STERLING CHECK CORP. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-K)

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and related notes and other information included elsewhere in this
Annual Report. This discussion contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from the
results described in or implied by the forward-looking statements. Factors that
could cause or contribute to those differences include, but are not limited to,
those identified below and those discussed in Part I, Item 1A. "Risk Factors"
and "Cautionary Note Regarding Forward-Looking Statements" included elsewhere in
this Annual Report on Form 10-K.

Overview

Sterling Check Corp. (the "Company," "Sterling," "we," "us" or "our") is a
leading global provider of technology-enabled background and identity
verification services. We provide the foundation of trust and safety our clients
need to create great environments for their most essential resource-people. We
offer a comprehensive hiring and risk management solution that begins with
identity verification, followed by criminal background screening, credential
verification, drug and health screening, processing of employee documentation
required for onboarding and ongoing risk monitoring. Our services are delivered
through our purpose-built, proprietary, cloud-based technology platform that
empowers organizations with real-time and data-driven insights to conduct and
manage their employment screening programs efficiently and effectively. Our
interfaces are supported by our powerful artificial intelligence ("AI")-driven
fulfillment platform, which leverages more than 3,300 automation integrations,
including Application Programming Interfaces ("APIs") and Robotic Process
Automation ("RPA") bots. This enables 90% of U.S. criminal searches to be
automated and allows us to complete 70% of U.S. criminal searches within the
first hour and 90% within the first day. As of December 31, 2021, over 95% of
our revenue is processed through platforms hosted in the cloud, which allows us
to consistently maintain 99.9% platform availability while being prepared to
scale into the future.

Our client-centric approach underpins everything we do. We serve a diverse and
global client base in a wide range of industries, such as healthcare, gig
economy, financial and business services, industrials, retail, contingent,
technology, media and entertainment, transportation and logistics, hospitality,
education and government. To serve these differing needs, our sales and support
delivery model is organized around teams dedicated to specific industries
("Verticals") and geographic markets ("Regions"). Our clients face a dynamic and
rapidly evolving global labor market with increasing complexity and regulatory
requirements. As a result, we believe our solutions are mission-critical to
their core human resources, risk management and compliance functions. During the
year ended December 31, 2021, we completed over 95 million searches for over
50,000
                                       60
--------------------------------------------------------------------------------

Table of Contents

clients, including over 50% of the Fortune 100 and over 45% of the Fortune 500.
We believe the combination of our deep market expertise from our sales and
support combined with the flexibility of our proprietary technology platform
enable us to deliver industry-leading, highly specialized solutions to our
clients in a scalable manner, driving growth and differentiating us from our
competitors.

Trends and Other Factors Affecting Our Performance

Macroeconomic and Job Environment

Our business is impacted by the overall economic environment and our clients'
hiring volumes. Despite fluctuations in the macroeconomic environment, we have
benefited recently from a number of key demand drivers, many of which increase
the need for more flexible, comprehensive screening and hiring solutions.

The American gig economy and contingent workforce accounts for a large and
growing proportion of the United States ("U.S.") workforce. As the gig economy
caters to clients in a very direct and personal way (e.g., rideshare, goods
delivery, household services), safe and effective background screening
capabilities have become critical. In addition, generational and structural
shifts in the workforce have led to increasing voluntary employee churn,
particularly with younger workers. The ongoing structural shift
from in-office to remote work further reduces the historical geographic matching
challenge employers and employees faced, further reducing switching costs for
employees and expanding talent pools for employers. Further, the proliferation
of personal data has exposed many identities to risk of exposure and theft,
driving the need for identity verification. Verifying identity is a powerful
tool that employers can use to help ensure that their candidates and workers are
who they claim to be, and that fraudulent data is not used during the hiring and
onboarding process. As false claims within job applications are an area of
growing concern for employers, our clients use our background and identification
verification services to mitigate reputational risks.

Background screening is also gaining broader adoption outside the U.S. Globally,
companies are consistently competing for the best talent, regardless of
location, and are therefore putting greater emphasis on reducing time-to-hire in
a compliant manner as well as creating a positive onboarding experience for the
candidate. Additionally, the international expansion of U.S.-based global
companies and their desire to offer centralized and comparable hiring practices
has introduced the benefits of background screening to foreign markets. Our
ability to navigate the complexities of international background checks and
verifying foreign credentials drives demand for our products and services.

Our clients are increasingly utilizing ongoing post-hire screening. This allows
for greater mobility and safety for remote, onsite and contingent jobs and also
ensures prompt risk warnings on any changes to an employee's profile, including
any criminal activity, drug use or health changes and compliance
with on-going certification and licensing requirements, amongst others. This has
further accelerated demand for our screening products and services.

New Product and Service Development

Our success depends on our ability to develop new products and services and introduce technological enhancements for our current products and services that meet the demands of existing and new clients. We have a robust new product roadmap focused on enhancing our ability to address the constantly evolving needs of our clients and their candidates.

As part of our continued evolution, in early 2019, we launched Project Ignite, a
three-phase strategic investment initiative to create an enterprise-class global
platform. We are already benefiting from the delivery of our new client and
candidate interfaces, scalable cloud-based infrastructure for our global and
local production platforms and an improved security environment through new
business wins, improved client retention and the ability to launch products
rapidly to meet immediate client needs, as we did with our full suite
of COVID-19 testing products in 2020. The remaining investment, which we expect
to substantially complete in 2022, will migrate our corporate technological
infrastructure to the cloud and unify our clients onto a single global
production platform. Over the long term, we expect these investments to further
enhance our margins, improve time to market as we build once and deploy globally
and allow us to increase innovation. We intend to continue to invest in
developing industry-first solutions, further innovating in our existing
Verticals as well as pursuing adjacent market opportunities that leverage our
existing technology platform. We plan to pursue new and under-penetrated
adjacent market opportunities, including talent assessment, reference checking,
onboarding and investigative due diligence.
                                       61
--------------------------------------------------------------------------------

  Table of Contents

Clients

Our results of operations depend on our ability to retain existing clients,
offer new products and services to existing clients, attract new clients and
maintain a diverse client base. We serve the background and identity
verification services needs of more than 50,000 clients. Our client base is
diversified in size of client and industry and includes over 50% of the Fortune
100, over 45% of the Fortune 500 and numerous small- and mid-sized business
("SMB") clients across the world. We have minimal client concentration with no
client accounting for more than 5% of revenue, and our top 25 clients accounting
for less than 25% of revenue. We serve the healthcare, gig, financial and
business services, industrials, retail, contingent, technology, media and
entertainment, transportation and logistics, hospitality, education and
government industries. We employ an operating model organized by Vertical and
Region that produces differentiated end-market insights and allows us to tailor
solutions to meet the needs of each industry we serve.

A majority of our U.S. enterprise client contracts are exclusive to Sterling or
require Sterling to be used as the primary provider. Additionally, they are
typically multi-year agreements with automatic renewal terms, no termination for
convenience clauses and set pricing with Sterling's right to increase prices
annually upon notice. Our success is driven by a competitive service offering of
fast, reliable, and accurate screening information delivered on a cost-effective
basis. Additionally, our offerings are tightly integrated with our clients'
applicant tracking systems ("ATS") and human capital management ("HCM") systems,
further cementing our services into our clients' daily human resources ("HR")
workflows. Taken together, these factors have yielded strong client
relationships with an average tenure of nine years across our top 100 clients
based on 2020 and 2021 total revenue.

Our ability to retain our existing clients and attract new clients will depend
on our ability to continue to deliver superior client service and on the quality
of the products and services that we provide, including the accuracy and speed
of the background checks that we perform and the protection of the data we
collect. Our gross retention rate in 2018, 2019, 2020 and 2021 was 88%, 91%, 94%
and 96%, respectively. Our gross retention rate in 2018 and 2019 reflected the
loss of two of our top five clients in 2018, prior to the formation of our new
management team, investment in our cloud-based technology platform, and
verticalization of the business.

Regulatory Environment

Our business is subject to extensive regulations in the U.S. and
internationally, which may expose us to significant regulatory risk and cause
additional legal costs to ensure compliance. See Part I, Item 1.
"Business-Regulation." We are subject to a number of laws and regulations
regarding protection of the security and privacy of certain healthcare and
personal information. While the overarching principles of security and privacy
laws and regulations are similar across geographies, the specific laws within
each region are not uniform and are often evolving, placing increasingly
complicated operational requirements on our business.

However, under certain circumstances, regulation may increase demand for our
products and services, and we believe we are well positioned to benefit from any
potential increased screenings due to regulatory changes as clients seek
products and services that meet regulatory requirements and solutions that help
them comply with their regulatory obligations. A growing number of laws and
regulations has led to greater complexities and potential legal liabilities
related to hiring and workforce management policies that are increasingly
difficult to navigate for employers. In response, our clients are increasing
their focus on compliance functions to ensure they are meeting these changing
legal and regulatory demands.

Competitive Environment

The market for global background and identity verification services is highly
fragmented and competitive. To our knowledge, no single private or public firm
possesses a market share of greater than 10%. We compete with a diverse group of
screening companies, including global full-suite players characterized by their
global scale and enterprise offerings; mid-tier players that tend to focus on a
particular geographic region, industry or product line; and small and
independently-owned background screening players that typically serve SMBs. It
is also possible that new competitors or alliances or consolidation among
competitors may emerge and significantly increase competition. We expect our
market to remain highly competitive.

We believe that reporting accurate information and maintaining security of
sensitive information are two fundamental requirements to compete successfully
as a reputable background screening provider. We also compete on the basis of a
number of factors, including: the technology-enabled, ease-of-use, level of
functionality and end-to-end efficiency of our solution; our ability to
integrate with client systems and major software applications; the breadth and
geographical reach of our service offerings; the speed of our screening results;
                                       62
--------------------------------------------------------------------------------

Table of Contents

pricing and return on investment for our clients; and our successful track record and reference base with similarly situated companies. See Part I, Item 1. "Business-Competition" for more detail on our competitors.

Technology and Cybersecurity Environment

We operate in industries that are subject to rapid technological advances and
changing client needs and preferences. In order to remain competitive and
responsive to client demands, we continually upgrade, enhance, and expand our
security, technology, products and services. If we experience cyber-threats and
attempted security breaches or fail to respond successfully to technology
challenges and client needs and preferences, the demand for our products and
services may diminish. If these threats or breaches were successful, they could
impact revenue and operating income and increase costs. We therefore continue to
make investments, which may result in increased costs, to strengthen our
cybersecurity measures.

Foreign Currency Exchange Rate Environment

We earn revenues, pay expenses, hold assets and incur liabilities in currencies
other than the U.S. dollar. Accordingly, fluctuations in foreign currency
exchange rates can affect our results of operations from period to period. In
particular, fluctuations in exchange rates for non-U.S. dollar currencies may
reduce the U.S. dollar value of revenues, earnings and cash flows we receive
from non-U.S. markets, increase our operating expenses (as measured in U.S.
dollars) in those markets, negatively impact our competitiveness in those
markets or otherwise adversely impact our results of operations or financial
condition. Key currencies affecting our results of operations at this time are
the Canadian dollar (CAD), Euro (EUR), British pound (GBP), Australian dollar
(AUD), Indian rupee (INR) and Philippine peso (PHP). As we expand into other
markets, other currencies may become relevant. Future fluctuations of foreign
currency exchange rates and their impact on our results of operations and
financial condition are inherently uncertain. As we continue to pursue growth of
our global operations, these fluctuations may be material. See "-Quantitative
and Qualitative Disclosures about Market Risk-Foreign Currency and Derivative
Risk."

Impact of the COVID-19 Pandemic

  Since the onset of the COVID-19 pandemic, we have been focused on keeping our
employees safe and maintaining our clients' uninterrupted access to our
services. We have implemented a series of measures to protect the health and
safety of our employees. The global impact of the outbreak has continued to
evolve rapidly. Many countries reacted by instituting quarantines and
restrictions on travel and limiting operations of non-essential businesses. Such
actions created disruption in global supply chains, increased rates of
unemployment and adversely impacted many industries. Beginning in the third
quarter of 2020, as shelter-in-place policies were relaxed, businesses began to
reopen and general economic conditions began to improve, we experienced an
increase in the demand for our products and services as we closely partnered
with our clients to support their increasing hiring needs. This increase in
demand continued through the end of 2020 and throughout 2021 as the broader
macroeconomic recovery from the COVID-19 pandemic continued. In addition, the
structural shift from in-office to remote work has reduced switching costs for
employees and expanded talent pools for employers, further increasing demand. We
cannot predict the extent to which such increased hiring and turnover trends
will continue. The COVID-19 pandemic could have a continued adverse impact on
economic and market conditions, and the full extent of the impact and duration
of the COVID-19 pandemic will depend on future developments, including, among
other factors, spread of the outbreak and the success of vaccination programs,
along with related travel advisories, quarantines and restrictions, the recovery
times of disrupted supply chains and industries, the impact of labor market
interruptions, the impact of government interventions, and uncertainty with
respect to the duration of the global economic slowdown.

As the COVID-19 pandemic continues, it may also have the effect of heightening
many of the risks described in "Risk Factors" of this Annual Report on Form
10-K, including, but not limited to, those relating to changes in economic,
political, social and market conditions; systems failures, interruptions, delays
in services, cybersecurity incidents, unforeseen or catastrophic events and any
resulting interruptions; our international operations; and our dependence on our
senior management team and other qualified personnel.

Operational Enablement

  In February 2020, we set up a COVID-19 Business Continuity Planning and Crisis
Management Task force led by our Chief Legal & Risk Officer. By mid-March 2020,
we had successfully executed a virtual operating model and nearly all of our
employees around the globe were working remotely. We have continued to be
successful in executing a virtual-first strategy, as a result of which most of
our employees have continued to work remotely. Operating in a virtual model has
required us to hire employees remotely, train them virtually and expand our
network capabilities.
                                       63
--------------------------------------------------------------------------------

  Table of Contents

  Revenue and Sales Generation

  Our financial performance in 2020 was impacted by the general economic
downturn experienced as a result of the COVID-19 pandemic. In response to
the COVID-19 pandemic, many of our clients froze headcount, furloughed and
terminated employees, deferred hiring and partially or completely shut down
their business operations and as a result, we experienced reduced demand for our
products and services, particularly in industries impacted severely by
the COVID-19 pandemic such as brick-and-mortar retail, entertainment, and
hospitality. However, we saw increased demand for our products and services in
industries such as U.S. healthcare and global gig, which we believe is
attributable to changing consumer behavior. Our lack of industry concentration
with a highly diversified client base provided a natural hedge against
industry-specific effects of the COVID-19 pandemic. Additionally, due to our
increased investment in automation, we were able to fulfill searches in at least
98% of U.S. jurisdictions throughout the COVID-19 pandemic, while we believe
certain competitors struggled to operate. We expanded our services to include
COVID-19 testing in June 2020, vaccination tracking in September 2021 and
antigen testing in December 2021. Beginning in the third quarter of 2020,
as shelter-in-place policies were relaxed, businesses began to reopen and
general economic conditions began to improve, we experienced an increase in the
demand for our products and services. This increase in demand continued through
the end of 2020 and throughout 2021 with the business moving into year-over-year
revenue growth for November and December 2020 compared to 2019 and a 41.4%
increase in revenues for the year ended December 31, 2021 compared to the year
ended December 31, 2020.

Cost Optimization and Cash Management

    Beginning in March 2020, as a result of the COVID-19 pandemic, we
implemented robust cost reduction measures across the organization, reducing
selling, general and administrative expenses. We recognized this as an
opportunity to implement strategic structural changes to improve operating
leverage and accelerate the modernization of our technological infrastructure.
We moved to a virtual-first strategy, closed or reduced the size of eleven
offices globally, began reducing our data center footprint to prioritize moving
our revenue to platforms hosted in the cloud, and streamlined our sales and
operations organization for greater operational efficiency. We derived
additional cost savings from reducing variable spending, such as bonus expense,
lower commissions, and lower marketing, travel, and entertainment expenses due
to business performance being impacted by the COVID-19 pandemic. During the
three months ended June 30, 2020, we incurred $1.3 million in incremental costs
as we were unable to right-size our fulfillment organization due to a mandate by
the Maharashtra state government that prohibited employers from terminating any
local employees until July 2020.

On March 27, 2020, the U.S. Coronavirus Aid, Relief, and Economic Security Act
(the "CARES Act") was enacted in response to the COVID-19 pandemic. The CARES
Act, among other things, permits the deferral of employer taxes. We chose to
avail ourselves of this provision, resulting in the deferral of $2.7 million of
employer taxes from 2020, payable in 2021 and 2022. We did not participate in
any other benefits of the CARES Act or in any other government programs globally
related to the COVID-19 pandemic.

In March 2020, we drew down $83.8 million from our revolving line of credit as a
liquidity precaution due to the uncertainty of a credit crisis in the
macroeconomic environment as a result of the COVID-19 pandemic. However, we did
not use these funds to operate the business and we repaid this amount in full in
May 2020, once we had sufficiently established there was no macroeconomic
ongoing credit concern.

Components of Our Results of Operations

The following discussion summarizes the key components of our consolidated statements of operations. We have one operating and reporting segment.

Revenues

We generate revenue by providing background and identity verification services
to our clients. We have an attractive business model underpinned by stable and
highly recurring transactional revenues, significant operating leverage and low
capital requirements that contribute to strong cash flow generation. We
recognize revenue under Accounting Standard Codification ("ASC") Topic 606
"Revenue from Contracts with Customers" ("ASC 606"). Under ASC 606, we recognize
revenue when control of the promised goods or services is transferred to
clients, generally at a point in time, in an amount that reflects the
consideration that we are entitled to for those goods or services. A majority of
our U.S. enterprise client contracts are exclusive to Sterling or require
Sterling to be used as the primary provider. Additionally, they are typically
multi-year agreements with automatic renewal terms, no termination for
convenience clauses and set pricing with Sterling's right to increase prices
annually upon notice. The strength of our contracts combined with our high
levels of client retention results in a high degree of revenue visibility.
                                       64
--------------------------------------------------------------------------------

Table of Contents

Our revenue drivers are acquiring new clients (which we measure by new client
growth, calculated as discussed in the following paragraph), retaining existing
clients (which we measure by gross retention rate, calculated as discussed in
the following paragraph), and growing our existing client relationships through
upselling, cross-selling, and organic and inorganic growth in our client's
operations that lead to an increase in hiring (which we measure by base growth,
calculated as discussed in the following paragraph).

New client growth for the relevant period is calculated as revenues from clients
that are in the first twelve months of billing with Sterling divided by total
revenues from the prior period, expressed as a percentage. Base growth is
defined as growth in revenues in the current period, from clients that have been
billing with us for longer than twelve calendar months, includes revenue from
cross-sell and up-sell, and is provided net of attrition, which is the revenue
impact from accounts considered lost. Base growth is expressed as a percentage,
where the denominator is total revenues from the prior period. Gross retention
rate is a percentage, the numerator of which is prior period revenues less the
revenue impact from accounts considered lost and the denominator is prior period
revenues. The revenue impact is calculated as revenue decline of lost accounts
in the relevant period from the prior period for the months after they were
considered lost. Therefore, the attrition impact of clients lost in the current
year may be partially captured in both the current and following period's
retention rates depending on what point during the period they are lost. Our
gross retention rate does not factor in the revenue impact, whether growth or
decline, attributable to existing clients or the incremental revenue impact of
new clients, inclusive of cross-sell and up-sell of products.

In addition to organic growth through the drivers mentioned above, we may from
time to time consider acquisitions that drive growth in our business. In those
instances, inorganic growth will refer to the revenue from acquisitions for the
twelve months following an acquisition. Any incremental revenue generation
thereafter will be considered organic growth.

Our revenues come from the following services which are sold as a bundle or individually, with revenue recognized at the time of delivery of background screening reports.

•Identity Verification - Leveraging innovative technologies in fingerprinting,
facial recognition and ID validation to verify that candidates are who they say
they are.

•Background Checks - County, state and federal criminal checks fulfilled through
proprietary automation technology enabling global criminal screening
capabilities in over 240 countries and territories. Other services include
credit checks, civil checks, motor vehicle registration confirmation, and social
media checks.

•Credential Verification - Thorough employment and education verification services, and licensing certification backed by a powerful fulfillment engine.

•Drug and Health Screening - Comprehensive, accurate, and fast drug and health
screening services through a network of over 15,000 collection sites supporting
the SAMHSA.

•Onboarding - Custom forms including I-9 and eVerify employment eligibility, tax withholding forms and Equal Employment Opportunity disclosure forms, with built-in compliance and dynamic validation.

•Post-Hire Monitoring - Continuous screening allowing for greater mobility and safety for remote, onsite and contingent jobs and also ensuring prompt risk warnings on any changes to an employee's profile.

Operating Expenses

Our cost structure is flexible and provides us with operational leverage to be
able to effectively adapt to changing client needs and broader economic events.
Additionally, in 2020 and 2021, we implemented strategic structural changes in
our business to improve operating leverage and accelerate modernizing our
technological infrastructure including leveraging robotics process automation.
We moved to a virtual-first strategy and closed or reduced the size of eleven
offices globally and began reducing our data center footprint as we executed
moving our revenue to the cloud and streamlined our sales and operations
organization for greater operational efficiency. In any given period, operating
expenses are driven by the amount of revenue, mix of clients and products, and
impact of automation, productivity, and procurement initiatives. While we expect
operating expenses to increase in absolute dollars to support our continued
growth, we believe that operating expenses will decline gradually as a
percentage of total revenues in the future as our business grows and our
operating scale continues to improve.
                                       65
--------------------------------------------------------------------------------

Table of Contents

Operating expenses include the following costs:

Cost of Revenues

Cost of revenues includes costs related to delivery of services and includes
third-party vendor costs associated with acquisition of data and to a lesser
extent, costs related to our onshore and offshore fulfillment teams and
facilities and hosting costs for our cloud-based platforms. Our ability to grow
profitably depends on our ability to manage our cost structure. Our costs are
affected by third-party costs including government fees and data vendor costs,
as these third parties have discretion to adjust pricing.

Third-party data costs include amounts paid to third parties for access to government records, other third-party data and services, as well as costs related to our court runner network. Third-party costs of services are largely variable in nature. Where applicable, these are typically invoiced to our clients as direct pass-through costs.

Cost of revenues also includes salaries and benefits expense for personnel
involved in the processing and fulfillment of our screening products and
solutions, as well as our client care organization, and facilities costs for our
onshore and offshore fulfillment centers. Additional vendor costs are
third-party costs for robotics process automation related to fulfillment, and
third-party costs related to hosting our fulfillment platforms in the cloud. We
do not allocate depreciation and amortization to cost of revenues.

Corporate Technology and Production Systems

Included in this line item are costs related to maintaining our corporate information technology infrastructure and non-capitalizable costs to develop and maintain our production systems.

Corporate information technology expenses consist of personnel costs supporting
internal operations such as information technology support and the maintenance
of our information security and business continuity functions. Also included are
third-party costs including cloud computing costs that support our corporate
internal systems, software licensing and maintenance, telecommunications and
other technology infrastructure costs.

Production systems costs consist of non-capitalizable personnel costs including
contractor costs incurred for the development of platform and product
initiatives, and production support and maintenance. Platform and product
initiatives facilitate the development of our technology platform and the launch
of new screening products. Production support and maintenance includes costs to
support and maintain the technology underlying our existing screening products,
and to enhance the ease of use for our cloud applications. Certain personnel
costs related to new products and features are capitalized and amortization of
these capitalized costs is included in the depreciation and amortization line
item.

Included within Corporate technology and production systems are
non-capitalizable production system and corporate information technology
expenses related to Project Ignite, a three-phase strategic investment
initiative. Phase one of Project Ignite modernized client and candidate
experiences and is complete. Phase two of Project Ignite focused on
decommissioning our on-premises data centers and migrating our production
systems and corporate information technological infrastructure to a managed
service provider in the cloud. During the first half of 2021, we completed phase
two related to the migration of our production and fulfillment systems to the
cloud, and as a result, over 95% of our revenue is processed through platforms
hosted in the cloud. The remaining expense to complete phase two is the
decommissioning of our on-premises data centers for our internal corporate
technology infrastructure and migration to the cloud. This final component will
be substantially completed by June 30, 2022. Phase three of Project Ignite is
decommissioning of platforms purchased over the prior ten years and the
migration of the clients to one global platform. This third and final phase,
which we expect to substantially complete in 2022, will unify our clients onto a
single global platform. The future costs related to completing these initiatives
will be included in our Corporate technology and production systems expense.

Selling, General and Administrative

Selling expenses consist of personnel costs, travel expenses, and other expenses
for our client success, sales and marketing teams. Additionally, selling
expenses include the cost of marketing and promotional events, corporate
communications, and other brand-building activities. General and administrative
expenses consist of personnel and related expenses for human resources, legal
and compliance, finance, global shared services, and executives. Additional
costs include professional fees, stock-based compensation, insurance premiums,
and other corporate expenses.

                                       66
--------------------------------------------------------------------------------

Table of Contents

We expect our selling, general, and administrative ("SG&A") expenses to increase in the future, primarily as a result of additional public company related reporting and compliance costs.

In addition, non-cash stock-based compensation expense associated with special
one-time bonus grants in connection with our IPO of options and restricted stock
under our Sterling Check Corp. 2021 Omnibus Incentive Plan (discussed in Note
14, "Stock-based Compensation" to our audited consolidated financial statements
included in Part II, Item 8. "Financial Statements and Supplementary Data" of
this Annual Report on Form 10-K) began in the third quarter of 2021 and will
continue over the following four years. Over the long term, we expect our
selling, general, and administrative expenses to decrease as a percentage of our
revenue as we leverage our past investments.

Depreciation and Amortization

Definite-lived intangible assets consist of intangibles acquired through
acquisition and the costs of developing internal-use software. They are
amortized using a straight-line basis over their estimated useful lives except
for customer lists, to which we apply an accelerated method of amortization. The
costs of developing internal-use software are capitalized during the application
development stage. Amortization commences when the software is placed into
service and is computed using the straight-line method over the useful life of
the underlying software of three years.

Depreciation of our property and equipment is computed on the straight-line basis over the estimated useful life of the assets, generally three to five years or, for leasehold improvements, the shorter of seven years or the term of the lease.

Impairment of Long-Lived Assets

Long-lived assets, such as property, equipment and capitalized internal use
software subject to amortization, are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable, such as (i) a significant adverse change in the extent or manner
in which it is being used or in its physical condition, (ii) a significant
adverse change in legal factors or in business climate that could affect its
value, or (iii) a current-period operation or cash flow loss combined with a
history of operating or cash flow losses or a projection or forecast that
demonstrates continuing losses associated with its use. An asset is considered
impaired if the carrying amount exceeds the undiscounted future net cash flows
the asset is expected to generate. An impairment charge is recognized for the
amount by which the carrying amount of the assets exceeds its fair value. The
adjusted carrying amount of the asset becomes its new cost basis. For a
depreciable long-lived asset, the new cost basis will be depreciated or
amortized over the remaining useful life of that asset. Assets held for sale are
reported at the lower of the carrying amount or fair value, less selling costs.

Interest Expense, Net

Interest expense consists of interest and the amortization discount on the First Lien Term Loan (as defined under "-Liquidity and Capital Resources-Credit Facility."

Loss on Interest Rate Swaps

Loss on interest rate swaps consists of realized and unrealized gains and losses
on our interest rate swap, which we entered into to reduce our exposure to
variability in expected future cash flows on the First Lien Term Loan, which
bears interest at a variable rate. We are currently party to one interest rate
swap. Unrealized gains and losses result from changes in the fair value of the
swap and realized gains and losses reflect the amounts payable or receivable
between the fixed rate on the swap and LIBOR. Our interest rate swap expires in
June 2022 and does not qualify for hedge accounting treatment.

Income Tax Benefit

Income tax benefit consists of domestic and foreign corporate income taxes
related to earnings from our sale of services, with statutory tax rates that
differ by jurisdiction. We expect the income earned by our international
entities to grow over time as a percentage of total income, which may impact our
effective income tax rate. However, our effective tax rate will be affected by
many other factors including changes in tax laws, regulations or rates, new
interpretations of existing laws or regulations, shifts in the allocation of
income earned throughout the world, and changes in overall levels of income
before tax. The computation of the provision for or benefit from income taxes
for interim periods is determined by applying the estimated annual effective tax
rate to year-to-date (loss) income before tax and adjusting for discrete tax
items recorded in the period, if any.
                                       67
--------------------------------------------------------------------------------

  Table of Contents

Results of Operations

Year Ended December 31, 2020 compared to the Year Ended December 31, 2021

  The following table sets forth certain historical consolidated financial
information for the year ended December 31, 2020 compared to the year ended
December 31, 2021.

                                                                 Year Ended                             Increase/
                                                                December 31,                           (Decrease)
                                                          2020                   2021                $            %

                                                              (dollars in thousands, except per share amounts)
Revenues                                           $       454,053           $ 641,884          $ 187,831         41.4  %
Cost of revenues (exclusive of depreciation and
amortization below)                                        217,310             313,155             95,845         44.1  %
Corporate technology and production systems                 44,296              44,323                 27          0.1  %
Selling, general and administrative                        122,554             198,700             76,146         62.1  %
Depreciation and amortization                               91,199              82,064             (9,135)       (10.0) %
Impairments of long-lived assets                             1,797               3,274              1,477         82.2  %
Total operating expenses                                   477,156             641,516            164,360         34.4  %
Operating (loss) income                                    (23,103)                368             23,471       (101.6) %
Interest expense, net                                       32,947              30,857             (2,090)        (6.3) %
Loss on interest rate swaps                                  9,451                  31             (9,420)       (99.7) %
Other income                                                (1,646)             (1,532)               114         (6.9) %
Total other expense, net                                    40,752              29,356            (11,396)       (28.0) %
Loss before income taxes                                   (63,855)            (28,988)            34,867        (54.6) %
Income tax benefit                                         (11,562)            (10,461)             1,101         (9.5) %
Net loss                                                   (52,293)            (18,527)            33,766        (64.6) %
Net loss margin                                              (11.5)  %            (2.9) %                          8.6  %
Net loss per share                                 $         (0.59)          $   (0.21)         $    0.39        (65.3) %


Revenues

Revenues increased 41.4%, or $187.8 million, from $454.1 million for the year
ended December 31, 2020 to $641.9 million for the year ended December 31, 2021.
The 41.4% growth rate was driven by 39.0% organic constant currency revenue
growth, a 1.7% favorable impact from fluctuations in foreign currency, and 0.7%
inorganic growth from the acquisition of Employment Background Investigations,
Inc. ("EBI"). The organic revenue increase reflected base revenue growth of
28.4%, including cross-sell and up-sell, net of attrition, and new customer
growth of 12.3%. Notably, our investments in technology and products, coupled
with our best-in-class turnaround times and customer-first focus, drove a 200
basis point improvement during 2021 in our gross retention rate from 94% to 96%.
Pricing was relatively stable across the periods and not meaningful to the
change in revenues.

Total revenue in our U.S. business grew 38.5% year-over-year. We saw broad-based
strength across our industry Verticals, with particularly exceptional results in
our Technology Media and Financial and Business Services Verticals, as we
executed our growth playbook and the U.S. economy benefitted from strong
macroeconomic factors. Our international business experienced total revenue
growth of 55.4%, with double-digit revenue growth in all three of our
international regions. International growth also benefited from strong economic
factors and continued growth in our international gig business.

Cost of Revenues

Cost of revenues increased 44.1%, or $95.8 million, from $217.3 million for the
year ended December 31, 2020 to $313.2 million for the year ended December 31,
2021. This was driven by an $89.9 million increase due to increased volume and a
$5.9 million increase due to change in the mix of business and other costs.
Other cost increases included an increase in bonus expense from strong business
performance, additional stock-based compensation resulting from the accelerated
vesting of outstanding options upon completion of the initial public offering
("IPO") in September 2021 and IPO equity grants, and an increase in hosting fees
driven by revenue growth.
                                       68
--------------------------------------------------------------------------------

Table of Contents

Cost of revenues as a percentage of revenues increased by 93 basis points from 47.9% for the year ended December 31, 2020 to 48.8% for the year ended December 31, 2021.

Corporate Technology and Production Systems

Corporate technology and production systems expenses decreased by 0.1%, or
$27,000, and were $44.3 million for the years ended December 31, 2020 and 2021.
These expenses include costs related to maintaining our corporate information
technology infrastructure and non-capitalizable costs to develop and maintain
our production systems. Costs related to maintaining our corporate information
technology infrastructure increased by $1.5 million from $19.7 million for the
year ended December 31, 2020 to $21.2 million for year ended December 31, 2021
due primarily to increased stock-based compensation expense resulting from the
accelerated vesting of options upon completion of the IPO. Costs to develop
platform and product initiatives decreased by $1.2 million from $16.6 million
for the year ended December 31, 2020 to $15.4 million for the year ended
December 31, 2021 due primarily to reduced headcount from 2020 to 2021 as a
result of project completions during 2020. Costs related to maintaining our
production systems decreased by $0.3 million from $8.0 million for the year
ended December 31, 2020 to $7.7 million for the year ended December 31, 2021.

These expenses include non-capitalizable costs related to Project Ignite. We
incurred $3.2 million related to phase one, $4.1 million related to phase two
and $4.9 million related to phase three in the year ended December 31, 2020
compared to $0.9 million related to phase one, $6.1 million related to phase two
and $6.6 million related to phase three in the year ended December 31, 2021. For
detailed disclosure on Project Ignite, including information related to the
anticipated completion and treatment of non-capitalizable expenses in future
periods, please see "-Components of our Results of Operations - Operating
Expenses - Corporate Technology and Production Systems."

Selling, General and Administrative

Selling, general and administrative expenses increased by 62.1%, or $76.1
million, from $122.6 million for the year ended December 31, 2020 to $198.7
million for the year ended December 31, 2021. The year-over-year increase was
primarily driven by costs related to the IPO of $38.2 million and an increase in
stock-based compensation expense of $25.5 million, of which $23.3 million was
due to the accelerated vesting of outstanding options and the forgiveness of
promissory notes exchanged for common stock in connection with the IPO. For the
year ended December 31, 2021, IPO related expenses of $38.2 million included
$16.8 million of contractual compensation payments to former executives (of
which $15.6 million was funded by certain stockholders), $7.5 million associated
with the final settlement of fees in connection with the Fourth Amended and
Restated Management Services Agreement and $13.9 million of professional fees
and other related expenses. The remaining increase was driven by normalized
bonus expense from strong business performance, one quarter of increased public
company costs, including headcount, professional services and insurance,
partially offset by a reduction in severance and savings related to reduced rent
due to our virtual-first strategy.

Depreciation and Amortization

Depreciation and amortization expense decreased by 10.0%, or $9.1 million, from
$91.2 million for the year ended December 31, 2020 to $82.1 million for the year
ended December 31, 2021 primarily due to $6.6 million of lower intangible asset
amortization, as new intangible assets were added at a lower rate compared to
those which became fully depreciated in the period. Fixed asset depreciation
decreased by approximately $2.6 million, primarily due to reduced fixed asset
additions in 2021 and the write-down of the leasehold improvements and furniture
and fixtures of closed office locations in 2020.

Impairments of Long-Lived Assets

Impairment of property and equipment and capitalized software increased by
82.2%, or $1.5 million, from $1.8 million for the year ended December 31, 2020
to $3.3 million for the year ended December 31, 2021. During 2021, impairment
costs were mainly driven by the write-off of fixed assets related to the exit of
our office in Bellevue, Washington, partially offset by lower capitalized
software impairments in comparison to 2020. There was no impairment of goodwill
or other intangible assets during the years ended December 31, 2020 and 2021.


Interest Expense, Net

Interest expense decreased by 6.3%, or $2.1 million, from $32.9 million for the
year ended December 31, 2020 to $30.9 million for the year ended December 31,
2021 primarily due to the reduction in the interest rate on our First Lien Term
Loan resulting from a reduction in LIBOR as well as a lower principal balance
due to a $6.7 million mandatory principal prepayment during the second quarter
of 2021 and $100.0 million
                                       69
--------------------------------------------------------------------------------

Table of Contents

principal repayment in November 2021. This reduction was partially offset by the
write-down of debt discount of $1.0 million due to the $100 million principal
repayment in November 2021. Amortization of the loan discount resulted in
expense of $2.4 million and $3.3 million for the years ended December 31, 2020
and 2021, respectively.

Loss on Interest Rate Swaps

Loss on interest rate swaps decreased by 99.7%, or $9.4 million, from a loss of
$9.5 million for the year ended December 31, 2020 to a loss of less than $0.1
million for the year ended December 31, 2021 due to a realized loss of $7.5
million, offset by a mark to market ("MTM") gain of $7.4 million.

Income Tax Benefit

Income tax benefit decreased by 9.5%, or $1.1 million, from $11.6 million for
the year ended December 31, 2020 to $10.5 million for the year ended December
31, 2021 primarily due to a number of factors principally related to the
significant variance in pre-tax loss, the jurisdictional mix of earnings, return
to provision adjustments and other permanent items.

Net Loss and Net Loss Margin

Net loss decreased by 64.6%, or $33.8 million, from a net loss of $52.3 million
for the year ended December 31, 2020 to a net loss of $18.5 million for the year
ended December 31, 2021. Net loss margin improved 864 basis points from a net
loss margin of 11.5% for the year ended December 31, 2020 to a net loss margin
of 2.9% for the year ended December 31, 2021 primarily driven by increased
revenue and improvements in operating efficiency partially offset by higher SG&A
expenses primarily related to the IPO.

The decrease in both net loss and net loss margin resulted from improved
operating leverage, as revenues increased by 41.4% while operating expenses grew
by only 34.4% for the year ended December 31, 2021 compared to the year ended
December 31, 2020, notwithstanding IPO related expenses in 2021.

Net Loss Per Share

Net loss per share decreased by 65.3%, or $0.39 per share, from a net loss of
$0.59 per share for the year ended December 31, 2020 to a net loss of $0.21 per
share for the year ended December 31, 2021.

Year Ended December 31, 2019 compared to the Year Ended December 31, 2020

The following table sets forth certain historical consolidated financial information for the year ended December 31, 2019 and compared to the year ended December 31, 2020.

                                       70
--------------------------------------------------------------------------------

  Table of Contents

                                                                Year Ended                                 Increase/
                                                               December 31,                               (Decrease)
                                                         2019                   2020                $                   %

                                                                 (dollars in thousands, except per share amounts)
Revenues                                          $      497,116            $ 454,053          $ (43,063)                (8.7) %
Cost of revenues (exclusive of depreciation and          221,347              217,310             (4,037)                (1.8) %
amortization below)
Corporate technology and production systems               44,923               44,296               (627)                (1.4) %
Selling, general and administrative                      147,198              122,554            (24,644)               (16.7) %
Depreciation and amortization                             93,802               91,199             (2,603)                (2.8) %
Impairments of long-lived assets                           3,220                1,797             (1,423)               (44.2) %
Total operating expenses                                 510,490              477,156            (33,333)                (6.5) %
Operating loss                                           (13,374)             (23,103)            (9,729)                72.7  %
Interest expense, net                                     39,316               32,947             (6,369)               (16.2) %
Loss on interest rate swap                                 7,324                9,451              2,127                 29.0  %
Other income                                              (1,529)              (1,646)              (117)                 7.7  %
Total other expenses, net                                 45,111               40,752             (4,359)                (9.7) %
Loss before income taxes                                 (58,485)             (63,855)            (5,370)                 9.2  %
Income tax benefit                                       (11,803)             (11,562)               241                 (2.0) %
Net loss                                          $      (46,682)           $ (52,293)         $  (5,611)                12.0  %
Net Loss Margin                                             (9.4)  %            (11.5) %               -                 (2.1) %
Net loss per share                                $        (0.53)           $   (0.59)         $   (0.06)                11.3  %


Revenues

Revenues decreased by 8.7%, or $43.1 million, from $497.1 million for the year
ended December 31, 2019 to $454.1 million for the year ended December 31, 2020.
This was driven by a decline in demand beginning mid-March 2020, due to the
impact of the global COVID-19 pandemic as some industry Verticals such as
brick-and-mortar retail, travel, entertainment and hospitality, financial
services, manufacturing and industrials were particularly impacted by the
COVID-19 pandemic. However, this decline was partially offset by higher demand
in the U.S. healthcare and U.S. and Europe, the EMEA gig businesses. Changing
consumer behavior, consumer demand for healthcare services as well as increased
at-home delivery of goods led to an increase in hiring in these sectors,
particularly in the second half of 2020. In 2020, we experienced approximately
7% new client growth and an approximately 9% decline in base growth due to the
COVID-19 pandemic. Our gross retention rate was 91% for the year ended
December 31, 2019 compared to 94% for the year ended December 31, 2020. Pricing
was relatively stable across the periods and not meaningful to the changes in
revenues.

We started 2020 with 12.6% year-over-year revenue growth in the first two months
and began experiencing the impact of the COVID-19 pandemic in the latter half of
March 2020. Overall, revenue for the three months ended March 31, 2020 was 8.0%
higher than revenue for the three months ended March 31, 2019. We experienced
the most significant negative impact of the COVID-19 pandemic during the second
quarter of 2020 with revenue approximately 33.1% lower than the corresponding
period in 2019. As the local shelter-in-place orders began lifting, the business
began experiencing some recovery in the third quarter of 2020 where revenue was
approximately 11.4% lower than the corresponding period in 2019. The business
moved into year-over-year revenue growth of approximately 5.8% for the fourth
quarter of 2020 as compared to the fourth quarter of 2019, driven by a strong
December 2020.

Cost of Revenues

Cost of revenues decreased by 1.8%, or $4.0 million, from $221.3 million for the
year ended December 31, 2019 to $217.3 million for the year ended December 31,
2020. This was driven by a $19.2 million reduction due to lower volume,
partially offset by $12.5 million due to a change in the mix of business and
$1.3 million in COVID-19 pandemic related costs, as we were temporarily unable
to right-size our fulfillment team in India due to a mandate by the Maharashtra
state government which prohibited termination of employees. The change in mix of
business was driven by a temporary decrease in revenue from some of our
higher-margin industry Verticals that were most severely impacted by the
COVID-19 pandemic.
                                       71
--------------------------------------------------------------------------------

Table of Contents

Cost of revenues as a percentage of revenues increased by 333 basis points from
44.5% for the year ended December 31, 2019 to 47.9% for the year ended
December 31, 2020 due to a change in mix of business as some of our
higher-margin industry Verticals were unfavorably impacted by the effects of the
COVID-19 pandemic as well as increased hosting costs for cloud-based
infrastructure for our platforms, including improvements to the security
environment.

Corporate Technology and Production Systems

Corporate technology and production systems expenses decreased by 1.4%, or
$0.6 million, from $44.9 million for the year ended December 31, 2019 to
$44.3 million for the year ended December 31, 2020. Included in this line item
are costs related to maintaining our corporate information technology
infrastructure and non-capitalizable costs to develop and maintain our
production systems. Costs related to maintaining our corporate information
technology infrastructure decreased by $3.9 million from $23.6 million for the
year ended December 31, 2019 to $19.7 million for the year ended December 31,
2020. The decrease was due primarily to reduced personnel-related costs. Costs
to develop platform and product initiatives increased by $2.2 million, from
$14.4 million for the year ended December 31, 2019 to $16.6 million for the year
ended December 31, 2020. The increase was driven primarily by new product
development including the launch of our full suite of COVID-19 testing products
in 2020. Costs related to maintaining our production systems increased by $1.1
million from $6.9 million for the year ended December 31, 2019 to $8.0 million
for the year ended December 31, 2020.

These expenses include non-capitalizable costs related to Project Ignite. We
incurred $7.2 million related to phase one, $3.1 million related to phase two
and $4.6 million related to phase three in the year ended December 31, 2019, and
$3.2 million related to phase one, $4.1 million related to phase two and $4.9
million related to phase three in the year ended December 31, 2020. For detailed
disclosure on Project Ignite, including information related to the anticipated
completion and treatment of non-capitalizable expenses in future periods, please
see "-Components of our Results of Operations - Operating Expenses - Corporate
Technology and Production Systems."

Selling, General and Administrative

Selling, general and administrative expenses decreased by 16.7%, or
$24.6 million, from $147.2 million for the year ended December 31, 2019 to
$122.6 million for the year ended December 31, 2020 primarily as a result of
savings actions taken in response to the COVID-19 pandemic. Beginning in March
2020, we implemented robust cost reduction measures across the organization to
reduce SG&A expenses. This was accomplished through structural changes like
moving to a virtual-first strategy by reducing office space globally,
streamlining our sales and operations organization, and variable spend
reduction, such as lower bonus expense, lower commissions, and lower marketing,
travel, and entertainment expenses due to business performance being impacted by
the COVID-19 pandemic. 2019 also included a one-time settlement of approximately
$8.5 million with the Consumer Financial Protection Bureau as discussed in Part
I, Item 1A. "Risk Factors - General Risks - We are exposed to litigation risk."

Depreciation and Amortization

Depreciation and amortization decreased by 2.8%, or $2.6 million, from $93.8
million for the year ended December 31, 2019 to $91.2 million for the year ended
December 31, 2020. Depreciation of property and equipment decreased from
$8.6 million for the year ended December 31, 2019 to $7.1 million for the year
ended December 31, 2020. The decrease was due to the write-down of the leasehold
improvements and furniture and fixtures of closed office locations, partially
offset by depreciation of computers and electronic equipment purchased in
support of the company-wide virtual-first work from home policy. Amortization of
intangible assets decreased from $85.2 million for the year ended December 31,
2019 to $84.1 million for the year ended December 31, 2020. Definite-lived
intangible assets consist of intangible assets acquired through acquisition and
the costs of developing internal-use software. These assets are amortized using
a straight-line basis over their estimated useful lives except for customer
lists which use an accelerated method of amortization. The decrease in
amortization on these assets can be attributed to the reducing amortization rate
of the customer lists.

Impairments of Long-Lived Assets

Impairment of property and equipment and capitalized software decreased from
$3.2 million for the year ended December 31, 2019 to $1.8 million for the year
ended December 31, 2020. In 2020, impairment costs were mainly driven by the
write down of fixed assets in our exited offices in Roseville, California and
Marietta, Georgia. There was no impairment of goodwill or other intangible
assets.
                                       72
--------------------------------------------------------------------------------

  Table of Contents

Interest Expense, Net

Interest expense decreased by 16.2%, or $6.4 million, from $39.3 million for the
year ended December 31, 2019 to $32.9 million for the year ended December 31,
2020. In 2019, interest expense on the First Lien Term Loan was $36.2 million
compared to $30.4 million in 2020. The reduction in 2020 was driven by the
reduction in interest rate following the fall in LIBOR. Amortization expense of
the loan discount was $2.4 million in 2019 and 2020.

Loss on Interest Rate Swap

Loss on interest rate swap consists of realized and unrealized gains and losses
on our interest rate swaps, which we entered into to reduce our exposure to
variability in expected future cash flows on our Term loan, which bears interest
at a variable rate. Unrealized gains and losses result from changes in the fair
value of the swaps and realized gains and losses reflect the amounts payable or
receivable between the fixed rate on the swap and LIBOR. Loss on interest rate
swap changed from a loss of $7.3 million for the year ended December 31, 2019 to
a loss of $9.5 million for the year ended December 31, 2020. The loss for the
twelve months ended December 31, 2020 was driven by the change in the MTM
valuation of our interest rate swaps, which depends on LIBOR.

Income Tax Benefit

Benefit from income taxes decreased by 2.0%, or $0.2 million, from $(11.8)
million for the year ended December 31, 2019 to $(11.6) million for the year
ended December 31, 2020. This was primarily due to a decrease in the U.S. state
and international deferred income tax provision.

Net Loss and Net Loss Margin

Net loss increased by 12.0%, or $5.6 million, from $(46.7) million for the year
ended December 31, 2019 to $(52.3) million for the year ended December 31, 2020.
Net Loss Margin changed from (9.4)% to (11.5)% primarily driven by an 8.7%
decrease in revenues due to the impact of the COVID-19 pandemic, partially
offset by a 6.5% decrease in total operating expenses as a result of structural
changes and cost savings initiatives implemented.

Net Loss Per Share

Net Loss Per Share increased by 11.3%, or $(0.06), from $(0.53) for the year ended December 31, 2019 to $(0.59) for the year ended December 31, 2020.

Non-GAAP Financial Measures

This Annual Report on Form 10-K contains "non-GAAP financial measures," which
are financial measures that are not calculated and presented in accordance with
accounting principles generally accepted in the United States of America ("US
GAAP").

Specifically, we make use of the non-GAAP financial measures "organic constant
currency revenue growth", "Adjusted EBITDA," "Adjusted EBITDA Margin," "Adjusted
Net Income," "Adjusted Earnings Per Share" and "Adjusted Free Cash Flow" to
assess the performance of our business.

Organic constant currency revenue growth is calculated by adjusting for any
merger and acquisition ("M&A") activity that contributed revenue in the current
period, which was not present in the prior period, and converting the current
period revenue at foreign currency exchange rates consistent with the prior
period. There was no impact of M&A activity on our revenue in the year ended
December 31, 2020. In 2021, we have provided the impact of revenue in December
2021 from the acquisition of EBI. We present organic constant currency revenue
growth because we believe it assists investors and analysts in comparing our
operating performance across reporting periods on a consistent basis by
excluding items that we do not believe are indicative of our core operating
performance; however, it has limitations as an analytical tool, and you should
not consider such a measure either in isolation or as a substitute for analyzing
our results as reported under US GAAP. In particular, organic constant currency
revenue growth does not reflect M&A activity or the impact of foreign currency
exchange rate fluctuations.

Adjusted EBITDA is defined as net loss adjusted for provision for income taxes, interest expense, depreciation and amortization, stock-based compensation,transaction expenses related to our public offering and

                                       73
--------------------------------------------------------------------------------

Table of Contents

M&A activity, optimization and restructuring, technology transformation costs,
foreign currency (gains) and losses and other costs affecting comparability.
Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by revenue for the
applicable period. We present Adjusted EBITDA and Adjusted EBITDA Margin because
we believe they assist investors and analysts in comparing our operating
performance across reporting periods on a consistent basis by excluding items
that we do not believe are indicative of our core operating performance.
Management and our board of directors use Adjusted EBITDA to evaluate the
factors and trends affecting our business to assess our financial performance
and in preparing and approving our annual budget and believe it is helpful in
highlighting trends in our core operating performance. Further, our executive
incentive compensation is based in part on components of Adjusted EBITDA.
Adjusted EBITDA and Adjusted EBITDA Margin have limitations as analytical tools
and should not be considered in isolation or as substitutes for our results as
reported under US GAAP. Adjusted EBITDA excludes items that can have a
significant effect on our profit or loss and should, therefore, be considered
only in conjunction with net income (loss) for the period. Our management uses
Adjusted EBITDA to supplement US GAAP results to evaluate the factors and trends
affecting the business to assess our financial performance and in preparing and
approving our annual budget and believe it is helpful in highlighting trends in
our core operating performance. Because not all companies use identical
calculations, these measures may not be comparable to other similarly titled
measures of other companies.

Adjusted Net Income is a non-GAAP profitability measure. Adjusted Net Income is
defined as net income adjusted for amortization of acquired intangible assets,
stock-based compensation, transaction expenses related to our public offering
and M&A activity, optimization and restructuring, technology transformation
costs, and certain other costs affecting comparability, adjusted for the
applicable tax rate. Adjusted Earnings Per Share is defined as Adjusted Net
Income divided by diluted weighted average shares for the applicable period. We
present Adjusted Net Income and Adjusted Earnings Per Share because we believe
they assist investors and analysts in comparing our operating performance across
reporting periods on a consistent basis by excluding certain material non-cash
items and unusual items that we do not expect to continue at the same level in
the future. Our management believes that the inclusion of supplementary
adjustments to net income (loss) applied in presenting Adjusted Net Income
provide additional information to investors about certain material non-cash
items and about items that we do not expect to continue at the same level in the
future. Adjusted Net Income and Adjusted Earnings Per Share have limitations as
analytical tools, and you should not consider such measures either in isolation
or as substitutes for analyzing our results as reported under US GAAP.

Adjusted Free Cash Flow is defined as Net Cash provided by (used in) Operating
Activities minus purchases of property and equipment and purchases of intangible
assets and capitalized software. For the year ended December 31, 2021, Adjusted
Free Cash Flow reflects adjustments for one-time, non-operating cash charges
related to the IPO. We present Adjusted Free Cash Flow because we believe it
assists investors and analysts in comparing our operating performance across
reporting periods on a consistent basis by excluding certain material
non-recurring, non-operating cash items that we do not expect to continue at the
same level in the future. Adjusted Free Cash Flow has limitations as an
analytical tool, and you should not consider such measure either in isolation or
as a substitute for analyzing our results as reported under US GAAP.

Organic Constant Currency Revenue Growth

The following table reconciles revenue growth, the most directly comparable US
GAAP measure, to organic constant currency revenue growth for the years ended
December 31, 2019, 2020 and 2021.

                                                           Year Ended
                                                          December 31,
                                               2019           2020           2021
Reported revenue growth                        8.1  %           (8.7) %     41.4  %
Inorganic revenue growth (1)                   2.8  %              -  %      0.7  %
Impact from foreign currency exchange (2)     (0.6) %           (0.1) %      1.7  %
Organic constant currency revenue growth       5.9  %           (8.6) %     

39.0 %

_______________________________

(1)Impact to revenue growth in the current period from acquisitions and dispositions that have occurred over the past twelve months.

(2)Impact to revenue growth in the current period from fluctuations in foreign currency exchange rates.

                                       74
--------------------------------------------------------------------------------

Table of Contents

Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA increased by 79.5%, or $79.4 million, from $99.8 million for the
year ended December 31, 2020 to $179.2 million for the year ended December 31,
2021. Adjusted EBITDA Margin increased by 593 basis points year-over-year from
22.0% in 2020 to 27.9% in 2021. This was due to the increase in revenues as well
as improved operating margin.

Adjusted EBITDA decreased by 16.1%, or $19.2 million, from $119.0 million for
the year ended December 31, 2019 to $99.8 million for the year ended
December 31, 2020. Adjusted EBITDA Margin decreased by 190 basis points
year-over-year from 23.9% in 2019 to 22.0% in 2020. This was due to the decline
in revenues due to the COVID-19 pandemic, partially offset by cost savings from
structural changes implemented in 2020.

The following table reconciles net loss, the most directly comparable US GAAP
measure, to Adjusted EBITDA for the years ended December 31, 2019, 2020 and
2021.


                                                           Year Ended
                                                          December 31,
                                              2019            2020            2021

                                                     (dollars in thousands)
Net loss                                  $ (46,682)      $ (52,293)      $ (18,527)
Income tax benefit                          (11,803)        (11,562)        (10,461)
Interest expense, net                        39,316          32,947          30,857
Depreciation and amortization                93,802          91,199          82,064
Stock-based compensation                      1,503           3,465          32,580
Transaction expenses(1)                       2,617           3,029          43,046
Restructuring(2)                              4,526           8,838           4,915
Technology Transformation(3)                  9,763          10,920          13,088
Settlements impacting comparability(4)       12,065           2,922         

468

Loss on interest rate swaps(5)                7,324           9,451              31
Other(6)                                      6,553             918           1,123
Adjusted EBITDA                           $ 118,984       $  99,834       $ 179,184
Adjusted EBITDA Margin                         23.9  %         22.0  %         27.9  %

_______________________________

(1)Consists of transaction expenses related to mergers and acquisitions,
associated earn-outs, investor management fees ("investor management fees" in
connection with the Fourth Amended and Restated Management Services Agreement,
which was terminated in connection with the IPO), and costs related to
preparation of our IPO. For the year ended December 31, 2019, costs include $2.1
million in investor management fees and $0.5 million in M&A transaction costs.
For the year ended December 31, 2020, costs include $2.0 million in investor
management fees and $1.0 million in M&A transaction costs. For the year ended
December 31, 2021, IPO related expenses of $38.2 million included $16.8 million
of contractual compensation payments to former executives (of which, $15.6
million was funded by certain stockholders), $7.5 million associated with the
final settlement of fees in connection with the Fourth Amended and Restated
Management Services Agreement, and $13.9 million of professional fees and other
related expenses. The year ended December 31, 2021 also includes $1.9 million in
costs related to the acquisition of EBI, $1.4 million of earn-out and
performance-based incentive payments associated with an acquisition in 2018, and
$1.4 million of investor management fees in connection with the Fourth Amended
and Restated Management Services Agreement, associated with the terms prior to
the final settlement.

(2)Consists of restructuring-related costs, including executive recruiting and
severance charges, and lease termination costs and disposal of fixed assets
related to our real estate consolidation efforts. During 2019 and 2020, we
executed an extensive restructuring program, significantly strengthening our
management team and creating a client facing industry-specific Vertical
organization. This program was completed by the end of 2020 and the final costs
related to this program were incurred through the first quarter of 2021.
Beginning in 2020, we began executing a virtual-first strategy, closing offices
and reducing office space globally. For the year ended December 31, 2019, these
costs include approximately $4.5 million of restructuring-related executive
recruiting and severance charges. For the
                                       75
--------------------------------------------------------------------------------

Table of Contents

year ended December 31, 2020, costs include approximately $6.7 million of
restructuring-related executive recruiting and severance charges and $2.1
million of lease termination costs and write-offs on disposal of fixed assets
related to our real estate consolidation program. For the year ended December
31, 2021, costs include $0.5 million of restructuring-related executive
recruiting and severance charges and $4.4 million of lease termination costs and
write-offs on disposal of fixed assets related to our real estate consolidation
program.

(3)Includes costs related to technology modernization efforts. We believe that
these costs are discrete and non-recurring in nature, as they relate to a
one-time restructuring and decommissioning of our on-premise production systems
and corporate technological infrastructure and the move to a managed service
provider, decommissioning redundant fulfillment systems, and modernizing
internal functional systems. As such, they are not normal, recurring operating
expenses and are not reflective of ongoing trends in the cost of doing business.
The significant majority of these are related to the last two phases of Project
Ignite, with the remainder related to an investment made to modernize internal
functional systems in preparation for our public company infrastructure. For the
years ended December 31, 2019, 2020 and 2021, investments related to phases two
and three of Project Ignite were $7.7 million, $9.0 million and $12.7 million,
respectively. Additional investment made to modernize internal functional
systems were $2.1 million, $1.9 million and $0.4 million in 2019, 2020 and 2021,
respectively.

(4)Consists of non-recurring settlements impacting comparability. For the year
ended December 31, 2019, the primary components were a settlement with the CFPB
of approximately $8.5 million and discrete incremental charges related to the
settlement of $1.7 million and a settlement related to sales tax of $1.8
million. For the year ended December 31, 2020, costs include $2.3 million in a
settlement related to sales tax. For the year ended December 31, 2021, costs
include $0.5 million in a settlement related to sales tax. These sales tax costs
are discrete and non-recurring in nature, and we do not expect them to occur in
future periods.

(5)Consists of net realized and unrealized loss (gain) on interest rate swaps.
See "-Quantitative and Qualitative Disclosures about Market Risk-Interest Rate
Risk" for additional information on interest rate swaps.

(6)Consists of costs related to a local government mandate in India, (gain) loss
on foreign currency transactions, impairment of capitalized software and other
costs outside of the ordinary course of business. The following table summarizes
these costs for the years ended December 31, 2019, 2020 and 2021.

                                                            Year Ended
                                                           December 31,
(in thousands)                                    2019         2020         2021
Other
Government mandate                              $     -      $ 1,291      $     -

Loss (gain) on foreign currency transactions 505 (359) 1,425 Impairment of capitalized software

                3,219          695          219
Duplicate fulfillment charges                     2,829         (709)        (521)
Total                                           $ 6,553      $   918      $ 1,123



                                       76

--------------------------------------------------------------------------------

Table of Contents

The following table presents the calculation of Net Loss Margin and Adjusted EBITDA Margin for the years ended December 31, 2019, 2020 and 2021.

                                            Year Ended
                                           December 31,
                               2019            2020            2021
(dollars in thousands)
Net loss                   $ (46,682)      $ (52,293)      $ (18,527)
Adjusted EBITDA              118,984          99,834         179,184
Revenues                     497,116         454,053         641,884
Net Loss Margin                 (9.4) %        (11.5) %         (2.9) %
Adjusted EBITDA margin          23.9  %         22.0  %         27.9  %

Adjusted Net Income and Adjusted Earnings Per Share

Adjusted Net Income increased by 245.9%, or $65.6 million, from $26.7 million
for the year ended December 31, 2020 to $92.2 million for the year ended
December 31, 2021. The increase was primarily driven by the increase in revenues
and improvement in operating efficiency. Adjusted Net Income decreased by 29.7%,
or $11.3 million, from $38.0 million for the year ended December 31, 2019 to
$26.7 million for the year ended December 31, 2020. This decrease was primarily
driven by a decrease in revenues due to impact of the COVID-19 pandemic,
partially offset by a decrease in total operating expenses as a result of
structural changes and cost savings initiatives implemented.

Adjusted Earnings Per Share-basic increased by 240.0%, or $0.72, from $0.30 per
share for the year ended December 31, 2020 to $1.02 per share for the year ended
December 31, 2021. Adjusted Earnings Per Share-diluted increased by 223.3%, or
$0.67, from $0.30 per share for the year ended December 31, 2020 to $0.97 per
share for the year ended December 31, 2021. The increase in Adjusted Earnings
Per Share-basic and Adjusted Earnings Per Share-diluted was primarily due to the
increase in Adjusted Net Income for the corresponding periods.

Adjusted Earnings Per Share-basic decreased by 30.2%, or $0.13, from $0.43 for
the year ended December 31, 2019 to $0.30 for the year ended December 31, 2020.
Adjusted Earnings Per Share-diluted decreased by 30.2%, or $0.13, from $0.43 for
the year ended December 31, 2019 to $0.30 for the year ended December 31, 2020.
The decrease in Adjusted Earnings Per Share-basic and Adjusted Earnings Per
Share-diluted was primarily due to the decrease in Adjusted Net Income. This
decrease was primarily driven by a decrease in revenues due to impact of the
COVID-19 pandemic, partially offset by a decrease in total operating expenses as
a result of structural changes and cost savings initiatives implemented.
                                       77
--------------------------------------------------------------------------------

Table of Contents

The following tables reconcile net loss, the most directly comparable US GAAP
measure, to Adjusted Net Income and Adjusted Earnings Per Share for the years
ended December 31, 2019, 2020 and 2021.
                                                                            Year Ended
                                                                           December 31,
                                                           2019                  2020                2021

                                                             (in thousands, except per share amounts)
Net loss                                             $      (46,682)         $  (52,293)         $  (18,527)
Income tax benefit                                          (11,803)            (11,562)            (10,461)
Loss before income taxes                                    (58,485)            (63,855)            (28,988)
Amortization of acquired intangible assets                   65,529              60,346              52,777
Stock-based compensation                                      1,503               3,464              32,580
Transaction expenses(1)                                       2,617               3,029              43,046
Restructuring(2)                                              4,526               8,838               4,915
Technology Transformation(3)                                  9,763              10,920              13,088
Settlements impacting comparability(4)                       12,065               2,922                 468
Loss on interest rate swaps(5)                                7,324               9,452                  31
Other(6)                                                      6,553                 918               1,123
Adjusted Net Income before income tax effect                 51,395              36,034             119,040
Income tax effect(7)                                         13,363               9,369              26,808
Adjusted Net Income                                          38,032              26,665              92,232
Net Loss per share-diluted                           $        (0.53)         $    (0.59)         $    (0.21)
Adjusted Earnings Per Share-basic                              0.43                0.30                1.02
Adjusted Earnings Per Share-diluted                            0.43                0.30                0.97

_______________________________

(1)Consists of transaction expenses related to mergers and acquisitions, associated earn-outs, investor management fees, and costs related to our IPO.

(2)Consists of restructuring-related costs, including executive recruiting and
severance charges, and lease termination costs and disposal of fixed assets
related to our real estate consolidation efforts. During 2019 and 2020, we
executed an extensive restructuring program, significantly strengthening our
management team and creating a client facing industry-specific Vertical
organization. This program was completed by the end of 2020 and the final costs
related to this program have been incurred through the first quarter of 2021.
Beginning in 2020, we began executing a virtual-first strategy, closing offices
and reducing office space globally.

(3)Includes costs related to technology modernization efforts. We believe that
these costs are discrete and non-recurring in nature, as they relate to a
one-time restructuring and decommissioning of our on-premise production systems
and corporate technological infrastructure and the move to a managed service
provider, decommissioning redundant fulfillment systems, and modernizing
internal functional systems. As such, they are not normal, recurring operating
expenses and are not reflective of ongoing trends in the cost of doing business.
The significant majority of these are related to the last two phases of Project
Ignite, with the remainder related to an investment made to modernize internal
functional systems in preparation for our public company infrastructure.

(4)Consists of non-recurring settlements impacting comparability.

(5)Consists of net realized and realized loss (gain) on interest rate swaps. See
"-Quantitative and Qualitative Disclosures about Market Risk-Interest Rate Risk"
for additional information on interest rate swaps.

(6)Consists of costs related to a local government mandate in India, (gain) loss
on foreign currency transactions, impairment of capitalized software and other
costs outside of the ordinary course of

                                       78
--------------------------------------------------------------------------------

Table of Contents

business. The following table summarizes these costs for the years ended December 31, 2019, 2020 and 2021.

                                                            Year Ended
                                                           December 31,
(in thousands)                                    2019         2020         2021
Other
Government mandate                              $     -      $ 1,291      $     -

(Gain) Loss on foreign currency transactions 505 (359) 1,425 Impairment of capitalized software

                3,219          695          219
Duplicate fulfillment charges                     2,829         (709)        (521)
Total                                           $ 6,553      $   918      $ 1,123




(7)Normalized effective tax rates of 26.0%, 26.0% and 22.5% have been used to
compute Adjusted Net Income for the 2019, 2020 and 2021 periods, respectively.
As of December 31, 2021, we had net operating loss carryforwards of
approximately $80.7 million for federal income tax purposes and deferred tax
assets of approximately $8.2 million related to state and foreign income tax
loss carryforwards available to reduce future income subject to income taxes.
The amount of actual cash taxes we pay for federal, state, and foreign income
taxes differs significantly from the effective income tax rate computed in
accordance with US GAAP, and from the normalized rate shown above.

The following tables reconcile net loss per share, the most directly comparable
US GAAP measure, to Adjusted Earnings Per Share for the years ended December 31,
2019, 2020 and 2021.

                                                                            Year Ended
                                                                           December 31,
(in thousands, except share and per share amounts)       2019                  2020                  2021
Net loss                                            $    (46,682)         $ 

(52,293) $ (18,527)

Undistributed losses allocated to stockholders $ (46,682) $

(52,293) $ (18,527)

Weighted average number of shares outstanding -
basic                                                 88,154,830            88,345,312            90,218,386
Weighted average number of shares outstanding -
diluted                                               88,154,830            88,345,312            90,218,386
Net loss per share - basic                          $      (0.53)         $      (0.59)         $      (0.21)
Net loss per share - diluted                        $      (0.53)         $ 

(0.59) $ (0.21)

Adjusted Net Income                                 $     38,032          $     26,665          $     92,232
Less: Undistributed amounts allocated to
participating securities                                       -                     9                     -

Undistributed earnings allocated to stockholders $ 38,032 $

26,656 $ 92,232

Weighted average number of shares outstanding -
basic                                                 88,154,830            88,345,312            90,218,386
Weighted average number of shares outstanding -
diluted                                               88,173,998            88,419,588            95,082,550
Adjusted earnings per share - basic                 $       0.43          $       0.30          $       1.02
Adjusted earnings per share - diluted               $       0.43          $       0.30          $       0.97




                                       79

--------------------------------------------------------------------------------

Table of Contents

The following table presents the calculation of Adjusted Diluted Earnings Per Share for the years ended December 31, 2019, 2020 and 2021.

                                                                              Year Ended
                                                                             December 31,
                                                           2019                  2020                  2021
Net loss per share - diluted                          $      (0.53)         $      (0.59)         $      (0.21)
Adjusted Net Income adjustments per share
Income tax benefit                                           (0.13)                (0.13)                (0.11)
Amortization of acquired intangible assets                    0.74                  0.68                  0.56
Stock-based compensation                                      0.02                  0.04                  0.34
Transaction expenses(1)                                       0.03                  0.03                  0.46
Restructuring(2)                                              0.05                  0.10                  0.05
Technology Transformation(3)                                  0.11                  0.12                  0.14
Settlements impacting comparability(4)                        0.14                  0.03                  0.01
Loss on interest rate swaps(5)                                0.08                  0.11                     -
Other(6)                                                      0.07                  0.01                  0.01
Income tax effect(7)                                         (0.15)                (0.10)                (0.28)
Adjusted earnings per share - diluted                 $       0.43

$ 0.30 $ 0.97

Weighted average number of shares outstanding used

  in computation of Adjusted Diluted Earnings Per
Share:
Weighted average number of shares outstanding -
diluted
  (GAAP)                                                88,154,830            88,345,312            90,218,386

Options not included in weighted average number of shares

outstanding - diluted (GAAP) (using treasury stock

   method)                                                  19,168                74,276             4,864,164
Weighted average number of shares outstanding -
diluted
  (non-GAAP) (using treasury stock method)              88,173,998            88,419,588            95,082,550

_______________________________

(1)Consists of transaction expenses related to mergers and acquisitions, associated earn-outs, investor management fees, and costs related to our IPO.

(2)Consists of restructuring-related costs, including executive recruiting and
severance charges, and lease termination costs and disposal of fixed assets
related to our real estate consolidation efforts. During 2019 and 2020, we
executed an extensive restructuring program, significantly strengthening our
management team and creating a client-facing industry-specific Vertical
organization. This program was completed by the end of 2020 and the final costs
related to this program were incurred through the first quarter of 2021.
Beginning in 2020, we began executing a virtual-first strategy, closing offices
and reducing office space globally.

(3)Includes costs related to technology modernization efforts. We believe that
these costs are discrete and non-recurring in nature, as they relate to a
one-time restructuring and decommissioning of our on-premise production systems
and corporate technological infrastructure and the move to a managed service
provider, decommissioning redundant fulfillment systems and modernizing internal
functional systems. As such, they are not normal, recurring operating expenses
and are not reflective of ongoing trends in the cost of doing business. The
significant majority of these are related to the last two phases of Project
Ignite, with the remainder related to an investment made to modernize internal
functional systems in preparation for our public company infrastructure.

(4)Consists of non-recurring settlements impacting comparability.

(5)Consists of net realized and unrealized loss (gain) on interest rate swaps.
See "-Quantitative and Qualitative Disclosures about Market Risk-Interest Rate
Risk" for additional information on interest rate swaps.

                                       80
--------------------------------------------------------------------------------

Table of Contents

(6)Consists of costs related to a local government mandate in India, (gain) loss
on foreign currency transactions, impairment of capitalized software and other
costs outside of the ordinary course of business.

The following table summarizes these costs for the years ended December 31,
2019, 2020 and 2021.

                                                            Year Ended
                                                           December 31,
(in thousands)                                    2019         2020         2021
Other
Government mandate                              $     -      $ 1,291      $     -

(Gain) Loss on foreign currency transactions 505 (359) 1,425 Impairment of capitalized software

                3,219          695          219
Duplicate fulfillment charges                     2,829         (709)        (521)
Total                                           $ 6,553      $   918      $ 1,123


(7)Normalized effective tax rates of 26%, 26% and 22.5% have been used to
compute Adjusted Net Income for the years ended December 31, 2019, 2020 and
2021, respectively. As of December 31, 2021, we had net operating loss
carryforwards of approximately $80.7 million for federal income tax purposes and
deferred tax assets of approximately $8.2 million related to state and foreign
income tax loss carryforwards available to reduce future income subject to
income taxes. The amount of actual cash taxes we pay for federal, state, and
foreign income taxes differs significantly from the effective income tax rate
computed in accordance with US GAAP, and from the normalized rate shown above.

Liquidity and Capital Resources

Overview

Liquidity describes the ability of a company to generate sufficient cash flows
to meet the cash requirements of its business operations, including working
capital needs to meet operating expenses, debt service, acquisitions, capital
expenditures, other commitments and contractual obligations. We consider
liquidity in terms of cash flows from operations and their sufficiency to fund
our operating and investing activities.

Our primary cash needs are for day-to-day operations, working capital
requirements, capital expenditures for ongoing development of our technological
offering and other mandatory payments such as taxes, and debt principal and
interest obligations. Our liquidity needs are met primarily through cash flows
from operations, which include cash received from customers less cash costs
related to our operations.

Our capital expenditures can vary depending on the timing of the development of
new products and services and technological enhancement-related investments.
Capital expenditures, excluding acquisitions, for the years ended December 31,
2020 and 2021 were approximately $16.5 million and $19.1 million, respectively,
primarily related to capitalizable software development.

We believe that our projected cash position and cash flows from operations will
be sufficient to fund our liquidity requirements for at least the next twelve
months. However, our future liquidity requirements could be higher than we
currently expect as a result of various factors. For example, any future
investments, acquisitions, joint ventures or other similar transactions may
require additional capital. In addition, our ability to continue to meet our
future liquidity requirements will depend on, among other things, our ability to
achieve anticipated levels of revenues and cash flows from operations and our
ability to manage costs and working capital successfully, all of which are
subject to general economic, financial, competitive and other factors beyond our
control. In the event we require any additional capital, it will take the form
of equity or debt financing, or both, and there can be no assurance that we will
be able to raise any such financing on terms acceptable to us or at all.

As of December 31, 2021, we had cash and cash equivalents of $48.0 million. On
November 1, 2021, the Company utilized the net proceeds from the IPO and cash on
hand to repay $100.0 million of outstanding borrowings under the First Lien Term
Loan. On November 30, 2021, we used available cash of $66.3 million in
connection with our purchase of EBI.

                                       81
--------------------------------------------------------------------------------

Table of Contents

As of December 31, 2020, we had cash and cash equivalents of $66.6 million,
which included $6.7 million accrued at year-end 2020 for our 2020 excess cash
flow payment paid to lenders under the Credit Agreement (as defined below) paid
in April 2021. Per the terms of the Credit Agreement, there is no excess cash
flow payment required for the year ended December 31, 2021.

Our total principal amount of indebtedness outstanding was $510.3 million under
our First Lien Term Loan as of December 31, 2021. All cash and cash equivalents
are held with independent financial institutions with a minimum credit rating of
A as defined by the three main credit rating agencies. As of December 31, 2021,
all cash and cash equivalents were held in accounts with banks such that the
funds are immediately available or in fixed term deposits with a maximum
maturity of three months.

Credit Facility

In June 2015, our subsidiary Sterling Midco Holdings, Inc. (predecessor to
Sterling Infosystems, Inc.) entered into a first lien credit agreement as
borrower (as most recently amended by the Sixth Amendment thereto dated August
11, 2021, the "Credit Agreement") with KeyBank National Association, as
administrative agent (the "Administrative Agent"), certain guarantors party
thereto and various lenders, including Goldman Sachs Lending Partners LLC, as
lenders. The Credit Agreement provides for aggregate principal borrowings of
$795.0 million (subject to the increase described below), comprising a $655.0
million original principal amount of term loan (the "First Lien Term Loan")
which matures in June 2024 and a $140.0 million revolving credit facility (the
"Revolving Credit Facility"), which matures the earlier of (a) August 11, 2026
or (b) December 31, 2023 unless, on or prior to December 31, 2023, the First
Lien Term Loan has been (i) refinanced with the proceeds of indebtedness with a
final maturity date that is no earlier than February 11, 2027 or (ii) amended,
modified or waived, such that the final maturity date of the First Lien Term
Loan is no earlier than February 11, 2027.

Amounts outstanding under the First Lien Term Loan bear interest under either of
the following two rates, elected in advance quarterly by the borrower for
periods of either one month, two months, three months or six months: (1) an
applicable rate of 2.5% plus a base rate (equal to the greater of (a) the prime
rate (b) the federal funds rate plus 1/2 of 1% or (c) the one-month LIBOR plus
1%, subject to a 2% floor); or (2) an applicable rate of 3.5% plus one-month
LIBOR which is subject to a 1% floor. Interest on LIBOR borrowings is payable on
the last business day of the interest period selected except in the case of a
six-month election, in which case it is payable on the last day of the third and
sixth month. The interest rate in effect for the First Lien Term Loan as of
December 31, 2021 was 4.5%. The First Lien Term Loan requires $1.6 million
repayment of principal on the last business day of each March, June, September
and December. Under the Credit Agreement, we must also make a mandatory
prepayment of principal in the amount of 50% of the excess cash, as defined in
the Credit Agreement, generated in any given year, if our Net Leverage Ratio (as
defined in the Credit Agreement) is greater than or equal to 2.95:1.00. In 2020,
the mandatory prepayment was $6.7 million and was paid in April 2021. Per the
terms of the Credit Agreement, there is no excess cash flow payment required for
the year ended December 31, 2021. On November 1, 2021, the Company utilized the
net proceeds from the IPO and cash on hand to repay $100.0 million of
outstanding borrowings under the First Lien Term Loan. All remaining outstanding
principal is due at maturity in June 2024. We have been in compliance with all
covenants under the Credit Agreement since origination. Pursuant to the Sixth
Amendment to the Credit Agreement, the $85.0 million Revolving Credit Facility
automatically increased an additional $55.0 million to $140.0 million upon the
consummation of the IPO on September 23, 2021.

Amounts outstanding under the Revolving Credit Facility bear interest at a
tiered floating interest rate based on the net leverage ratio of the borrower.
The rate may be chosen periodically in advance of each interest period at the
election of the borrower, as follows: (1) an applicable rate of 2.5% plus the
greater of (a) the prime rate (b) the federal funds rate plus 1/2 of 1% (c) the
one-month LIBOR plus 1% or (d) a 2% floor or (2) an applicable rate of 3.5% plus
one-month LIBOR. In addition, there is a quarterly fee of 0.50% or 0.375% on the
unused portion of the commitments based on the first lien net leverage ratio.
Unused and therefore available borrowings under the Revolving Credit Facility,
net of letters of credit, were $84.0 million and $139.3 million as of December
31, 2020 and December 31, 2021, respectively. The Revolving Credit Facility
matures on the earlier of August 11, 2026 or December 31, 2023 unless, on or
prior to December 31, 2023, the First Lien Term Loan has been refinanced with a
final maturity date that is no earlier than February 11, 2027 or amended,
modified or waived, such that the final maturity date of the First Lien Term
Loan is no earlier than February 11, 2027. We can use available funding capacity
under the Revolving Credit Facility to satisfy letters of credit related to
leased office space and other obligations, subject to a sublimit equal to the
lesser of $20.0 million or aggregate amounts available for borrowing under the
Revolving Credit Facility. The issuance of letters of credit reduces the
available capacity under the Revolving Credit Facility. We had outstanding
letters of credit totaling $1.0 million as of December 31, 2020 and $0.7 million
as of December 31, 2021 and additional availability for letters of credit of
$19.0 million and $19.3 million, respectively.

                                       82
--------------------------------------------------------------------------------

Table of Contents

The Credit Agreement contains covenants that, among other things, restrict our
ability to: incur certain additional indebtedness; transfer money between our
various subsidiaries; pay dividends on, repurchase or make distributions with
respect to our subsidiaries' capital stock or make other restricted payments;
issue stock of subsidiaries; make certain investments, loans or advances;
transfer and sell certain assets; create or permit liens on assets; consolidate,
merge, sell or otherwise dispose of all or substantially all of our assets;
enter into certain transactions with our affiliates; and amend certain
documents. The Credit Agreement also contains financial covenants that require
us to maintain a total specified leverage ratio of less than 6.75:1.00 for so
long as we have borrowed at least 35% or more of the total availability under
the Revolving Credit Facility. Compliance with the financial covenants may be
waived by lenders holding a majority of the Revolving Credit Facility. We were
in compliance with all financial covenants under the Credit Agreement as of
December 31, 2021.

Obligations under the Credit Agreement are collateralized by a first lien on
substantially all the assets and outstanding capital stock of the Company
subject to exceptions. The Credit Agreement also contains various events of
default, including, without limitation, the failure to pay interest or principal
when the same is due, cross default and cross acceleration provisions, the
failure of representations and warranties contained in the agreements to be true
and certain insolvency events. If an event of default occurs and is continuing,
the principal amounts outstanding under the Credit Agreement, together with all
accrued and unpaid interest and other amounts owed thereunder, may be declared
immediately due and payable by the lenders.

We can use available funding capacity under the Revolving Credit Facility to
satisfy letters of credit related to leased office space and other obligations,
subject to a sublimit equal to the lesser of $20.0 million or aggregate amounts
available for borrowing under the Revolving Credit Facility. Amounts used to
satisfy the letters of credit reduce the available capacity under the Revolving
Credit Facility. We had outstanding letters of credit totaling $1.2 million,
$1.0 million and $0.7 million as of December 31, 2019, 2020 and 2021.

Cash Flows

The following table presents a summary of our consolidated cash flows from operating, investing and financing activities for the year ended December 31, 2020 compared to the year ended December 31, 2021.

                                                          Year Ended
                                                         December 31,
                                                      2020          2021

Net cash provided by operating activities $ 36,185 $ 68,605 Net cash used in investing activities

               (16,266)      (85,376)
Net cash used in financing activities                (3,218)       (1,087)

(Decrease) increase in cash and cash equivalents 16,701 (17,858) Effect of exchange rate changes on cash

                (367)         (777)

Cash and cash equivalents at beginning of period 50,299 66,633 Cash and cash equivalents at end of period $ 66,633 $ 47,998

Operating Activities

Net cash provided by operating activities for the year ended December 31, 2020
was $36.2 million and reflected the adjustment to net loss for non-cash charges
totaling $87.1 million, primarily driven by $91.2 million of depreciation and
amortization (including $60.3 million of acquired intangible asset
amortization), a $5.8 million change in fair value of derivatives, $3.5 million
of stock-based compensation, $2.4 million amortization of debt discount, and
$1.8 million impairment of long-lived assets, partially offset by $17.0 million
in deferred income taxes and $0.8 million in deferred rent. Changes in operating
assets and liabilities provided an additional $1.4 million for the year.

Net cash provided by operating activities for the year ended December 31, 2021
was $68.6 million and reflected the adjustment to net loss for non-cash charges
totaling $91.6 million, primarily driven by $82.1 million of depreciation and
amortization (including $52.1 million of acquired intangible asset
amortization), $32.6 million of stock-based compensation expense, $3.3 million
for amortization of debt discount, $3.3 million of impairment of long-lived
assets, and $1.2 million of provision for bad debt, partially offset by $22.0
million in deferred income taxes, $7.4 million related to changes in the fair
value of derivative instruments and $1.6 million in deferred rent. Changes in
operating assets and liabilities reduced cash provided by operating activities
by $3.3 million for the year.

                                       83
--------------------------------------------------------------------------------

  Table of Contents

Investing Activities

Net cash used in investing activities for the years ended December 31, 2020 and
2021 was $16.3 million and $85.4 million, respectively. Net cash used in
investing activities increased primarily due to the acquisition of EBI for a
purchase price of $67.8 million, consisting of $66.3 million of cash and $1.5
million of contingent consideration recorded at fair value.

Net cash used in investing activities for the year ended December 31, 2020
primarily consisted of $14.0 million investment in capitalized software
development and $2.3 million in computer hardware and other property, plant and
equipment. Net cash used in investing activities for the year ended December 31,
2021 primarily consisted of $66.3 million of cash used for the acquisition of
EBI in addition to $15.9 million of investment in capitalized software
development and $3.2 million in computer hardware and other property, plant and
equipment.

Financing Activities

Net cash used in financing activities for the years ended December 31, 2020 and
2021 was $3.2 million and $1.1 million, respectively. Net cash used in financing
activities for the year ended December 31, 2020 consisted of $6.5 million of
principal payments on our long-term debt, partially offset by $3.3 million in
cash proceeds from the issuance of common stock. Net cash used in financing
activities for the year ended December 31, 2021 consisted of $113.1 million of
repayments of long-term debt coupled with the payment of $7.9 million of IPO
costs offset by $102.6 million of proceeds from the issuance of common stock in
the IPO and a $15.6 million capital contribution from certain stockholders to
fund a contractual compensation payment to former executives.

Adjusted Free Cash Flow

For the year ended December 31, 2021, the company generated $84.3 million of
Adjusted Free Cash Flow, adjusted for one-time, cash, non-operating expenses
related to the IPO, compared to $19.7 million in the previous period. The
year-over-year increase is driven by higher revenues driving higher cash flow
from operations.

The following table reconciles net cash flow provided by operating activities,
the most directly comparable US GAAP measure, to Adjusted Free Cash Flow for the
years ended December 31, 2020 and 2021.

                                                                          Year Ended
                                                                         December 31,
       (in thousands)                                                 2020          2021
       Net cash provided by operating activities                   $ 36,185      $ 68,605
       Total IPO adjustments(1)                                           -        34,777

Purchases of intangible assets and capitalized software (14,185) (15,860)

       Purchase of property and equipment                            

(2,317) (3,234)

       Adjusted Free Cash Flow                                     $ 19,683      $ 84,288

______________________________

(1) Includes one-time, cash, non-operating charges related to the IPO. Costs
included are $16.8 million of contractual compensation payments to former
executives, of which $15.6 million was funded by certain stockholders, $7.5
million of a final settlement of investor management fees in connection with the
Fourth Amended and Restated Management services agreement, and $10.5 million
related primarily to professional fees and other expenses.

Off-Balance Sheet Arrangements

As of December 31, 2021, we did not have any off-balance sheet arrangements.

Contractual Obligations

Our principal commitments consist of obligations for outstanding debt and leases for our office spaces.

                                       84
--------------------------------------------------------------------------------

Table of Contents

As of December 31, 2021, we had the following contractual obligations:

                                                                              Payments due by Period
                               Total              2022              2023               2024              2025             2026            Thereafter

                                                               (in thousands)
Operating lease obligations
(1)                         $  23,285          $  4,326          $  3,951

$ 3,385 $ 3,439 $ 3,492 $ 4,692 Capital lease obligations (1)

                                43                18                15                 10                -                -                    -
Long-term debt obligations
(2)                           510,340             6,461             6,461            497,418                -                -                    -
Interest payments on
long-term debt obligations
(3)                            56,669            23,237            22,878             10,554                -                -                    -
Total                       $ 590,337          $ 34,042          $ 33,305          $ 511,367          $ 3,439          $ 3,492          $     4,692

Critical Accounting Estimates

The preparation of our financial statements in conformity with US GAAP requires
management to make estimates, assumptions and judgments that can affect the
reported amount of assets, liabilities, revenues, expenses and the disclosure of
contingent assets and liabilities. We base our estimates on historical
experience and on various assumptions believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities. However, we operate in an
industry that is subject to intense competition, government regulation and rapid
technological change. Our operations are subject to significant risk and
uncertainties including financial, operational, technological, regulatory,
foreign operations, and other risks. Actual results could differ materially from
these estimates under different assumptions or conditions.

The most significant accounting estimates involve a high degree of judgment or
complexity. Management believes the estimates and judgments most critical to the
preparation of our consolidated financial statements and to the understanding of
our reported financial results are described below. Such are determined to
involve "critical accounting estimates" because they are particularly dependent
on assumptions and estimates made by management about matters that are
inherently uncertain.

See Note 2, "Summary of Significant Accounting Policies" to our audited consolidated financial statements included in Part II, Item 8. "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for information on our accounting policies.

Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts in order to record accounts
receivable at their net realizable value. Inherent in the assessment of the
allowance for doubtful accounts are certain judgments and estimates relating to,
among other things, our customers' access to capital, our customers' willingness
and or ability to pay, general economic conditions and the ongoing relationship
with customers. Allowances have been recorded for receivables believed to be
uncollectible, including amounts for the resolution of potential credit and
other collection issues such as disputed invoices. Adjustments to the allowance
may be required in future periods depending on how such potential issues are
resolved or if the financial condition of our customers were to deteriorate
resulting in an impairment of their ability to make payments. We have not
historically had material write-offs due to uncollectible accounts receivable.
Materially incorrect estimates of bad debt reserves could result in unexpected
losses in profitability. The increase in our allowance for doubtful accounts
from December 31, 2020 to December 31, 2021 is primarily driven by the
significant increase in revenues and receivables for the same period.

(in thousands)
Balance - December 31, 2019                 $ 1,435
Additions                                       432
Write-offs, net of recoveries                  (101)

Foreign currency translation adjustment 95 Balance - December 31, 2020

                   1,861
Additions                                     1,169
Write-offs, net of recoveries                  (210)

Foreign currency translation adjustment 129 Balance - December 31, 2021

$ 2,949


                                       85
--------------------------------------------------------------------------------

Table of Contents

Goodwill, Intangible Assets, net and Impairment

We record the excess of purchase price over fair value of net assets of acquired
entities as goodwill. Management relies on numerous assumptions and estimates in
determining fair value of acquired entities and significant changes in such
estimates could yield materially different results when determining goodwill.

Goodwill is tested for impairment annually or when certain triggering events
require additional testing. Our goodwill is predominantly the result of the
acquisition of Sterling by our Sponsor on June 19, 2015. During the year ended
December 31, 2021, we recorded $21.7 million of goodwill related to the
acquisition of EBI on November 30, 2021 based on the preliminary purchase price
allocation.

We perform an annual goodwill impairment assessment during the fourth quarter of
each calendar year. We first assess qualitative factors to determine if it is
more likely than not that the reporting unit's carrying amount exceeds its fair
value. If necessary, after the qualitative assessment, we will perform a
quantitative goodwill impairment test by comparing the fair value of a reporting
unit with its carrying amount. An impairment loss is recognized if the carrying
amount of the reporting unit exceeds its fair value. We performed qualitative
assessments of goodwill during the fourth quarters of 2020 and 2021. Based on
the results of these assessments, there were no reporting units at risk of
having a carrying value in excess of the fair value and thus, the quantitative
goodwill impairment assessments were not performed. Should conditions change
which impact fair value and the factors that determine the need for impairment,
there is a possibility that we could recognize impairment in future periods.
Materially incorrect estimates of fair value could cause an impairment to
goodwill and potentially result in a loss of profitability.

Definite-lived intangible assets consist of intangibles acquired through
acquisition and the costs of developing internal-use software and are reported
net of amortization. Such are amortized on a straight-line basis over their
estimated useful lives. Customer lists are amortized using an accelerated method
of amortization. During the year ended December 31, 2021, we recorded $56.0
million for customer relationships, $0.8 million for a non-compete agreement and
$2.1 million for trademarks related to the acquisition of EBI. For purposes of
estimating the fair value of customer relationships, the non-compete agreement
and the trademarks, management and a third-party valuation firm considered the
prospective income- and cash-generating capability of the assets and determined
that the multi-period excess earnings method of the income approach, the avoided
loss of income method of the income approach and relief-from-royalty method of
the income approach were the most appropriate methods to determine the fair
value for the respective intangible assets. Cost of acquisition, renewal and
extension of intangible assets are capitalized. There are no significant renewal
or extension provisions associated with our intangible assets. We have no
indefinite-lived intangible assets.

The costs of developing internal-use software are capitalized during the
application development stage and are included in Intangible assets, net on the
consolidated balance sheets. Amortization commences when the software is placed
into service and is computed using the straight-line method over the useful life
of the underlying software of three years.

We assess definite-lived intangible assets for impairment at least annually as
well as when events and circumstances exist that indicate that an impairment may
have occurred. Management relies on numerous assumptions and estimates in
determining fair value and significant changes in such estimates could yield
materially different results when determining and calculating impairment. See
"Long-Lived Assets" below for additional discussion of such impairment
assessments.

Derivative Instruments and Hedging Activities

We are exposed to fluctuations in various foreign currencies against our
functional currency, the U.S. dollar ("USD"). Specifically, we are exposed to
third-party expenses denominated in Indian Rupees ("INR"). As such, we
historically have entered into, and plan to enter into in the future, foreign
currency forward agreements to manage our exposure to exchange rate fluctuations
between the USD and INR exchange rate. Additionally, we are exposed to
variability in expected future cash outflows on variable rate debt attributable
to changes in LIBOR. As such, we historically have entered into, and plan to
enter into in the future, interest rate swaps to economically offset a portion
of this risk.

We record all derivatives on the balance sheet at fair value. The accounting for
changes in the fair value of derivatives depends on the intended use of the
derivative, whether we have elected to designate a derivative in a hedging
relationship and apply hedge accounting and whether the hedging relationship has
satisfied the criteria necessary to apply hedge accounting. Derivatives
designated and qualifying as a hedge of the exposure to variability in expected
future cash flows, or other types of forecasted transactions, are considered
cash flow hedges. Hedge accounting generally provides for the matching of the
timing of gain or loss recognition on the hedging instrument with the earnings
effect of the hedged forecasted transactions in a cash flow hedge. We may enter
into derivative contracts that are intended to economically hedge certain of our
risk, even though hedge accounting does not apply or we elect not to apply hedge
accounting.

                                       86
--------------------------------------------------------------------------------

Table of Contents

As the prices of the hedged commodity moves in reaction to market trends and
information, our statement of operations will be affected depending on the
impact such market movements have on the value of our derivative instruments.
Depending on market movements, exchange rates and changes in LIBOR, these price
protection positions may cause immediate adverse effects, but are expected to
protect the Company over the term of the contracts for the hedged amounts.

Stock-Based Compensation

Stock-based payments are measured at the grant date, based on the fair value of
the award, and are expensed over the requisite service period unless they are
performance-based (see Note 14, "Stock-Based Compensation" to our audited
consolidated financial statements included in Part II, Item 8. "Financial
Statements and Supplementary Data" of this Annual Report on Form 10-K). The
equity incentive plans generally provide for stock options, restricted stock
awards and restricted stock units to vest over a 4-year period, unless otherwise
stated in an individual award agreement. Continued employment is a prerequisite
for vesting. Stock-based compensation expense is recorded for each tranche of
awards and is recorded over the requisite vesting period in Cost of revenues,
Corporate technology and production systems and Selling, general and
administrative expense in the consolidated statements of operations.

Long-Lived Assets

Long-lived assets consist of property and equipment and definite-lived
intangible assets. We regularly evaluate whether events and circumstances have
occurred that indicate that the carrying amount of property and equipment and
definite-lived intangible assets may not be recoverable. Conditions that could
indicate that an impairment assessment is needed include a significant decline
in the observable market value of an asset or asset group, a significant change
in the extent or manner in which an asset or asset group is used, or a
significant adverse change that would indicate that the carrying amount of an
asset or asset group is not recoverable. When factors indicate that a long-lived
asset or asset group should be evaluated for possible impairment, we assess the
potential impairment by determining whether the carrying value of such
long-lived asset or asset group will be recovered through the future
undiscounted cash flows expected from use of the asset or asset group and its
eventual disposition. If the carrying amount of the asset or asset group is
determined not to be recoverable, an impairment charge is recorded based on the
excess, if any, of the carrying amount over fair value. Fair values are
determined based on quoted market values or discounted cash flows analyses as
applicable. We regularly evaluate whether events and circumstances have occurred
that indicate the useful lives of property and equipment and definite-life
intangible assets may warrant revision to reflect that the period of economic
benefit has changed. If the carrying value of the long-lived asset exceeds the
fair value, an impairment charge would be recognized in an amount equal to the
amount by which the carrying value of the long- lived asset exceeds its fair
value. Based on a quantitative assessment of the carrying values, we recorded an
impairment loss related to abandonment of capitalized software costs and
property and equipment no longer in use due to office closures in the amount of
$3.2 million, $1.8 million and $3.3 million during the years ended December 31,
2019, 2020 and 2021, respectively.

Business Combinations

The Company records business combinations using the acquisition method of
accounting in accordance with the Financial Accounting Standards Board's (the
"FASB") Accounting Standards Codification Topic 805, "Business Combinations"
("ASC 805"). Under the acquisition method of accounting, identifiable assets
acquired and liabilities assumed are recorded at their acquisition-date fair
value. The excess of the purchase price over the estimated fair value is
recorded as goodwill. Changes in the estimated fair values of net assets
recorded for acquisitions based on management's best estimates may result in
adjustments to the amount of purchase price allocable to goodwill. Measurement
period adjustments are reflected in the period in which they occur and may be
made up to one year subsequent to the acquisition date should new information
become available.

The Company utilizes variations of the income approach, which relies on
historical financial and qualitative information, as well as assumptions and
estimates for projected financial information, to value acquired trade names,
customer lists and software developed for internal use.

Revenue Recognition

We must make subjective estimates as to the impact of pricing adjustments and
the collectability of our accounts receivable. Revenue is recognized when a
performance obligation has been satisfied by transferring a promised good or
service to a client and the client obtains control of the good or service. To
recognize revenue, two parties must have an agreement that creates enforceable
rights and obligations, the performance obligations

                                       87
--------------------------------------------------------------------------------

Table of Contents

must be identifiable, and the transaction price must be determinable. The agreement must also have commercial substance and collection must be probable.

Our contracts are primarily for screening service orders. Our screening services
include court record reports, credit reports, criminal background checks,
employment and education verifications, and drug and health screenings, amongst
others. The client takes control of the product when the screening report is
completed. Accordingly, revenue is generally recognized at the point in time
when the client receives and can use the report. Screening services comprised a
substantial portion of the total revenues for the years ended December 31, 2019,
2020 and 2021, respectively. As such, significant changes in screening services
could affect the nature, amount, timing and uncertainty of revenue and related
cash flows. Payment for screening reports generally occurs once the reports have
been received by the client.

Our contracts generally do not include any obligations for returns, refunds, or
similar obligations, nor do we have a practice of granting significant
concessions. Payment terms and conditions vary by contract and client, although
terms generally include a requirement of payment within 30 to 60 days of the
invoice. Any advanced payments received from clients are initially deferred and
subsequently recognized as revenue as the related performance obligations are
satisfied. There is typically no variable consideration related to our
contracts, nor do they include a significant financing component, non-cash
consideration, or consideration payable to a client.

For revenue arrangements containing multiple products or services, we account
for the individual products or services as separate performance obligations if
they are distinct, the product or service is separately identifiable from other
terms in the contract, and if a client can benefit from it on its own or with
other resources that are readily available to the client. If these criteria are
not met, the promised products or services are accounted for as a combined
performance obligation. We allocate the contract price to each performance
obligation based on the standalone selling prices of each distinct product or
service in the contract.

We did not have any material contract liabilities as of December 31, 2020 and 2021.

Sales taxes collected from clients are remitted to governmental authorities and are therefore excluded from revenues in the consolidated statements of operations and comprehensive loss.

Incremental costs of obtaining a contract with a client are recognized as an
asset if the benefit of such costs is expected to be longer than one year, with
a majority of contracts being multi-year. Incremental costs include commissions
to the sales force and are amortized over three years, as we estimate that this
corresponds to the period over which a client benefits from existing technology
in the underlying product or service that was transferred to the client.

Income Taxes

We are subject to income taxes in the U.S. and various foreign jurisdictions.
Significant judgments are required in determining the consolidated provision for
income taxes. Our effective annual tax rate is determined based on our income
and the jurisdictions where it is earned, statutory tax rates, and the tax
impacts of items treated differently for tax purposes than for financial
reporting purposes. Also inherent in determining our effective tax rate are
judgments and assumptions regarding the recoverability of certain deferred tax
balances, and our ability to uphold certain tax positions. We are subject to
complex tax laws, in the U.S. and numerous foreign jurisdictions, and the manner
in which they apply can be open to interpretation. Realization of deferred tax
assets is dependent upon generating sufficient taxable income in the appropriate
jurisdiction in future periods, which involves business plans, planning
opportunities, and expectations about future outcomes. Our assessment relies on
estimates and assumptions, and may involve a series of complex judgments about
future events.

There are a number of estimates and assumptions inherent in calculating the
various components of our tax provision. Future events such as changes in tax
legislation, geographic mix of earnings, completion of tax audits or earnings
repatriation plans could have an impact on those estimates and our effective tax
rate.

Estimated State Sales Taxes

Included in Other current liabilities on the consolidated balance sheets at
December 31, 2020 and 2021, are liabilities for estimated state sales taxes in
the U.S. of approximately $6.5 million and $7.3 million, respectively. This
reflects our review of state sales tax where we have nexus and our best estimate
of the cost to become compliant in those states in which we believe we may have
nexus but had not historically collected sales tax from our clients. These
estimates include the liability for both uncollected sales tax and interest. The
calculation of these estimates involves judgment and uncertainty regarding
various state sales tax laws, and there is a possibility that a particular state
in which we have estimated a liability will disagree with our assessment. It is
also possible that a state in which we have determined we do not have a
liability will disagree

                                       88
--------------------------------------------------------------------------------

Table of Contents

with our evaluation and assess a retroactive liability for uncollected sales tax. Based on our assessment, we do not expect the resolution of these liabilities to have a material effect on our results of operations or cash flows.

Emerging Growth Company

The Jumpstart Our Business Startups Act of 2021 permits us, as an "emerging
growth company," to take advantage of an extended transition period to comply
with new or revised accounting standards applicable to public companies. We have
elected to use this extended transition period and, as a result, we will adopt
new or revised accounting standards on the relevant dates on which adoption of
such standards is required for private companies.

Recent Accounting Standard Updates

Refer to Note 3, "Recent Accounting Standards Updates" of the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for information about recent accounting pronouncements.

© Edgar Online, source Glimpses