Capital Resources—Credit Facilities.”

Other (expense) income, net. Other (expense) income, net consists primarily of certain non-operating income and expenses.

 

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Income Tax Benefit

Income tax benefit relates to U.S. federal, state, and foreign income taxes in which we conduct business. We have U.S. federal and state net operating loss, or NOL, available to offset future income tax and are subject to limitations under Section 382 of the Internal Revenue Code, or Section 382. We also have other tax credits, such as research and development tax credits, available to further offset our taxable income in the future. Our cash tax rate is significantly lower than our book tax rate primarily due to the utilization of our NOLs and other tax credits.

Results of Operations

The following table sets forth our consolidated statement of operations for the period indicated:

 

     Six Months Ended
June 30,
    Years Ended
December 31,
 
     2021     2020     2020     2019  
     (in thousands)  

Consolidated Statements of Operations:

        

Revenues

   $ 138,353     $ 124,520     $ 251,283     $ 214,202  

Cost of revenues(1)(2)

     36,052       28,860       57,628       51,039  
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross Profit

     102,301       95,660       193,655       163,163  

Operating expenses:

        

Sales and marketing(1)(2)

     42,920       34,098       69,998       70,559  

Research and development(1)(2)

     27,238       23,962       48,255       43,121  

General and administrative(1)(2)

     23,584       22,937       51,752       42,274  

Amortization of intangible assets

     27,226       24,350       49,267       46,971  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     120,968       105,347       219,272       202,925  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating loss

     (18,667     (9,687     (25,617     (39,762
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest and other (expense) income:

        

Interest expense, net

     (22,187     (19,401     (39,140     (40,528

Other income (expense), net

     53       (121     (121     61  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest and other expense, net

     (22,134     (19,522     (39,261     (40,467
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income tax benefit

     (40,801     (29,209     (64,878     (80,229

Income tax benefit

     (9,760     (8,294     (16,708     (21,149
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (31,041   $ (20,915   $ (48,170   $ (59,080
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Includes stock-based compensation as follows:

 

     Six Months
Ended June 30,
     Years Ended
December 31,
 
     2021      2020      2020      2019  
     (in thousands)  

Cost of revenues

   $ 211      $ 34      $ 241      $ 53  

Sales and marketing

     540        427        922        689  

Research and development

     465        333        668        723  

General and administrative

     1,635        1,629        3,267        4,049  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total stock-based compensation

   $ 2,851      $ 2,423      $ 5,098      $ 5,514  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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(2)

Includes depreciation expense as follows:

 

     Six Months
Ended June 30,
     Years Ended
December 31,
 
     2021      2020      2020      2019  
     (in thousands)  

Cost of revenues

   $ 596      $ 653      $ 1,307      $ 1,179  

Sales and marketing

     609        621        1,257        1,055  

Research and development

     486        588        1,162        926  

General and administrative

     357        376        763        573  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total depreciation expense

   $ 2,048      $ 2,238      $ 4,489      $ 3,733  
  

 

 

    

 

 

    

 

 

    

 

 

 

The following table sets forth our consolidated statements of operations expressed as a percentage of total revenue for the periods indicated:

 

     Six Months
Ended June 30,
    Years Ended
December 31,
 
     2021     2020     2020     2019  

Consolidated Statement of Operations

        

Revenues

     100.0     100.0     100.0     100.0

Cost of revenues

     26.1       23.2       22.9       23.8  
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross Profit

     73.9       76.8       77.1       76.2  

Operating expenses:

        

Sales and Marketing

     31.0       27.4       27.9       32.9  

Research and development

     19.7       19.2       19.2       20.1  

General and administrative

     17.0       18.4       20.6       19.7  

Amortization of intangible assets

     19.7       19.6       19.6       21.9  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     87.4       84.6       87.3       94.7  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating loss

     (13.5     (7.8     (10.2     (18.6
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest and other (expense) income

        

Interest expense, net

     (16.0     (15.6     (15.6     (18.9

Other income (expense), net

           (0.1            
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest and other expense, net

     (16.0     (15.7     (15.6     (18.9
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income tax benefit

     (29.5     (23.5     (25.8     (37.5

Income tax benefit

     (7.1     (6.7     (6.6     (9.9
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

     (22.4 )%      (16.8 )%      (19.2 )%      (27.6 )% 
  

 

 

   

 

 

   

 

 

   

 

 

 

Results of Operations for the Six Months Ended June 30, 2021 and 2020

Revenues

 

     Six Months
Ended June 30,
     Change  
     2021      2020      Amount      %  
     (in thousands except for %)  

Revenues

   $ 138,353      $ 124,520      $ 13,833        11.1  

Total revenues increased $13.8 million, or 11.1%, to $138.3 million for the six months ended June 30, 2021 from $124.5 million for the same period in 2020. The increase in revenues was driven by a $15.9 million, or 13.6%, growth in subscription revenues for the six months of 2021 versus a year ago. Our increase in revenues

 

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was partially offset by the decrease in professional services revenues of $2.1 million, which was mainly attributable to the impact from the COVID-19 pandemic resulting in less activities in our professional services in the first quarter of 2021 as compared to a year ago. Revenues from sales to new customers accounted for $9.0 million of the total year-over-year growth in subscription revenues. Our acquisitions of Easyrecrue in November 2020 and Altru in December 2020 had contributed an additional $6.2 million of revenues in the first half of 2021. Our subscription revenues from existing customers had increased $0.8 million for the six months ended June 30, 2021 as compared to the same period in 2020. Our total revenues from international customers also grew significantly year over year by 79% to $11.2 million for the six months ended 2021 versus $6.2 million a year ago.

Cost of Revenues

 

     Six Months
Ended June 30,
     Change  
     2021      2020      Amount      %  
     (in thousands except for %)  

Cost of revenues

   $ 36,052      $ 28,860      $ 7,192        24.9  

Total cost of revenues increased $7.2 million, or 24.9%, to $36.1 million for the six months ended June 30, 2021 from $28.9 million for the same period in 2020. The increase in cost of revenues was driven by $3.1 million higher hosting services costs and other supporting software expenses to support our subscription business growth. The increase was also due to $2.1 million higher personnel-related costs as we hired a number of leadership positions in our cost of revenue departments after the second quarter of 2020 and additional headcounts we took on from Easyrecrue and Altru acquisitions since the fourth quarter of 2020, partially offset by the severance expense we incurred for our restructuring activities in the second quarter of 2020. The increase was also due in part to a rise of $1.2 million in software development cost amortization as a result of new products and product enhancements launched in 2021.

Gross Profit

 

     Six Months
Ended June 30,
     Change  
     2021      2020      Amount      %  
     (in thousands except for %)  

Gross profit

   $ 102,301      $ 95,660      $ 6,641        6.9  

Gross profit increased $6.6 million, or 6.9%, to $102.3 million for the six months ended June 30, 2021 from $95.7 million for the same period in 2020. Our gross profit margin was 73.9% for the six months ended June 30, 2021, as compared to 76.8% for the same period in 2020. The decrease in gross profit margin was driven by the increase in cost of revenues both in absolute dollars and as a percentage of total revenue, due primarily to the increase in hosting services costs and other supporting software expenses, and personnel-related costs in cost of revenues.

Operating expenses

 

     Six Months
Ended June 30,
     Change  
     2021      2020      Amount      %  
     (in thousands except for %)  

Operating expenses:

           

Sales and marketing

   $ 42,920      $ 34,098      $ 8,822        25.9  

Research and development

     27,238        23,962        3,276        13.7  

General and administrative

     23,584        22,937        647        2.8  

Amortization of intangible assets

     27,226        24,350        2,876        11.8  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

   $ 120,968      $ 105,347      $ 15,621        14.8  
  

 

 

    

 

 

    

 

 

    

 

 

 

Sales and Marketing. Sales and marketing expenses increased $8.8 million, or 25.9%, to $42.9 million for the six months ended June 30, 2021 from $34.1 million for the same period in 2020. The increase was driven

 

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by $6.7 million higher personnel-related costs as we hired a number of leadership positions in our sales department and an expansion of our marketing team after the second quarter of 2020, partially offset by the severance expense we incurred for our restructuring activities in the second quarter of 2020. The increase in personnel-related costs was also attributable to higher sales incentive compensation in connection with our revenue growth. We also increased our spending by $1.1 million on demand generation programs focused on new customer acquisitions in 2021 as opposed to lowering such spending as a result of the COVID-19 pandemic a year ago.

Research and development. Research and development expense increased $3.3 million, or 13.7%, to $27.2 million for the six months ended June 30, 2021 from $23.9 million for the same period in 2020. The increase was driven by a $1.7 million increase in our third-party offshore research and development operations beginning from the middle of 2020 and $0.9 million higher personnel-related costs associated with additional headcounts we took on from Easyrecrue and Altru acquisitions since the fourth quarter of 2020. We also spent $0.7 million during the first half of 2021 on product integrations with Easyrecrue and Altru which contributed to the overall increase in research and development expense.

General and administrative. General and administrative expense increased $0.6 million, or 2.8%, to $23.5 million for the six months ended June 30, 2021 from $22.9 million for the same period in 2020. The increase was largely driven by $1.5 million of accounting related professional and consulting fees incurred during the first half of 2021 in anticipation of becoming a public company. The increase in general and administrative expense was partially offset by $1.1 million of lower bad debt expense in 2021 versus a year ago.

Amortization of intangible assets. Amortization of intangible assets costs increased $2.9 million, or 11.8%, to $27.2 million for the six months ended June 30, 2021 from $24.3 million for the same period in 2020. The increase was largely driven by the full period effect in 2021 for the amortization of intangible assets associated with our three acquisitions after the first quarter of 2020. We completed our acquisitions of Opening HR in May 2020, Easyrecrue in November 2020 and Altru in December 2020.

Interest and other (expense) income

 

     Six Months
Ended June 30,
    Change  
     2021     2020     Amount     %  
     (in thousands except for %)  

Interest and other income (expense)

        

Interest expense, net

   $ (22,187   $ (19,401   $ 2,786       14.4  

Other income (expense), net

     53       (121     (174     (143.8
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest and other expense, net

   $ (22,134   $ (19,522   $ 2,612       13.4  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest and other expense, net. Total interest and other expense, net increased $2.6 million, or 13.4%, to $22.1 million for the six months ended June 30, 2021 from $19.5 million for the same period in 2020. The increase was mainly driven by the increase in interest expense, resulting from our incremental borrowings of $70.0 million under our Term Loan Facility in November 2020 and $25.0 million under our Revolving Credit Facility in December 2020 in connection with our acquisitions of Easyrecrue and Altru, respectively. Our effective interest rate for the six months ended June 30, 2021 was consistent with the same period in 2020 at 7.9%.

Income tax benefit

 

     Six Months
Ended June 30,
    Change  
     2021     2020     Amount      %  
     (in thousands except for %)  

Income tax benefit

   $ (9,760   $ (8,294   $ 1,466        17.7  

 

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Income tax benefit. Income tax benefit increased $1.5 million, or 17.7%, to $(9.8) million for the six months ended June 30, 2021 from $(8.3) million for the same period in 2020. The increase was driven by higher loss before income tax benefit, partially offset by a lower effective tax rate, in 2021 as compared to 2020. The lower effective tax rate of 23.9% for the six months ended June 30, 2021 as compared with 28.4% for the same period in 2020 was related to the impact of the net operating loss, or NOL, carryback claims under the CARES Act in 2020 and an increase in valuation allowance associated with our foreign deferred tax assets acquired through the acquisition of Easyrecrue in November 2020, partially offset by higher foreign tax expense in 2021.

Results of Operations for the Years Ended December 31, 2020 and 2019

Revenues

 

     Year Ended
December 31,
     Change  
     2020      2019      Amount      %  
     (in thousands except for %)  

Revenues

   $ 251,283      $ 214,202      $ 37,081        17.3  

Total revenues increased $37.1 million, or 17.3%, to $251.3 million in 2020 from $214.2 million in 2019. The increase in revenues was largely driven by a $38.8 million, or 19%, growth in subscription revenues in 2020 from 2019. We benefited from strong demand from existing customers who renewed at a higher contract value as compared with their prior contract and contracted for more applications under our iCIMS Talent Cloud platform. The subscription revenues from existing customers increased $20.2 million, or 10%, in 2020, as compared to 2019. The increase in subscription revenues was also impacted by our strong sales to new customers, which accounted for $18.6 million in 2020. The increase in subscription revenues was partially offset by the decrease in professional services revenues of $1.7 million, which was attributable to certain pass-through revenues we stopped offering at the end of 2019. Pass-through revenues represented our job posting services acquired from the acquisition of Jibe, or the Jibe Acquisition, in which we performed the service as a principal under ASC 606. Our revenues associated with the implementation of services remained flat in 2020, as compared to 2019.

Cost of Revenues

 

     Year Ended
December 31,
     Change  
     2020      2019      Amount      %  
     (in thousands except for %)  

Cost of revenues

   $ 57,628      $ 51,039      $ 6,589        12.9  

Total cost of revenues increased $6.6 million, or 12.9%, to $57.6 million in 2020 from $51.0 million in 2019. The increase in cost of revenues was driven by $3.3 million higher hosting services costs and other supporting software expenses, as well as $1.8 million higher personnel-related costs to support our subscription business growth. The increase was also due to $1.5 million higher software development cost amortization as a result of new products and product enhancements launched in 2020, which was partially offset by $1.8 million lower pass-through expenses in connection with a service we stopped offering at the end of 2019. Pass-through expenses represented our job posting services acquired from the Jibe Acquisition, in which we performed the service as a principal under ASC 606.

Gross Profit

 

     Year Ended
December 31,
     Change  
     2020      2019      Amount      %  
     (in thousands except for %)  

Gross profit

   $ 193,655      $ 163,163      $ 30,492        18.7  

 

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Gross profit increased $30.5 million, or 18.7%, to $193.7 million in 2020 from $163.2 million in 2019. Our gross profit margin was 77.1% in 2020, as compared to 76.2% in 2019. The increase in gross profit margin was driven by the increase, as a percentage of total revenue, in subscription revenues, which has a higher gross profit margin as compared to professional services revenues.

Operating expenses

 

     Year Ended
December 31,
     Change  
     2020      2019      Amount     %  
     (in thousands except for %)  

Operating expenses:

          

Sales and marketing

   $ 69,998      $ 70,559      $ (561     (0.8

Research and development

     48,255        43,121        5,134       11.9  

General and administrative

     51,752        42,274        9,478       22.4  

Amortization of intangible assets

     49,267        46,971        2,296       4.9  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total operating expenses

   $ 219,272      $ 202,925      $ 16,347       8.1  
  

 

 

    

 

 

    

 

 

   

 

 

 

Sales and Marketing. Sales and marketing expenses decreased $0.6 million, or 0.8%, to $70.0 million in 2020 from $70.6 million in 2019. The decrease was driven by $4.0 million lower spending on demand generation programs focused on new customer acquisitions and $1.7 million decrease in trade show expenses as a result of the COVID-19 pandemic, which was partially offset by $1.9 million higher amortization of deferred sales commission in connection with our revenue growth and certain additional marketing expenses totaling $1.8 million associated with our rebranding and our INSPIRE customer virtual conference in 2020.

Research and development. Research and development expense increased $5.1 million, or 11.9%, to $48.3 million in 2020 from $43.1 million in 2019. The increase was driven by an increase in our third-party offshore research and development operations in 2020 of $1.9 million and higher personnel-related costs attributable to a $1.0 million severance expense in 2020 and a slight increase in headcount from 2019, partially offset by $1.1 million higher internal software capitalization resulting from the increased activities in enhancing and broadening our iCIMS Talent Cloud platform.

General and administrative. General and administrative expense increased $9.5 million, or 22.4%, to $51.8 million in 2020 from $42.3 million in 2019. The increase was largely driven by $7.2 million of acquisition costs in 2020, as compared to $1.2 million in 2019. The increase was also due to $1.4 million of additional bad debt expense associated with customers impacted by the COVID-19 pandemic and higher personnel-related costs attributable to the severance expense in 2020 and a slight increase in headcount from 2019 totaling $2.1 million.

Amortization of intangible assets. Amortization of intangible assets costs increased $2.3 million, or 4.9%, to $49.3 million in 2020 from $47.0 million in 2019. The increase was largely driven by the full year effect in 2020 for the amortization of intangible assets associated with the Jibe Acquisition in June 2019. The increase was also due to an increase in intangible assets resulting from the acquisition of Easyrecrue in November 2020 and Altru in December 2020.

Interest and other (expense) income

 

     Year Ended
December 31,
    Change  
     2020     2019     Amount     %  
     (in thousands except for %)  

Interest and other (expense) income

        

Interest expense, net

   $ (39,140   $ (40,528   $ (1,388     (3.4

Other (expense) income, net

     (121     61       (182     298.4  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest and other expense, net

   $ (39,261   $ (40,467   $ 1,206       (3.0
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Total interest and other expense, net. Total interest and other expense, net decreased $1.2 million, or 3.0%, to $39.3 million in 2020 from $40.5 million in 2019. The decrease was driven by the decrease in interest expense of $1.4 million, resulting from a decline in the Eurodollar Rate on our Term Loan Facility in 2020. The decrease in other (expense) income, net from 2019 to 2020, was due to a one-time registration fee of $0.2 million paid in connection with the Grow New Jersey tax incentive program.

Income tax benefit

 

     Year Ended
December 31,
    Change  
     2020      2019     Amount      %  
     (in thousands except for %)  

Income tax benefit

   $  (16,708)      $ (21,149   $  (4,441)        (21.0

Income tax benefit. Income tax benefit decreased $4.4 million, or 21.0%, to $(16.7) million in 2020 from $(21.1) million in 2019. The decrease was driven by lower loss before income tax benefit in 2020, as compared to 2019. The effective tax rate was reduced to 25.8% in 2020 from 26.4% in 2019, resulting from higher permanent differences and an increase in state income taxes net of federal benefit.

Quarterly Results of Operations and Other Data

The following tables set forth selected unaudited consolidated quarterly statements of operations data for each of the ten fiscal quarters ended June 30, 2021, as well as the percentage of revenue that each line item represents for each quarter. The information for each of these quarters has been prepared on the same basis as the audited annual consolidated financial statements included elsewhere in this prospectus and, in the opinion of management, includes all adjustments, which consist only of normal recurring adjustments, necessary for the fair presentation of the results of operations for these periods. This data should be read in conjunction with our audited consolidated financial statements and related notes included elsewhere in this prospectus. These quarterly results are not necessarily indicative of our results of operations to be expected for any future period.

 

    Three Months Ended  
    June 30,
2021
    March 31,
2021
    December 31,
2020
    September 30,
2020
    June 30,
2020
    March 31,
2020
    December 31,
2019
    September 30,
2019
    June 30,
2019
    March 31,
2019
 
          (in thousands, except unit and per unit data)  

Revenues

  $ 70,641     $ 67,712     $ 64,323     $ 62,440     $ 62,686     $ 61,834     $ 59,482     $ 56,270     $ 51,286     $ 47,164  

Cost of revenues(1)(2)

    18,976       17,076       15,102       13,666       14,091       14,769       15,429       13,666       11,822       10,122  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross Profit

    51,665       50,636       49,221       48,774       48,595       47,065       44,053       42,604       39,464       37,042  

Operating expenses:

 

               

Sales and marketing(1)(2)

    21,519       21,401       20,045       15,855       14,646       19,452       18,856       17,864       18,034       15,805  

Research and development(1)(2)

    13,221       14,017       13,236       11,057       11,722       12,240       12,557       12,456       9,436       8,672  

General and administrative(1)(2)

    11,109       12,475       18,638       10,177       11,813       11,124       11,477       11,108       10,741       8,948  

Amortization of intangible assets

    13,614       13,612       12,705       12,212       12,203       12,147       12,147       12,147       11,412       11,265  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

    59,463       61,505       64,624       49,301       50,384       54,963       55,037       53,575       49,623       44,690  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating loss

    (7,798     (10,869     (15,403     (527     (1,789     (7,898     (10,984     (10,971     (10,159     (7,648
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest and other (expense) income

                   

Interest expense, net

    (11,191     (10,996     (10,313     (9,426     (9,331     (10,070     (10,402     (10,875     (9,781     (9,470

Other income (expense), net

    30       23       (20     20       (148     27       1       13       33       14  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents
    Three Months Ended  
    June 30,
2021
    March 31,
2021
    December 31,
2020
    September 30,
2020
    June 30,
2020
    March 31,
2020
    December 31,
2019
    September 30,
2019
    June 30,
2019
    March 31,
2019
 
          (in thousands, except unit and per unit data)  

Total interest and other expense, net

    (11,161     (10,973     (10,333     (9,406     (9,479     (10,043     (10,401     (10,862     (9,748     (9,456
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss before income tax benefit

    (18,959     (21,842     (25,376     (9,933     (11,268     (17,941     (21,385     (21,833     (19,907     (17,104

Income tax benefit

    (4,465     (5,295     (5,959     (2,455     (3,584     (4,710     (5,809     (5,600     (5,237     (4,503
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

  $ (14,494   $ (16,547   $ (19,777   $ (7,478   $ (7,684   $ (13,231   $ (15,576   $ (16,233   $ (14,670   $ (12,601
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss per unit:

                   

Basic and diluted

  $ (16.54   $ (18.96   $ (23.00   $ (8.72   $ (8.96   $ (15.47   $ (18.22   $ (19.02   $ (17.19   $ (14.76
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average members’ equity units outstanding:

 

               

Basic and diluted

    876,340       872,660       859,972       857,590       857,639       855,436       854,943       853,514       853,514       853,514  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

    Three Months Ended  
    June 30,
2021
    March 31,
2021
    December 31,
2020
    September 30,
2020
    June 30,
2020
    March 31,
2020
    December 31,
2019
    September 30,
2019
    June 30,
2019
    March 31,
2019
 
    (in thousands)  

(1)   Includes stock-based compensation as follows:

    

         

Cost of revenues

  $ 105     $ 106     $ 104     $ 102     $ 15     $ 20     $ 11     $ (2   $ 22     $ 22  

Sales and marketing

    338       202       236       260       202       224       240       186       140       123  

Research and development

    253       212       169       166       165       168       164       191       186       182  

General and administrative

    871       764       769       868       842       788       1,074       1,029       1,005       941  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total stock-based compensation

  $ 1,567     $ 1,284     $ 1,278     $ 1,396     $ 1,224     $ 1,200     $ 1,489     $ 1,404     $ 1,353     $ 1,268  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

    Three Months Ended  
    June 30,
2021
    March 31,
2021
    December 31,
2020
    September 30,
2020
    June 30,
2020
    March 31,
2020
    December 31,
2019
    September 30,
2019
    June 30,
2019
    March 31,
2019
 
    (in thousands)  

(2)   Includes depreciation expense as follows:

    

         

Cost of revenues

  $ 296     $ 300     $ 321     $ 333     $ 318     $ 335     $ 353     $ 275     $ 289     $ 262  

Sales and marketing

    313       296       306       330       316       305       316       246       259       234  

Research and development

    243       243       269       305       287       301       280       215       226       205  

General and administrative

    177       180       182       205       198       178       173       132       141       127  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total depreciation expense

  $ 1,029     $ 1,019     $ 1,078     $ 1,173     $ 1,119     $ 1,119     $ 1,122     $ 868     $ 915     $ 828  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

94


Table of Contents
    Three Months Ended  
    June 30,
2021
     March 31,
2021
    December 31,
2020
    September 30,
2020
    June 30,
2020
    March 31,
2020
    December 31,
2019
    September 30,
2019
    June 30,
2019
    March 31,
2019
 

Revenues

    100.0     100.0     100.0     100.0     100.0     100.0     100.0     100.0     100.0