The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our unaudited condensed
consolidated financial statements and related notes for the three months ended
March 31, 2022. 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 the sections titled "Risk Factors"
included in our Annual Report on Form 10-K for the year ended December 31, 2021
filed with the U.S. Securities and Exchange Commission on March 16, 2022 ("2021
Annual Report") and "Cautionary Note Regarding Forward-Looking Statements"
included elsewhere in this Quarterly Report on Form 10-Q.

BASIS OF PRESENTATION



As used in this report, unless the context otherwise requires, references to
"Sterling," "we," "us," "our," the "Company," and similar references refer to
Sterling Check Corp.

Numerical figures included in this report have been subject to rounding
adjustments. Accordingly, numerical figures shown as totals in various tables
may not be arithmetic aggregations of the figures that precede them. In
addition, we round certain percentages presented in this report to the nearest
whole number. As a result, figures expressed as percentages in the text may not
total 100% or, when aggregated, may not be the arithmetic aggregation of the
percentages that precede them.

On September 10, 2021, our Board of Directors authorized a stock split and we
filed an amendment to our certificate of incorporation to effectuate a
1,198-for-1 split of our outstanding common stock. The stock split was
effectuated such that (i) each then outstanding share of common stock was
increased to 1,198; (ii) the number of shares of common stock into which
then-outstanding options to purchase common stock is exercisable was
proportionately increased; and (iii) the exercise price of each then-outstanding
option to purchase common stock was proportionately reduced. The accompanying
discussion gives retroactive effect as though the 1,198-for-1 stock split of our
common stock occurred for all periods presented.

Overview



We are a global provider of technology-enabled background and identity
verification services. We provide the foundation of trust and safety that 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 and
Robotic Process Automation bots. This enables 90% of United States ("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. Employers are facing numerous challenges, including
complex and changing legal and regulatory requirements, a rise in fraudulent job
applications, a growing spotlight on reputation and more complex global
workforces. Successfully navigating these challenges requires an
industry-specific perspective, given differing candidate profiles, economics,
competitive dynamics and regulatory demands. To serve these differing needs, our
sales and support delivery model is organized around industry-specific teams
("Verticals") and geographic markets ("Regions"). Experienced client success,
sales, product and operations teams dedicated to individual Verticals
collaborate with our clients to address their unique challenges and compliance
requirements while providing industry best practice guidance. Our delivery model
provides our clients with both the personal touch and consultative partnership
of a small boutique firm and the global reach, scale, innovation and resources
of an industry leader; all of which benefit small- and mid-sized businesses,
global multinational enterprises and
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everyone in between. Additionally, this delivery model supports our principle of
"Compliance by Design", enabling clients to maintain compliance globally. 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 twelve months ended December 31, 2021, we
completed over 95 million searches for over 50,000 clients, including over 50%
of the Fortune 100 and over 50% 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.

We offer an extensive suite of global products addressing a wide range of
complex client needs, and we see compelling opportunities to continue extending
our operating presence in other geographies. We believe we have a unique ability
to translate client needs into superior local market solutions through a
combination of portfolio depth and breadth, local know-how and language
capabilities. Additionally, we view a targeted, disciplined approach to
strategic mergers and acquisitions ("M&A") as highly complementary to our other
key growth objectives, compounding and/or accelerating related opportunities.
Through our investments in technology, we have established a unified platform,
allowing us to quickly integrate targets and drive synergies. We expect
Sterling's proven track record of M&A-with 11 acquisitions over the last 11
years-to continue to support and elevate the various layers of our future growth
profile.

Throughout our more than 45-year operating history, innovation and
self-disruption have been at the core of what we do every day. Our history of
unique, industry-oriented market insights allows us to be at the forefront of
innovation which includes multiple industry-leading solutions. For example, we
pioneered criminal fulfillment technology (CourtDirect), arrest record and
incarceration alert products, post-hire monitoring capabilities, AI-enhanced
record review and validation process and the industry's only proprietary
technology in a single-sourced U.S.-nationwide fingerprint network. Our
commitment to innovation has continued with the recent development and
introduction of enhanced global language support capabilities, a cloud-based
operating platform and a comprehensive identity verification solution. Enabled
by our market leadership and platform investments, we have established a
foundation and roadmap for future innovation which includes industry-specific
products, growing our Identity-as-a-Service capabilities and further geographic
expansion.

Emerging Growth Company

The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") 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.

We will cease to be an emerging growth company upon the earliest of (a) the last
day of the fiscal year in which we have total annual gross revenues of $1.07
billion or more; (b) the last day of our fiscal year following the fifth
anniversary of the date of our IPO; (c) the date on which we have issued more
than $1.0 billion in nonconvertible debt during the previous three years; or (d)
the date on which we are deemed to be a "large accelerated filer" as defined in
Rule 12b-2 under the Exchange Act, which would occur as of the last day of a
fiscal year in which the market value of our common stock held by non-affiliates
equals or exceeds $700 million as of the last business day of the second fiscal
quarter of such fiscal year.

Recent Accounting Standards Updates

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

Components of Our Results of Operations

The following discussion summarizes the key components of our unaudited condensed consolidated statements of income and comprehensive income. We have one operating and reporting segment.


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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 the Financial Accounting Standards Board's Accounting
Standards Codification Topic No. 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.

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.

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 Substance Abuse and Mental Health Services Administration in the U.S.

•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.


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•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, 2021 and to date in 2022, 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 11 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.

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
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for our internal corporate technology infrastructure and migration to the cloud.
This final component is expected to 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.

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
our 2021 Annual Report) began in the third quarter of 2021 and will continue
over the following four years. Over the long term, we expect our SG&A 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.")


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Gain on Interest Rate Swaps



Gain on interest rate swaps consists of realized and unrealized gains 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 Provision



Income tax provision 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.

Results of Operations

Three Months Ended March 31, 2021 compared to the Three Months Ended March 31, 2022

The following table sets forth certain historical consolidated financial performance for the three months ended March 31, 2021 compared to the three months ended March 31, 2022:





                                                              Three Months Ended                         Increase/
                                                                   March 31,                             (Decrease)
                                                            2021               2022                $                   %
(dollars in thousands, except per share amounts)
Revenues                                                $ 139,370          $ 191,972          $  52,602                37.7  %

Cost of revenues (exclusive of depreciation and


  amortization below)                                      67,579            100,956             33,377                49.4  %
Corporate technology and production systems                10,353             12,552              2,199                21.2  %
Selling, general and administrative                        29,606             42,333             12,727                43.0  %
Depreciation and amortization                              20,549             20,156               (393)               (1.9) %
Impairments of long-lived assets                            2,876                  -             (2,876)             (100.0) %
Total operating expenses                                  130,963            175,997             45,034                34.4  %
Operating income                                            8,407             15,975              7,568                90.0  %
Interest expense, net                                       7,570              6,336             (1,234)              (16.3) %
Gain on interest rate swaps                                   (46)              (328)              (282)              613.0  %
Other income                                                 (271)              (354)               (83)               30.6  %
Total other expense, net                                    7,253              5,654             (1,599)              (22.0) %
Income before income taxes                                  1,154             10,321              9,167               794.4  %
Income tax provision                                          526              4,085              3,559               676.6  %
Net income                                              $     628          $   6,236          $   5,608               893.0  %

Net income margin                                             0.5  %             3.2  %                                 2.8  %
Net income per share - basic                            $    0.01          $    0.07          $    0.06               836.3  %



Revenues

Revenues increased by 37.7%, or $52.6 million, from $139.4 million for the three
months ended March 31, 2021 to $192.0 million for the three months ended
March 31, 2022. The 37.7% growth rate was driven by 30.4% organic constant
currency revenue growth and 8.0% inorganic growth from the acquisition of EBI,
partially offset
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by a 0.7% unfavorable impact from fluctuations in foreign currency. The organic
revenue increase reflected base revenue growth of 20.1%, including cross-sell
and up-sell, net of attrition, and new customer growth of 9.7%. 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
in our gross retention rate from 94% for the twelve months ended March 31, 2021
to 96% for the twelve months ended March 31, 2022. Pricing was relatively stable
across the periods and not meaningful to the change in revenues.

Total revenue in our U.S. business grew 45.9% year-over-year. We saw broad-based
strength across our industry Verticals, with particularly exceptional results in
our Consumer and Gig, Industrials, Technology Media and Financial and Business
Services Verticals, as we executed our growth playbook and benefited from
secular tailwinds that are driving increased labor turnover. Our international
business experienced total revenue growth of 8.2%, with double-digit revenue
growth in Canada and APAC.

Cost of Revenues

Cost of revenues increased by 49.4%, or $33.4 million, from $67.6 million for
the three months ended March 31, 2021 to $101.0 million for the three months
ended March 31, 2022. This was driven by a $25.5 million increase due to
increased volume and a $7.9 million increase due to higher cost of revenue on
the EBI business, additional payroll and related expenses due to increased
headcount to support revenue growth and higher stock-based compensation expense
related to IPO equity grants to employees.

Cost of revenues as a percentage of revenues increased by 410 basis points from
48.5% for the three months ended March 31, 2021 to 52.6% for the three months
ended March 31, 2022.

Corporate Technology and Production Systems Expense



Corporate technology and production systems expense increased by 21.2%, or $2.2
million, from $10.4 million for the three months ended March 31, 2021 to $12.6
million for the three months ended March 31, 2022. 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 $1.6 million from $4.6 million for the three months ended March 31,
2021 to $6.1 million for the three months ended March 31, 2022 primarily due to
the acquisition of EBI, increased headcount and third party software license
cost to support growth and increased stock-based compensation expense from IPO
equity grants to employees. Costs to develop platform and product initiatives
increased by $0.7 million from $3.6 million for the three months ended March 31,
2021 to $4.2 million for the three months ended March 31, 2022 due primarily to
increased stock-based compensation expense resulting from IPO equity grants to
employees. Costs related to maintaining our production systems remained flat at
$2.2 million for the three months ended March 31, 2021 and 2022.

These expenses also include non-capitalizable costs related to Project Ignite.
We incurred $0.9 million related to phase one, $1.3 million related to phase two
and $0.7 million related to phase three in the three months ended March 31,
2021, and $1.0 million related to phase two and $2.2 million related to phase
three in the three months ended March 31, 2022. For more information about
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 43.0%, or $12.7
million, from $29.6 million for the three months ended March 31, 2021 to $42.3
million for the three months ended March 31, 2022. The year-over-year increase
was primarily driven by a $5.2 million increase in payroll and related taxes and
benefits expense driven by additional headcount, partially due to the EBI
acquisition, a $3.3 million increase in stock-based compensation expense related
to IPO equity grants to employees and a $2.7 million increase due to higher
professional fees and insurance costs related to operating as a public company.
The remainder of the increase was due to higher variable costs required to
support revenue growth.

Depreciation and Amortization



Depreciation and amortization expense decreased by 1.9%, or $0.4 million, from
$20.5 million for the three months ended March 31, 2021 to $20.2 million for the
three months ended March 31, 2022, primarily due to
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lower intangible asset amortization, as new intangible assets were added at a
lower rate compared to those which became fully depreciated in the interim
period coupled with reduced fixed asset depreciation resulting from decreased
capital expenditure activity.

Impairments of Long-Lived Assets



Impairments of long-lived assets totaled $2.9 million for the three months ended
March 31, 2021 primarily resulting from the write-off of fixed assets related to
the exit of our Bellevue, Washington office. There was no impairment of goodwill
or other intangible assets during the three months ended March 31, 2022.

Interest Expense, Net



Interest expense decreased by 16.3%, or $1.2 million, from $7.6 million for the
three months ended March 31, 2021 to $6.3 million for the three months ended
March 31, 2022 primarily due to the reduction in the outstanding debt balance
following the $100 million principal payment on our First Lien Term Loan in
November 2021. Amortization of the loan discount and deferred issuance costs
resulted in expense of $0.6 million and $0.5 million for three months ended
March 31, 2021 and 2022, respectively.

Gain on Interest Rate Swaps



Gain on interest rate swaps increased $0.3 million, from a gain of less than
$0.1 million for the three months ended March 31, 2021 to a gain of $0.3 million
for the three months ended March 31, 2022 due to a realized loss of $2.1 million
offset by a mark to market ("MTM") gain of $2.4 million.

Income Tax Provision
Income tax provision increased $3.6 million from $0.5 million for the three
months ended March 31, 2021 to $4.1 million for the three months ended March 31,
2022, resulting in an effective tax rate of 45.6% and 39.6%, respectively. The
increase in the income tax provision is primarily due to the increase in income
before taxes. Income before taxes increased $9.2 million from $1.2 million for
the three months ended March 31, 2021 to $10.3 million for the three months
ended March 31, 2022. For the three months ended March 31, 2021 and 2022, the
effective rate differs from the statutory rate mainly due to a jurisdictional
mix of earnings and permanent items.

Net Income and Net Income Margin



Net income increased $5.6 million from net income of $0.6 million for the three
months ended March 31, 2021 to net income of $6.2 million for the three months
ended March 31, 2022. Net income margin increased 281 basis points from a net
income margin of 0.5% for the three months ended March 31, 2021 to a net income
margin of 3.2% for the three months ended March 31, 2022.

The increase in both net income and net income margin resulted primarily from improved operating leverage as revenues increased by 37.7% while operating expenses increased by only 34.4%.

Net Income per Share

Net income per share increased $0.06 per share from net income of $0.01 per share for the three months ended March 31, 2021 to net income of $0.07 per share for the three months ended March 31, 2022 due to the increase in net income.

Non-GAAP Financial Measures



This Quarterly Report on Form 10-Q contains "non-GAAP financial measures," which
are financial measures that are not calculated and presented in accordance with
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 inorganic revenue growth, which is defined as the impact to revenue growth in the current period from merger and acquisition ("M&A") activity


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that has occurred over the past twelve months, and converting the current period
revenue at foreign currency exchange rates consistent with the prior period. 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 income adjusted for provision for income
taxes, interest expense, depreciation and amortization, stock-based
compensation, transaction expenses related to our public offering and one-time
public company transition expenses, 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 and Adjusted EBITDA Margin to evaluate
the factors and trends affecting our business to assess our financial
performance and in preparing and approving our annual budget and believe they
are 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. 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 one-time public company transition expenses, 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. 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.


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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 three months
ended March 31, 2021 and 2022. There was no impact of inorganic revenue growth
on our revenue in the three months ended March 31, 2021. For the three months
ended March 31, 2022, we have provided the impact of revenue from the
acquisition of EBI.

                                                   Three Months Ended
                                                        March 31,
                                                    2021              2022
Reported revenue growth                                  16.7  %     37.7  %
Inorganic revenue growth (1)                                -  %      8.0  %
Impact from foreign currency exchange (2)                 2.1  %     (0.7) %
Organic constant currency revenue growth                 14.6  %     30.4  %


__________

(1)Impact to revenue growth in the current period from M&A activity that has
occurred over the past twelve months.
(2)Impact to revenue growth in the current period from fluctuations in foreign
currency exchange rates.

Adjusted EBITDA and Adjusted EBITDA Margin



Adjusted EBITDA increased by 29.4%, or $10.8 million, from $36.8 million for the
three months ended March 31, 2021 to $47.6 million for the three months ended
March 31, 2022. This was due to increased revenue and improved operating
leverage. Adjusted EBITDA Margin decreased by 159 basis points year-over-year
from 26.4% for the three months ended March 31, 2021 to 24.8% for the three
months ended March 31, 2022, predominantly driven by a full quarter of public
company costs as well as lower margin from EBI.

The following table reconciles net income, the most directly comparable US GAAP
measure, to Adjusted EBITDA for the three months ended March 31, 2021 and 2022:

                                     Three Months Ended
                                         March 31,
                                    2021           2022
(dollars in thousands)
Net income                       $    628       $  6,236

Income tax provision (benefit) 526 4,085 Interest expense, net

               7,570          6,336

Depreciation and amortization 20,549 20,156 Stock-based compensation

              898          5,108
Transaction expenses(1)             1,089          1,888
Restructuring(2)                    3,035            346

Technology Transformation(3) 2,059 3,762



Gain on interest rate swaps(4)        (46)          (328)
Other(5)                              496             47
Adjusted EBITDA                  $ 36,804       $ 47,636
Adjusted EBITDA Margin               26.4  %        24.8  %




(1)Consists of transaction expenses related to mergers and acquisitions,
associated earn-outs, investor management fees in connection with the Fourth
Amended and Restated Management Services Agreement and costs related to
preparation of our IPO and one-time public company transition expenses. For the
three months ended March 31, 2021, approximately $0.6 million related to
preparation of our IPO and approximately $0.4 million in costs related to
mergers and acquisitions. For the three months ended March
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31, 2022, costs consisted primarily of $1.5 million of one-time public company
transition expenses and $0.3 million in costs related to mergers and
acquisitions.
(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 three months ended March 31, 2021,
approximately $2.5 million was related to our real estate consolidation program,
consisting primarily of the write-off on disposal of fixed assets for our exited
facility in Bellevue, Washington. The remaining costs consisted of $0.5 million
of restructuring-related executive recruiting and severance charges. For the
three months ended March 31, 2022, the costs consisted of $0.3 million in
expenses related to our real estate consolidation program.
(3)Includes costs related to technology modernization efforts, as well as costs
related to decommissioning of on premise production systems and redundant
fulfillment systems of acquired companies and the migration to the Company's
platform. 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, a three-phase strategic investment initiative launched in
2019 to create an enterprise-class global platform, with the remainder related
to an investment made to modernize internal functional systems in preparation
for our public company infrastructure. For the three months ended March 31,
2021, we made an investment of approximately $3.0 million in Project Ignite. For
the three months ended March 31, 2022, investment related to Project Ignite was
$3.2 million. The remaining $0.6 million relates to costs for decommissioning of
the on-premise production system and decommissioning of the redundant
fulfillment system of EBI and migrating onto the Company's platform.
(4)Consists of gain on interest rate swaps. See Part I. Item 3. "Quantitative
and Qualitative Disclosures about Market Risk-Interest Rate Risk" for additional
information on interest rate swaps.
(5)Consists of costs related to loss on foreign currency transactions.

The following table presents the calculation of Net Income Margin and Adjusted EBITDA Margin for the three months ended March 31, 2021 and 2022:


                              Three Months Ended
                                  March 31,
                             2021            2022
(dollars in thousands)
Net income               $     628       $   6,236

Adjusted EBITDA $ 36,804 $ 47,636 Revenues

$ 139,370       $ 191,972
Net income margin              0.5  %          3.2  %

Adjusted EBITDA margin 26.4 % 24.8 %

Adjusted Net Income and Adjusted Earnings Per Share

Adjusted Net Income increased by 57.9%, or $9.0 million, from $15.5 million for the three months ended March 31, 2021 to $24.4 million for the three months ended March 31, 2022. The increase was primarily driven by an increase in revenues and improved operating leverage.



Adjusted Earnings Per Share-basic increased by 52.9%, or $0.09 per share from
$0.17 per share for the three months ended March 31, 2021 to $0.26 per share for
the three months ended March 31, 2022. Adjusted Earnings Per Share-diluted
increased by 47.1%, or $0.08 per share from $0.17 per share for the three months
ended March 31, 2021 to $0.25 per share for the three months ended March 31,
2022. The increase in Earnings Per Share-basic and Earnings Per Share-diluted
was primarily due to the increase in Adjusted Net Income.


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The following table reconciles net income, the most directly comparable US GAAP
measure, to Adjusted Net Income and Adjusted Earnings Per Share for the three
months ended March 31, 2021 and 2022:
                                                   Three Months Ended
                                                       March 31,
                                                   2021           2022
(in thousands, except per share amounts)
Net income                                     $      628      $  6,236
Income tax provision                                  526         4,085
Income before income taxes                          1,154        10,321
Amortization of acquired intangible assets         13,263        13,764
Stock-based compensation                              898         5,108
Transaction expenses(1)                             1,089         1,888
Restructuring(2)                                    3,035           346
Technology Transformation(3)                        2,059         3,762

Gain on interest rate swaps(4)                        (46)         (328)
Other(5)                                              496            47

Adjusted Net Income before income tax effect 21,948 34,908 Income tax effect(6)

                                6,498        10,507
Adjusted Net Income                            $   15,450      $ 24,401
Net Income per share-basic                     $     0.01      $   0.07
Net Income per share-diluted                   $     0.01      $   0.06
Adjusted Earnings Per Share-basic              $     0.17      $   0.26
Adjusted Earnings Per Share-diluted            $     0.17      $   0.25




(1)Consists of transaction expenses related to mergers and acquisitions,
associated earn-outs, investor management fees, and costs related to preparation
of our IPO and one-time public company transition expenses.
(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 and acquisition-related
technology integration and migration 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 gain on interest rate swaps. See Part I. Item 3. "Quantitative
and Qualitative Disclosures about Market Risk-Interest Rate Risk" for additional
information on interest rate swaps.
(5)Consists of costs related to loss on foreign currency transactions.
(6)Normalized effective tax rates of 29.6% and 30.1% have been used to compute
Adjusted Net Income for the three months ended March 31, 2021 and 2022,
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.
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The following table reconciles net income per share, the most directly comparable US GAAP measure, to Adjusted Earnings Per Share for the three months ended March 31, 2021 and 2022:



                                                                                  Three Months Ended
                                                                                      March 31,
                                                                              2021                  2022

(in thousands, except share and per share amounts) Net income

                                                              $         628          $      6,236
Less: Undistributed amounts allocated to participating securities                   3                     -
Undistributed earnings allocated to stockholders                        $   

625 $ 6,236



Weighted average number of shares outstanding - basic                      88,602,167            93,967,819
Weighted average number of shares outstanding - diluted                    92,165,163            99,186,456
Net income per share - basic                                            $        0.01          $       0.07
Net income per share - diluted                                          $   

0.01 $ 0.06



Adjusted Net Income                                                     $      15,450          $     24,401
Less: Undistributed amounts allocated to participating securities                  64                     -
Undistributed earnings allocated to stockholders                        $   

15,386 $ 24,401



Weighted average number of shares outstanding - basic                      88,602,167            93,967,819
Weighted average number of shares outstanding - diluted                    92,165,163            99,186,456
Adjusted earnings per share - basic                                     $        0.17          $       0.26
Adjusted earnings per share - diluted                                   $   

0.17 $ 0.25


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The following table presents the calculation of Adjusted Diluted Earnings Per Share for the three months ended March 31, 2021 and 2022:


                                                                                           Three Months Ended
                                                                                                March 31,
                                                                                       2021                     2022
Net income per share - diluted                                                 $        0.01               $       0.06
Adjusted Net Income adjustments per share
Income tax expense                                                                      0.01                       0.04
Amortization of acquired intangible assets                                              0.14                       0.14
Stock-based compensation                                                                0.01                       0.05
Transaction expenses(1)                                                                 0.01                       0.02
Restructuring(2)                                                                        0.03                          -
Technology Transformation(3)                                                            0.02                       0.04

Gain on interest rate swaps(4)                                                             -                          -
Other(5)                                                                                0.01                          -
Income tax effect(6)                                                                   (0.07)                     (0.11)
Adjusted earnings per share - diluted                                          $        0.17               $       0.25
Weighted average number of shares outstanding used in computation of Adjusted
Diluted Earnings Per Share:
Weighted average number of shares outstanding - diluted (US GAAP)                 92,165,163                 99,186,456

Options not included in weighted average number of shares outstanding - diluted (US GAAP) (using treasury stock method)

                                            -                          -
Weighted average number of shares outstanding - diluted (non-GAAP) (using
treasury stock method)                                                            92,165,163                 99,186,456




(1)Consists of transaction expenses related to mergers and acquisitions,
associated earn-outs, investor management fees, and costs related to preparation
of our IPO and one-time public company transition expenses.
(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 and acquisition-related
technology integration and migration 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 gain on interest rate swaps. See Part 1. Item 3. "Quantitative
and Qualitative Disclosures about Market Risk-Interest Rate Risk" for additional
information on interest rate swaps.
(5)Consists of costs related to loss on foreign currency transactions.
(6)Normalized effective tax rates of 29.6% and 30.1% have been used to compute
Adjusted Net Income for the three months ended March 31, 2021 and 2022,
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.
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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 for the three months ended March 31, 2021 and 2022 were
approximately $4.2 million and $5.2 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 March 31, 2022, we had cash and cash equivalents of approximately $44.3
million. As of December 31, 2021, we had cash and cash equivalents of $48.0
million. 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 March 31, 2022, 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
March 31, 2022 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
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greater than or equal to 2.95:1.00. Per the terms of the Credit Agreement, there
was 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 $139.3 million as of December 31, 2021 and
March 31, 2022. 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 reduce the available capacity under the
Revolving Credit Facility. We had outstanding letters of credit totaling $0.7
million as of December 31, 2021 and March 31, 2022 and additional availability
for letters of credit of $19.3 million.

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
March 31, 2022.

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.


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Cash Flows



The following table presents a summary of our condensed consolidated cash flows
from operating, investing and financing activities for the three months ended
March 31, 2021 and 2022:
                                                           Three Months Ended
                                                               March 31,
                                                           2021           2022
(in thousands)
Net cash provided by operating activities              $   21,983      $  

3,445


Net cash used in investing activities                      (4,185)       

(5,233)


Net cash used in financing activities                        (127)       

(1,771)


Increase (decrease) in cash and cash equivalents           17,671        

(3,559)


Effect of exchange rate changes on cash                       151           

(92)

Cash and cash equivalents at beginning of the period 66,633 47,998 Cash and cash equivalents at end of the period $ 84,455 $ 44,347




Operating Activities

Net cash provided by operating activities of $22.0 million for the three months
ended March 31, 2021 reflects the adjustment to net income for non-cash charges
totaling $19.9 million, primarily driven by $20.5 million in depreciation and
amortization, $2.9 million of impairments of long-lived assets, $0.9 million of
stock-based compensation and $0.6 million of debt discount amortization
partially offset by $2.4 million in deferred income taxes, $1.1 million of
deferred rent and $1.5 million of changes in the fair value of derivatives.
Changes in operating assets and liabilities provided an additional $1.5 million
of operating cash flow.

Net cash provided by operating activities of $3.4 million for the three months
ended March 31, 2022 reflects the adjustment to net income for non-cash charges
totaling $26.7 million primarily driven by $20.2 million of depreciation and
amortization, $5.1 million of stock-based compensation and $3.4 million of
deferred income taxes offset by $2.5 million of changes in the fair value of
derivatives. Changes in operating assets and liabilities for the three months
ended March 31, 2022 decreased cash flow from operating activities by $29.4
million.

Investing Activities



Net cash used in investing activities for the three months ended March 31, 2021
and 2022 was $4.2 million and $5.2 million, respectively. Net cash used in
investing activities for the three months ended March 31, 2021 consisted of a
$3.8 million investment in capitalized software and $0.3 million in purchases of
computer hardware and other property, plant and equipment. Net cash used in
investing activities for the three months ended March 31, 2022 consisted of a
$3.7 million investment in capitalized software and $1.5 million in purchases of
computer hardware and other property, plant and equipment.

Financing Activities



Net cash used in financing activities for the three months ended March 31, 2021
was $0.1 million. Net cash used in financing activities for the three months
ended March 31, 2022 was $1.8 million. The increase in net cash used in
financing year-over-year is primarily due to a decrease in proceeds from
issuance of common stock during the period ended March 31, 2022 compared to the
period ended March 31, 2021.

Adjusted Free Cash Flow

For the three months ended March 31, 2021, we generated $17.9 million of
Adjusted Free Cash Flow compared to $(1.8) million for the three months ended
March 31, 2022. The decrease in Adjusted Free Cash Flow compared to the prior
year period was driven by a return to our normal bonus payment structure and the
timing of interest and tax payments.
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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
three months ended March 31, 2021 and 2022. For the three months ended March 31,
2021, we adjusted Free Cash Flow for one-time, cash, non-operating charges
related to the completed IPO.

                                                              Three Months Ended
                                                                  March 31,
(in thousands)                                                2021           2022
Net Cash provided by Operating Activities                 $   21,983      $ 

3,445


Total IPO adjustments (1)                                        122        

-

Purchases of intangible assets and capitalized software (3,839) (3,742) Purchases of property and equipment

                             (346)       (1,495)
Adjusted Free Cash Flow                                   $   17,920      $ (1,792)


_______________

(1) Includes one-time, cash, non-operating charges related to our IPO. Costs include $0.1 million of professional fees in preparation of our IPO.

Critical Accounting Policies and Estimates



The preparation of our consolidated financial statements in accordance with US
GAAP requires us to use estimates and make judgments and assumptions about
future events that affect the reported amounts of assets, liabilities, revenue
and expenses and the related disclosures. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations-Critical Accounting
Policies and Estimates" in our 2021 Annual Report for a description of our
critical accounting estimates and Note 2, "Summary of Significant Accounting
Policies" to our 2021 consolidated financial statements in our 2021 Annual
Report for our significant accounting policies. During the three months ended
March 31, 2022, we adopted FASB ASC Topic 326, "Financial Instruments - Credit
Losses" ("CECL") with an adoption date of January 1, 2022. As a result, we
changed our accounting policy for allowance for credit losses and the adoption
of CECL resulted in an immaterial cumulative effect adjustment recorded in
retained earnings as of January 1, 2022. For additional information, see Note 2,
"Summary of Significant Accounting Policies" to our unaudited condensed
consolidated financial statements in this quarterly report on Form 10-Q. There
were no additional changes to our critical accounting estimates in the three
months ended March 31, 2022. See Note 3, "Recent Accounting Standards Update" to
our unaudited condensed consolidated financial statements in this Quarterly
Report on Form 10-Q for a discussion of new accounting guidance adopted during
the first three months of 2022.
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