Cover Page
Cover Page - shares | 6 Months Ended | |
Jun. 30, 2021 | Aug. 31, 2021 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Jun. 30, 2021 | |
Document Transition Report | false | |
Entity File Number | 001-40684 | |
Entity Registrant Name | PowerSchool Holdings, Inc. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 85-4166024 | |
Entity Address, Address Line One | 150 Parkshore Drive | |
Entity Address, City or Town | Folsom | |
Entity Address, State or Province | CA | |
Entity Address, Postal Zip Code | 95630 | |
City Area Code | 877 | |
Local Phone Number | 873-1550 | |
Title of 12(b) Security | Class A Common Stock, par value $0.0001 per share | |
Trading Symbol | PWSC | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | No | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Smaller Reporting Company | false | |
Emerging Growth Company | true | |
Entity Ex Transition Period | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 198,401,832 | |
Entity Central Index Key | 0001835681 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2021 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Jun. 30, 2021 | Dec. 31, 2020 |
Current Assets: | ||
Cash and cash equivalents | $ 10 | $ 10 |
Assets | 10 | 10 |
Noncurrent Liabilities: | ||
Total liabilities | 0 | 0 |
Members’ Equity: | ||
Common stock, $0.01 par value per share, 1,000 authorized,1,000 shares issued and outstanding | 10 | 10 |
Additional paid-in capital | 0 | 0 |
Total | 10 | 10 |
Severin Holdings, LLC | ||
Current Assets: | ||
Cash and cash equivalents | 22,533,000 | 52,734,000 |
Accounts receivable—net of allowance of $4,133 and $7,869, respectively | 57,349,000 | 47,977,000 |
Prepaid expenses and other current assets | 32,060,000 | 22,799,000 |
Total current assets | 111,942,000 | 123,510,000 |
Property and equipment - net | 16,783,000 | 17,069,000 |
Capitalized product development costs - net | 70,868,000 | 58,894,000 |
Goodwill | 2,446,869,000 | 2,213,367,000 |
Intangible assets - net | 846,147,000 | 763,459,000 |
Other assets | 37,433,000 | 24,401,000 |
Assets | 3,530,042,000 | 3,200,700,000 |
Current Liabilities: | ||
Accounts payable | 14,678,000 | 11,145,000 |
Accrued expenses | 59,553,000 | 53,698,000 |
Deferred revenue, current | 169,972,000 | 229,622,000 |
Revolving credit facility | 95,000,000 | 40,000,000 |
Current portion of long-term debt | 8,450,000 | 8,450,000 |
Total current liabilities | 347,653,000 | 342,915,000 |
Noncurrent Liabilities: | ||
Other liabilities | 7,650,000 | 7,535,000 |
Deferred taxes | 17,195,000 | 6,483,000 |
Deferred revenue—net of current | 4,198,000 | 5,568,000 |
Long-term debt, net | 1,475,474,000 | 1,160,326,000 |
Total liabilities | 1,852,170,000 | 1,522,827,000 |
Commitments and contingencies (Note 12) | ||
Members’ Equity: | ||
Members’ investment | 1,858,019,000 | 1,855,730,000 |
Accumulated other comprehensive income | 213,000 | 441,000 |
Accumulated deficit | (180,360,000) | (178,298,000) |
Total members’ equity | 1,677,872,000 | 1,677,873,000 |
Total | $ 3,530,042,000 | $ 3,200,700,000 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) $ in Thousands | Jun. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | |
Common stock, shares authorized (in shares) | 1,000 | 1,000 | |
Common stock, shares issued (in shares) | 1,000 | 1,000 | |
Common stock, shares outstanding (in shares) | 1,000 | 1,000 | |
Severin Holdings, LLC | |||
Accounts receivable, allowance for credit losses | $ 4,133 | $ 7,869 | $ 6,901 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) - Severin Holdings, LLC - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2021 | Jun. 30, 2020 | Jun. 30, 2021 | Jun. 30, 2020 | |
Revenue: | ||||
Total revenue | $ 145,403 | $ 103,136 | $ 263,550 | $ 203,211 |
Cost of revenue: | ||||
Depreciation and amortization | 12,846 | 9,588 | 24,602 | 18,917 |
Total cost of revenue | 59,804 | 46,027 | 111,684 | 90,477 |
Gross profit | 85,599 | 57,109 | 151,866 | 112,734 |
Operating expenses: | ||||
Research and development | 21,929 | 15,836 | 40,474 | 32,927 |
Selling, general, and administrative | 30,653 | 22,348 | 55,984 | 46,130 |
Acquisition costs | 177 | 0 | 5,780 | 2 |
Depreciation and amortization | 16,154 | 13,871 | 30,713 | 27,817 |
Total operating expenses | 68,913 | 52,055 | 132,951 | 106,876 |
Income from operations | 16,686 | 5,054 | 18,915 | 5,858 |
Interest expense—Net | 21,297 | 17,400 | 38,559 | 36,951 |
Other expense (income)—Net | (376) | 61 | (233) | (1,780) |
Loss before income taxes | (4,235) | (12,407) | (19,411) | (29,313) |
Income tax benefit | (1,690) | (18) | (17,349) | (42) |
Net loss | (2,545) | (12,389) | (2,062) | (29,271) |
Other comprehensive income (loss)—Foreign currency translation | (381) | 183 | (228) | (345) |
Total other comprehensive income (loss) | (381) | 183 | (228) | (345) |
Comprehensive loss | (2,926) | (12,206) | (2,290) | (29,616) |
Subscriptions and support | ||||
Revenue: | ||||
Total revenue | 121,763 | 88,533 | 224,854 | 176,254 |
Cost of revenue: | ||||
Cost of revenue, excluding depreciation and amortization | 33,632 | 26,681 | 62,664 | 51,905 |
Service | ||||
Revenue: | ||||
Total revenue | 16,083 | 11,841 | 29,036 | 22,404 |
Cost of revenue: | ||||
Cost of revenue, excluding depreciation and amortization | 12,795 | 9,438 | 23,489 | 19,040 |
License and other | ||||
Revenue: | ||||
Total revenue | 7,557 | 2,762 | 9,660 | 4,553 |
Cost of revenue: | ||||
Cost of revenue, excluding depreciation and amortization | $ 531 | $ 320 | $ 929 | $ 615 |
CONSOLIDATED STATEMENTS OF MEMB
CONSOLIDATED STATEMENTS OF MEMBERS’ EQUITY (Unaudited) - Severin Holdings, LLC - USD ($) $ in Thousands | Total | Members’ Investment | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit |
Beginning balance at Dec. 31, 2019 | $ 1,719,565 | $ 1,851,127 | $ 88 | $ (131,650) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Repurchase of management incentive units | (989) | (989) | ||
Management incentive unit-based compensation | 2,822 | 2,822 | ||
Foreign currency translation | (345) | (345) | ||
Net loss | (29,271) | (29,271) | ||
Ending balance at Jun. 30, 2020 | 1,691,782 | 1,852,960 | (257) | (160,921) |
Beginning balance at Mar. 31, 2020 | 1,703,567 | 1,852,539 | (440) | (148,532) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Repurchase of management incentive units | (989) | (989) | ||
Management incentive unit-based compensation | 1,410 | 1,410 | ||
Foreign currency translation | 183 | 183 | ||
Net loss | (12,389) | (12,389) | ||
Ending balance at Jun. 30, 2020 | 1,691,782 | 1,852,960 | (257) | (160,921) |
Beginning balance at Dec. 31, 2020 | 1,677,873 | 1,855,730 | 441 | (178,298) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Repurchase of management incentive units | (448) | (448) | ||
Management incentive unit-based compensation | 2,737 | 2,737 | ||
Foreign currency translation | (228) | (228) | ||
Net loss | (2,062) | (2,062) | ||
Ending balance at Jun. 30, 2021 | 1,677,872 | 1,858,019 | 213 | (180,360) |
Beginning balance at Mar. 31, 2021 | 1,679,425 | 1,856,646 | 594 | (177,815) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Management incentive unit-based compensation | 1,373 | 1,373 | ||
Foreign currency translation | (381) | (381) | ||
Net loss | (2,545) | (2,545) | ||
Ending balance at Jun. 30, 2021 | $ 1,677,872 | $ 1,858,019 | $ 213 | $ (180,360) |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2021 | Jun. 30, 2020 | |
Reconciliation of cash, cash equivalents, and restricted cash | ||
Cash and cash equivalents | $ 10 | |
Severin Holdings, LLC | ||
Cash flows from operating activities: | ||
Net loss | (2,062,000) | $ (29,271,000) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation of property and equipment | 3,283,000 | 3,874,000 |
Amortization of intangible assets | 44,721,000 | 39,280,000 |
Amortization of capitalized product development costs | 7,310,000 | 3,584,000 |
Loss on disposal/retirement of property and equipment | 4,000 | 101,000 |
Provision for allowance for doubtful accounts | (262,000) | (38,000) |
Management incentive unit-based compensation | 2,737,000 | 2,822,000 |
Amortization of debt issuance costs and discount | 6,464,000 | 2,735,000 |
Changes in operating assets and liabilities — net of effects of acquisitions: | ||
Accounts receivables | (735,000) | (11,743,000) |
Prepaid expenses and other current assets | 4,266,000 | (1,559,000) |
Other assets | (10,535,000) | (2,171,000) |
Accounts payable | 1,669,000 | 6,184,000 |
Accrued expenses | 1,800,000 | (9,736,000) |
Other liabilities | (43,000) | (110,000) |
Deferred taxes | (18,892,000) | (138,000) |
Deferred revenue | (90,659,000) | (49,717,000) |
Net cash used in operating activities | (50,934,000) | (45,903,000) |
Cash flows from investing activities: | ||
Purchases of property and equipment | (2,172,000) | (1,766,000) |
Proceeds from sale of property and equipment | 13,000 | 3,000 |
Investment in capitalized product development costs | (19,137,000) | (16,794,000) |
Acquisitions—net of cash acquired | (318,919,000) | 321,000 |
Other | 95,000 | 0 |
Net cash used in investing activities | (340,120,000) | (18,236,000) |
Cash flows from financing activities: | ||
Proceeds from Revolving Credit Agreement | 55,000,000 | 61,000,000 |
Proceeds from Bridge Loan | 315,200,000 | 0 |
Payments for repurchase of management incentive units | (448,000) | (989,000) |
Payments of deferred offering costs | (2,655,000) | 0 |
Payment of debt issuance costs | (2,100,000) | 0 |
Repayment of capital leases | (108,000) | (36,000) |
Net cash provided by financing activities | 360,664,000 | 55,925,000 |
Effect of foreign exchange rate changes on cash | 189,000 | (1,203,000) |
Net decrease in cash, cash equivalents, and restricted cash | (30,201,000) | (9,417,000) |
Cash, cash equivalents, and restricted cash—Beginning of period | 53,246,000 | 39,491,000 |
Cash, cash equivalents, and restricted cash—End of period | 23,045,000 | 30,074,000 |
Supplemental disclosures of cash flow information: | ||
Cash paid for interest | 31,645,000 | 42,315,000 |
Cash paid for income taxes | 2,998,000 | 513,000 |
Non-cash investing and financing activities: | ||
Property and equipment additions in accounts payable and accrued liabilities | 184,000 | 98,000 |
Capitalized interest related to investment in capitalized product development costs | 165,000 | 390,000 |
Reconciliation of cash, cash equivalents, and restricted cash | ||
Cash and cash equivalents | 22,533,000 | 29,574,000 |
Restricted cash, included in other current assets | 512,000 | 500,000 |
Total cash, cash equivalents, and restricted cash | 23,045,000 | 30,074,000 |
Severin Holdings, LLC | First Lien Debt | ||
Cash flows from financing activities: | ||
Repayments of lines of credit | (3,875,000) | (3,875,000) |
Severin Holdings, LLC | Incremental Facility | ||
Cash flows from financing activities: | ||
Repayments of lines of credit | $ (350,000) | $ (175,000) |
Description of the Business and
Description of the Business and Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description of the Business and Summary of Significant Accounting Policies | Description of the Business and Summary of Significant Accounting Policies Background and Nature of Operations PowerSchool Holdings, Inc. (the “Company”) was formed as a Delaware corporation on November 30, 2020. The Company was formed for the purpose of completing an initial public offering (“IPO”) and related organizational transactions (the “Organizational Transactions”) in order to carry on the business of Severin Holdings, LLC (now known as PowerSchool Holdings LLC, “Holdings LLC”), which is an entity that provides a cloud platform with an integrated, enterprise-scale suite of solutions purpose-built for the K-12 education market. Basis of Presentation The accompanying condensed balance sheets are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Separate statements of income and comprehensive income, changes in stockholder’s equity, and cash flows have not been presented because there had been no activities in this entity for the period from its formation through June 30, 2021. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in our financial statements and the accompanying notes. Actual results may differ materially from our estimates. |
Stockholder_s Equity
Stockholder’s Equity | 6 Months Ended |
Jun. 30, 2021 | |
Equity [Abstract] | |
Stockholder’s Equity | Stockholder’s EquityAs of December 31, 2020, and June 30, 2021, the Company was authorized to issue 1,000 shares of common stock, par value $0.01 per share, and had issued 1,000 shares of common stock to Severin Topco, LLC. |
BUSINESS
BUSINESS | 6 Months Ended |
Jun. 30, 2021 | |
Severin Holdings, LLC | |
Financial Support for Nonconsolidated Legal Entity [Line Items] | |
BUSINESS | BUSINESS Severin Holdings, LLC (“PowerSchool,” “we,” “us,” “our”, “Holdings LLC” or the “Company”) provides a comprehensive suite of solutions that includes the core system of record used by districts and schools. The Company’s platform is embedded in school workflows and is used by educators, students, administrators, and parents. PowerSchool’s cloud platform is an integrated, enterprise-scale suite of solutions purpose-built for the K-12 education market. Its cloud-based technology platform helps schools and districts efficiently manage state reporting and related compliance, special education, finance, human resources, talent, registration, attendance, funding, learning, instruction, grading, assessments and analytics in one unified platform. The Company’s integrated technology approach streamlines operations, aggregates disparate data sets, and develops insights using predictive modelling and machine learning. The Company is headquartered in Folsom, California, and together with its wholly-owned subsidiaries has locations in the United States, Canada, and India. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Jun. 30, 2021 | |
Severin Holdings, LLC | |
Accounting Policies [Line Items] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying interim condensed consolidated balance sheets as June 30, 2021 and December 31, 2020, the interim condensed consolidated statements of operations and comprehensive loss, and members’ equity for the three and six months ended June 30, 2020 and 2021, and cash flows for the six months ended June 30, 2020 and 2021, and the notes to such interim condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim financial information. As permitted under those rules, we condensed or omitted certain footnotes or other financial information that are normally required by GAAP for annual financial statements. We have included all adjustments necessary for a fair presentation of the results of the interim period. These adjustments consist of normal and recurring items. Our unaudited interim consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements and related notes. These unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in management’s opinion, include all adjustments necessary to state fairly the consolidated financial position of the Company as of June 30, 2021, the results of operations for the three and six months ended June 30, 2020 and 2021 and cash flows for the six months ended June 30, 2020 and 2021. The results of operations for the three and six months ended June 30, 2021 and cash flows for the six months ended June 30, 2021 are not necessarily indicative of the results expected for the year ending December 31, 2021 or any future interim or annual period. Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Use of Estimates Use of estimates is required in the preparation of the consolidated financial statements in conformity with GAAP. Management makes estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments. Management bases its estimates and judgments on historical experience and on various other factors that it believes are reasonable under the circumstances. The estimates the Company evaluates includes those related to revenue recognition, allowance for doubtful accounts, capitalized product development costs, goodwill and intangible asset valuation, management incentive unit-based compensation, and income taxes. Actual results could differ from those estimates under different assumptions or conditions including, but not limited to, the continued uncertainty surrounding the rapidly changing market and economic conditions due to the novel Coronavirus Disease 2019 (“COVID-19”) pandemic. Recent Accounting Pronouncements Not Yet Adopted In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-02, Leases , which requires an entity to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. The guidance offers specific accounting guidance for a lessee, lessor, and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. Leases will be classified as either finance or operating, with the classification affecting the pattern of expense recognition in the income statement. The guidance is effective for the Company beginning on January 1, 2022 and requires a modified retrospective adoption, with early adoption permitted. Although the Company is currently evaluating the impact of this guidance on its consolidated financial statements, the Company expects that most of its operating lease commitments will be recognized as operating lease liabilities and right-of-use assets upon adoption of the new guidance. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13). This update changes the accounting for recognizing impairments of financial assets, such that credit losses for certain types of financial instruments will be estimated based on expected losses. The update also modifies the impairment models for available-for-sale debt securities and for purchased financial assets with credit deterioration since their origination. ASU 2016-13 is effective for the Company beginning on January 1, 2023. Early adoption is permitted after for periods beginning after December 15, 2018. The Company is currently evaluating the impact of ASU 2016-13 on its consolidated financial statements. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting (ASU 2020-04) and subsequently ASU No. 2021-01, Reference Rate Reform (Topic 848) in January 2021. The guidances provide optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference London Interbank Offered Rate (“LIBOR”) or other reference rate expected to be discontinued in 2022 or potentially 2023 (pending possible extension). The optional expedients within ASU 2020-04 are effective as of March 12, 2020 through December 31, 2022 and may be applied prospectively. The Company is currently evaluating the impact of adopting the guidances on its consolidated financial statements. Accounting Pronouncements Recently Adopted On January 1, 2021, we adopted ASU No. 2018-15, Intangibles - Goodwill and Other - Internal- Use Software , ASU No. 2018-13, Fair Value Measurement (Topic 820) and ASU No. 2017-04, Intangibles—Goodwill and Other: Simplifying the Test for Goodwill Impairment . The adoption of these accounting pronouncements did not have a material impact on the Company’s consolidated financial statements. Revenue Recognition The Company generates revenue from the following sources: (i) software-as-a-service (“SaaS”) offerings in cloud and hosted environments; (ii) professional services including implementation, consulting, customization, training and data migration services; (iii) software license; (iv) software maintenance; and (v) reseller arrangements. Revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services by following a five-step process: 1. Identify the contract(s) with a customer 2. Identify the performance obligations in the contract 3. Determine the transaction price 4. Allocate the transaction price to the performance obligations in the contract 5. Recognize revenue when (or as) the Company satisfies a performance obligation The Company identifies enforceable contracts with a customer when the agreement is signed and has determined that contract terms are generally 12 months since customers are generally permitted to terminate after 12 months without incurring a penalty. The Company also evaluates whether any optional periods represent a material right. Some of the Company’s contracts with customers contain multiple performance obligations. For these contracts, the Company accounts for individual performance obligations separately if they are distinct. Transaction price includes both fixed and variable consideration. However, the Company only includes variable consideration in the transaction price to the extent that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. The Company determines the standalone selling prices based on its overall pricing objectives, taking into consideration market conditions and other factors, including the value of its contracts, the products sold, customer demographics, geographic locations, and the number and types of users within the Company’s contracts. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental entities (e.g., sales and other indirect taxes). The following describes the nature of the Company’s primary types of revenue and related revenue recognition policies: SaaS Offerings The Company offers SaaS-based solutions to customers that purchase remote access to its software and its functionality. For the Company’s SaaS offerings, the nature of its promise to the customer is to provide continuous access to its application platforms. Accordingly, the Company’s SaaS offerings are generally viewed as stand-ready performance obligations comprised of a series of distinct daily services. The Company typically satisfies its SaaS performance obligations over time as the services are provided. A time-elapsed output method is used to measure progress because its efforts are expended evenly throughout the period and customers benefit consistently throughout the contract term. As such, for fixed-fee contracts, revenue is recognized ratably over the contract period and classified as Subscriptions and Support revenue in the consolidated statements of operations and comprehensive loss. Professional Services Professional services revenue is comprised of implementation, consulting, customization, training, and data migration services associated with the Company’s SaaS offerings and licensed software. These services are generally recognized over time, with service durations spanning from several weeks to several months, depending on the scope and complexity of the work. Payment terms for professional services may be based on a fixed fee or charged on a time and materials basis. Professional services are typically considered distinct performance obligations. The Company’s professional services that are billed on a fixed fee basis are typically satisfied as services are rendered, and the Company generally uses efforts expended (labor hours) to measure progress toward completion as this is considered a faithful representation of the transfer of control of the services given the nature of the performance obligation. For professional services that are billed on a time and materials basis, the Company applies the ‘as-invoiced’ practical expedient. Accordingly, revenue is generally recognized based on the amount that the Company has a right to invoice, as this amount corresponds directly with the value to the customer of the Company’s performance completed to date and is classified as Service revenue in the consolidated statements of operations and comprehensive loss. Software License The Company licenses software that is distinct and has significant stand-alone functionality (i.e., functional IP). Revenue attributable to such arrangements is typically recognized at the point in time when the customer is able to use and benefit from the software, which is generally upon delivery to the customer or upon the commencement of the renewal term. Software license revenue is classified as License and Other revenue in the consolidated statements of operations and comprehensive loss. Software Maintenance Software maintenance is comprised of stand-ready services including technical support services and unspecified software updates and upgrades, which are provided on a when-and-if-available basis. Software maintenance is transferred evenly using a time-elapsed output method over the contract term given it is a stand-ready obligation and there is no discernible pattern of performance. Software maintenance revenue is generally based on fixed fees. Payments are typically required annually in advance of the Company’s performance of the relevant services and recognized as revenue ratably over the maintenance term. This revenue is classified as Subscription and Support revenue in the consolidated statements of operations and comprehensive loss. Reseller Arrangements The Company has reseller arrangements with several third-party partners. For certain reseller arrangements, the Company does not control the products or services prior to when they are transferred to the customer, Revenue from these arrangements is recorded on a net basis. Reseller revenue is recognized at a point in time when the products or services are resold to the end customer as there are no outstanding performance obligations under these arrangements after the resale. The revenue for these arrangements is classified as License and Other revenue in the consolidated statements of operations and comprehensive loss. Principal vs. Agent From time to time the Company enters into arrangements with third parties to offer their products both as integrated into the Company’s offerings as well as add-ons for specific configurations with separate pricing. The Company considers the terms of our arrangements and the economics of the transactions with the third parties to determine the nature of our promise to the customer and whether or not the Company has control of the products or services prior to the transfer to the customer. Where we determine that the nature of our promise is to provide the underlying good or service, we recognize revenue on a gross basis (as the principal) and where the nature of the promise is primarily to facilitate the sale, we recognize revenue on a net basis (as the agent). Contract Costs Contract and customer acquisition costs, consisting primarily of sales commissions, are incremental and recoverable costs of obtaining a contract. These costs are capitalized using the portfolio approach and are amortized over the expected period of benefit, which is the estimated life of the technology (determined to be approximately 7 years) provided in the underlying contract. The amortization is determined on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the asset relates. Deferred commissions that will amortize within the next 12-month period are classified as current and included in prepaid expenses and other current assets. The remaining balance is classified as noncurrent and are included in other assets. The Company also applies the practical expedient to expense certain costs as incurred when the amortization period is expected to be one year or less. The practical expedient typically applies to the Company’s professional services offerings. Contract Balances The timing of revenue recognition may differ from the timing of invoicing to customers. The Company records a receivable when it can contractually invoice a customer and payment will become due solely based on the passage of time, a contract asset when revenue is recognized prior to invoicing and payment is contingent upon transfer of control of another separate performance obligation, or deferred revenue (contract liability) when consideration is received from or amounts are billed to customers which precedes its performance to fully satisfy the associated performance obligation(s). Deferred revenue primarily results from the revenue from our SaaS offerings that is billed in advance of when such services are provided by the Company. Deferred revenue that will be realized during the succeeding 12-month period is recorded as current, and the remaining deferred revenue is recorded as non-current. Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 days. In instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined that contracts generally do not include a significant financing component. Fair Value Measurements GAAP guidance for fair value measurements clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The Company has established a fair value hierarchy which prioritizes the inputs to the valuation techniques used to measure fair value into three levels. These levels are determined based on the lowest-level input that is significant to the fair value measurement. Levels within the hierarchy are defined as follows: Level 1 —Unadjusted quoted prices in active markets for identical assets and liabilities; Level 2 —Quoted prices for similar assets and liabilities in active markets (other than those included in Level 1) which are observable, either directly or indirectly; and Level 3 —Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. The Company does not have any assets or liabilities that are required to be recorded at fair value on a recurring basis using values determined by Level 2 or Level 3 inputs. The recorded amounts of cash and cash equivalents, accounts receivable, other current assets, accounts payable, and accrued expenses and other liabilities approximate the fair values principally because of their short-term nature. Short-term and long-term debt are reported at amortized costs in the Company’s consolidated balance sheets. The remaining financial instruments are reported in the Company’s consolidated balance sheets at amounts that approximate current fair values. Concentration of Credit Risk The Company’s cash, cash equivalents, and accounts receivable are potentially subject to concentration of credit risk. Cash and cash equivalents are deposited with financial institutions that management believes are creditworthy. As of December 31, 2020, and June 30, 2021, substantially all the Company’s cash has been deposited in low-interest- bearing accounts. The Company maintains cash balances in excess of the Federal Deposit Insurance Corporation limits at certain financial institutions. We have deposits only with financial institutions believed to have high-quality credit. The Company maintains an allowance for doubtful accounts receivable based on various factors, including the Company’s review of credit profiles of its customers, contractual terms and conditions, current economic trends, and historical payment experience. The Company had no customers who accounted for more than 10% of accounts receivable as of December 31, 2020 and June 30, 2021. Since most of these receivables were satisfied in subsequent periods, the Company believes that this does not pose an undue concentration of credit risk on the Company. The Company had no customers accounting for more than 10% of total revenue for all periods presented. Cash and Cash Equivalents The Company considers all highly liquid investment securities with remaining maturities at the date of purchase of three months or less to be cash equivalents. Accounts Receivable Accounts receivable primarily includes trade accounts receivable from the Company’s customers. Allowances for doubtful accounts are established based on various factors, including, but not limited to, credit profiles of the Company’s customers, contractual terms and conditions, historical payments, and current economic trends including the impact of COVID-19. Accounts receivable are written off or credited on a case-by-case basis, net of any amounts that may be collected. Property and Equipment Property and equipment is stated at cost, net of accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of software, equipment, and furniture and fixtures which is generally three Significant improvements that substantially extend the useful lives of assets are capitalized. Expenditures for maintenance and repairs are charged to expense as they are incurred. Intangible Assets Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values using the straight-line method designed to match the amortization to the benefits received. Leases An arrangement is or contains a lease if there are specified assets and the right to control the use of a specified asset is conveyed for a period in exchange for consideration. Upon lease inception, the Company classifies leases as either operating or capital leases. Leases are classified as capital leases when the terms of the lease transfers substantially all of the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. For leases that contain rent escalation or rent concession provisions, the Company records rent expense for the total rent payable during the lease term on a straight-line basis over the term of the lease. The Company records the difference between the rent paid and the straight line rent as a deferred rent liability in accrued expenses and other liabilities in the accompanying balance sheet for the current and non-current portions, respectively. Operating leases are not recognized on the consolidated balance sheet. For capital leases, the Company recognizes capital lease assets and corresponding lease liabilities within the consolidated balance sheet at lease commencement. For income statement purposes, the Company recognizes rent expense on a straight-line basis for operating leases. For capital leases, the Company recognizes interest expense associated with the capital lease liability and depreciation expense associated with the capital lease asset. For capital lease assets and leasehold improvements, the estimated useful lives are limited to either (i) the shorter of the useful life of the asset or (ii) the term of the lease. Capitalized Product Development Costs The Company’s software and website development costs are accounted for under the guidance for internal use software and website development costs. The costs in the preliminary stages of development are expensed as incurred. Once an application has reached the development stage, if: (1) the costs are direct and incremental and (2) management has determined that it is probable that the project will be completed and the software will be used to perform the function intended, internal and external costs are capitalized until the application is substantially complete and ready for its intended use. The Company makes ongoing evaluations of the recoverability of its capitalized software projects by comparing the net amount capitalized for each product to the estimated net realizable value of the product. If such evaluations indicate that the unamortized software development costs exceed the net realizable value, the Company writes off the amount by which the unamortized software development costs exceed net realizable value. Capitalized software development costs are being amortized on a straight-line basis over five years to cost of revenue. Useful lives are reviewed at least annually and adjusted if appropriate. Capitalized Cloud Computing Arrangement Implementation Costs The Company capitalizes certain qualifying costs to implement cloud computing hosting arrangements that are service contracts. Such qualifying costs include direct costs for third-party consulting services, and does not include software maintenance and training costs, which are expensed as incurred. Capitalization of these costs ceases once the software of the hosting arrangement is ready for its intended use. Capitalized costs, net of accumulated amortization, are included in prepaid expenses and non-current assets on the Company’s consolidated balance sheets and amortized using the straight-line method over the expected term of the associated arrangement, including periods that are reasonably expected to be renewed. The amount capitalized is included as a component of net cash used in operating activities in the statements of cash flows. Capitalized Interest Interest is capitalized on software products under development. Interest capitalization is based on rates applicable to borrowings outstanding during the period and the balance of qualified assets under development during the period. Capitalized interest is amortized over the useful lives of such assets and the amortization is reported as cost of revenue. Goodwill Assets Goodwill is the excess of the purchase price in a business combination over the fair value of identifiable net assets acquired. Goodwill is subject to periodic testing for impairment. Goodwill is assessed at least annually, but also whenever events or changes in circumstances indicate the carrying values may not be recoverable. Factors that could trigger an impairment review, include (a) significant underperformance relative to historical or projected future operating results; (b) significant changes in the manner of or use of the acquired assets or the strategy for the Company’s overall business, and (c) significant negative industry or economic trends. The Company conducts an impairment assessment on December 31 of each year taking a qualitative and quantitative evaluation approach to determine if there are any adverse market factors or changes in circumstances indicating that the carrying value of goodwill may not be recoverable. If it is more likely than not that an impairment exists, the Company performs a quantitative test that compares the fair value to the net carrying value and records an impairment of goodwill to the extent that the net carrying value exceeds the fair value equal to the excess amount. There was no goodwill impairment recorded by the Company in any of the periods presented. Recoverability of Long-Lived and Intangible Assets The Company evaluates the recoverability of its long-lived assets, including amortizable intangible and tangible assets in accordance with authoritative guidance on accounting for the impairment or disposal of long-lived assets. The Company evaluates long- lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. No long-lived asset impairment losses were recorded by the Company during any of the periods presented. Debt Issuance Costs and Debt Discount The Company records debt issuance costs as a reduction to the carrying value of the related debt and such amounts are being amortized over the term of the related debt using the straight-line method of amortization, which approximates the effective interest method. Amortization of debt issuance costs are included in interest expense - net on the consolidated statements of operations and comprehensive loss. The Company accounts for the discounts as an adjustment to the carrying amount and then amortizes the discounts over the terms using the effective interest method. Deferred Offering Costs The Company records deferred offering costs as other assets on its consolidated balance sheets. They consist of costs incurred in connection with the anticipated sale of the Company’s common stock in an IPO, including certain legal, accounting, printing, and other IPO related costs. After completion of the IPO, these costs will be recorded in stockholders’ deficit as a reduction from the IPO proceeds. As of June 30, 2021 and December 31, 2020, the Company had $10.4 million and $0.3 million in deferred offering costs included in other assets on the consolidated balance sheet, respectively. Business Combinations The Company accounts for acquisitions under the purchase method of accounting in accordance with ASC 805, Business Combinations. The consolidated statements of operations and comprehensive loss include the results of operations of the acquirees since the date of acquisition. The net assets of the acquisition were recorded at their estimated fair values as of the acquisition date. Unit-Based Compensation Employees are granted unit-based awards by the Company’s parent entity as profit interests based on the estimated fair value of the awards at the date of grant. The Company utilizes the Black-Scholes pricing model for determining the estimated fair value of the unit-based awards on the date that the awards are granted. Given the absence of any active market for the shares underlying the awards, the fair value of the awards was determined with input from management and third-party valuations. The Company recognizes expense over the requisite service period on a straight-line basis. Unit- based compensation expense is recognized within cost of revenue; research and development; and selling, general, and administrative expense on the consolidated statements of operations and comprehensive loss based on the function of the employees receiving awards. Income Taxes The Company is a limited liability company that is treated as a partnership for federal income tax purposes. The Company is also treated as a partnership in the majority of the states in which it operates; however, certain state jurisdictions tax the Company’s operations as a limited liability company. The Company has purchased corporate entities that operate in the United States and are taxed at corporate tax rates. The Company also has operations in Canada through an entity that is treated as a corporation for Canadian income tax purposes. Under this partnership structure, federal and most state income tax liabilities and/or benefits of the Company are passed through to its owners. As such, the recognition of income tax expense (or benefit) represents income tax related to the Company’s US corporate entities, Canadian operations, foreign withholding taxes, and state corporate taxes that are imposed on the Company. Interest and penalties related to unrecognized tax benefits are recorded as income tax expense. The tax provision for interim periods is determined using an estimate of the Company’s annual effective tax rate, adjusted for discrete items, if any, that arise during the period. Each quarter, the Company updates its estimate of its annual effective tax rate, and if the estimated annual effective tax rate changes, the Company makes a cumulative adjustment in such period. The quarterly tax provision and estimate of the Company’s annual effective tax rate are subject to variation due to several factors including variability in pre-tax income (or loss), the mix of jurisdictions to which such income relates, changes in how the Company conducts business, and tax law developments. Cost of Revenue The Company includes costs directly related to revenue as a component of cost of revenue. Personnel costs associated with cost of revenue consist of salaries, benefits, bonuses, payroll taxes and stock-based compensation expense. Subscriptions and support Subscription and support cost of revenue consists of costs directly related to subscription services, including personnel costs related to operating data centers and customer support operations, hosting and data center related costs, third-party software licenses and allocated facilities and overhead costs. Service Service cost of revenue consists of personnel costs related to the delivery of the Company’s service offerings, software, equipment, and information technology related expenses, third-party contractor costs, as well as travel and allocated facilities and overhead costs. License and other License and other cost of revenue consists primarily of personnel costs associated with delivering licenses, reseller arrangements, and allocated facilities and overhead costs. Depreciation and amortization Depreciation and amortization cost of revenue includes allocated depreciation of its computer and software equipment related to the Company’s customer support operations, hosting and data center related costs and amortization of the Company’s capitalized product development costs and technology intangible assets. |
BUSINESS COMBINATIONS
BUSINESS COMBINATIONS | 6 Months Ended |
Jun. 30, 2021 | |
Severin Holdings, LLC | |
Business Acquisition [Line Items] | |
BUSINESS COMBINATIONS | BUSINESS COMBINATIONS We completed one acquisition in fiscal year 2020 and one acquisition during the six months ended June 30, 2021. The purchase price allocation for these acquisitions, discussed in detail below, reflects various fair value estimates and analyses, including certain tangible assets acquired and liabilities assumed, the valuation of intangible assets acquired, income taxes and goodwill, which are subject to change within the measurement period as preliminary valuations are finalized. Measurement period adjustments are recorded in the reporting period in which the estimates are finalized and adjustment amounts are determined. The fair value of the assets and liabilities acquired are based on valuations using the Level 3, unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The results of operations of these business combinations have been included in the Company’s consolidated financial statements from their respective acquisition dates. Fiscal 2020 Acquisition On October 28, 2020, the Company acquired 100% of the unit capital of Hoonuit Holdings, LLC (“Hoonuit”), a privately held company operating entirely in the US. Hoonuit is a leading K-12 analytics and data management solution. The purpose of the acquisition is to incorporate Hoonuit’s advanced analytics and data management tools with PowerSchool’s existing suite of education technology solutions. The total purchase price was $81.1 million, all of which was provided in the form of cash consideration. Transaction costs of $2.4 million were incurred related to this acquisition and are recorded in acquisition costs in the consolidated statements of operations and comprehensive loss. The Company has accounted for this acquisition as a business combination. The acquisition date fair values of the assets acquired and liabilities assumed are as follows (in thousands): Consideration $ 81,101 Cash 5,227 Accounts receivable 5,737 Prepaid expenses and other assets 643 Property and equipment 300 Intangible assets 26,500 Accounts payable 1,958 Accrued expenses 2,414 Deferred revenue 5,024 Other 7 Non-current tax payable 2,202 Goodwill $ 54,300 The Company recorded $54.3 million of goodwill arising from the acquisition of Hoonuit, none of which is expected to be deductible for tax purposes. The goodwill is a result of the growth expected by adding new schools and further creating a comprehensive education technology portfolio as well as margin improvements resulting from market participant synergies and operating leverage as sales increase. This business combination did not have a material impact on the Company’s consolidated financial statements (individually or in the aggregate during the 2020 fiscal period). Therefore, historical results of operations subsequent to the acquisition date and pro forma results of operations have not been presented. Refer to Footnote 8 below for information regarding changes to goodwill within the measurement period. Fiscal 2021 Acquisition On March 3, 2021, the Company acquired 100% of the equity interests of Hobsons, Inc. (“Hobsons”). Hobsons’ businesses comprised of Naviance and Intersect. Naviance is a college, career, and life readiness solution used by students across U.S. schools for assessing and developing students’ interests and competencies in preparation for life after high school. Intersect is an innovative admissions solution connecting Naviance students to their best-fit higher education opportunities. The purpose of the acquisition was to enhance and expand the PowerSchool product offering. The total purchase price for Hobsons was $318.9 million, which was paid in cash. Transaction costs of $4.9 million were incurred in the three and six months ended June 30, 2021 related to this acquisition and are recorded in acquisition costs in the consolidated statements of operations and comprehensive loss. The Company has accounted for this acquisition as a business combination in accordance with ASC 805. The purchase consideration was allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date with the excess recorded as goodwill. The preliminary calculations and valuations of fair values assigned to assets acquired and liabilities assumed are based on management’s estimates and assumptions which may be subject to change as we obtain additional information. The areas that remain preliminary relate to the fair values of the identified intangible assets acquired, deferred tax liabilities and deferred revenue assumed. We expect to finalize the valuation as soon as practicable, but not later than one year from the acquisition date. Any changes in the fair value of the assets acquired and liabilities assumed during the measurement period may result in adjustments to goodwill. Consideration $ 318,861 Accounts receivable 8,058 Prepaid expenses and other assets 13,967 Property and equipment 670 Other assets 26 Intangible assets 127,400 Accounts payable 1,814 Accrued expenses 4,427 Deferred revenue 29,618 Deferred taxes 29,465 Goodwill $ 234,064 The Company recorded $234.1 million of goodwill, arising from the acquisition, none of which is expected to be deductible for tax purposes. The goodwill is a result of the growth expected by creating a fully comprehensive education technology portfolio for educators, students and parents as well as margin improvements resulting from market participant synergies and operating leverage as sales increase. The Company believes it is not practicable to provide pro forma statements of operations of the combined business as if the acquisition had been completed at an earlier date as it would require significant estimates and assumptions without the use of hindsight that could be misleading. This is due to seller’s lack of historical financial information sufficient to produce such pro forma statements given that the Company purchased specific businesses that were not segregated in the seller’s financial records and for which separate carve-out financial statements were not readily available. |
REVENUE
REVENUE | 6 Months Ended |
Jun. 30, 2021 | |
Severin Holdings, LLC | |
Disaggregation of Revenue [Line Items] | |
Revenue from Contract with Customer | REVENUE Disaggregation of Revenue The following table depicts the disaggregation of revenue according to the Company’s revenue streams. The Company believes this depicts the nature, amount, timing and uncertainty of revenue and cash flows consistent with how we evaluate our financial statements (in thousands): Three months ended Six months ended June 30, 2021 2020 2021 2020 SaaS $ 94,823 $ 59,899 $ 170,652 $ 119,594 Professional services 16,083 11,841 29,036 22,404 Software maintenance 26,940 28,634 54,202 56,660 License and other 7,557 2,762 9,660 4,553 Total revenue $ 145,403 $ 103,136 $ 263,550 $ 203,211 Revenue recognized for the three and six month period ended June 30, 2021 and 2020 from performance obligations satisfied in the prior periods was immaterial. Revenue by principal geographic areas based on where the customer is located was as follows (in thousands): Three months ended Six months ended June 30, 2021 2020 2021 2020 United States $ 134,061 $ 94,115 $ 241,811 $ 186,090 Canada 9,392 7,303 17,668 14,076 Other 1,950 1,718 4,071 3,045 Total revenue $ 145,403 $ 103,136 $ 263,550 $ 203,211 Deferred Revenue The changes in the deferred revenue balance were as follows (in thousands): June 30, 2021 December 31, 2020 Balance at beginning of period $ 235,190 $ 198,665 Decrease from revenue recognized (177,843) (194,930) Increase from acquisitions 25,880 5,024 Increase from current year net deferred revenue additions 90,943 226,431 Balance at end of period $ 174,170 $ 235,190 As of June 30, 2021, the Company expects to recognize revenue on approximately 98% of these remaining performance obligations over the next 12 months, with the balance recognized thereafter. The estimated revenues from the remaining performance obligations do not include uncommitted contract amounts such as (i) amounts that are cancellable by the customer without significant penalty, (ii) future billings for time and material contracts, and (iii) amounts associated with optional renewal periods. Contract Cost Assets Contract cost assets are included in prepaid expenses and other current assets and other assets, respectively, on the consolidated balance sheets as follows (in thousands): June 30, 2021 December 31, 2020 Contract costs, current $ 4,111 $ 2,903 Contract costs, noncurrent 16,880 14,548 Total contract costs $ 20,991 $ 17,451 Amortization expense for contract cost assets was $0.8 million and $1.5 million for the three and six months ended June 30, 2021 and $0.4 million and $0.8 million for the three and six months ended June 30, 2020, respectively. There was no impairment of contract cost assets during the period. |
ACCOUNTS RECEIVABLE
ACCOUNTS RECEIVABLE | 6 Months Ended |
Jun. 30, 2021 | |
Severin Holdings, LLC | |
Financing Receivable, Allowance for Credit Loss [Line Items] | |
ACCOUNTS RECEIVABLE | ACCOUNTS RECEIVABLE Accounts receivable, net, is as follows (in thousands): June 30, 2021 December 31, 2020 Accounts receivable $ 61,482 $ 55,846 Less allowance (4,133) (7,869) Accounts receivable—net $ 57,349 $ 47,977 The following tables presents the changes in the allowance for doubtful accounts (in thousands): June 30, 2021 December 31, 2020 Allowance for doubtful accounts, beginning balance $ 7,869 $ 6,901 Additions to (removals from) allowance for doubtful accounts (3,712) 1,157 Writeoffs of bad debt expense (24) (189) Allowance for doubtful accounts, ending balance $ 4,133 $ 7,869 |
PROPERTY AND EQUIPMENT_NET
PROPERTY AND EQUIPMENT—NET | 6 Months Ended |
Jun. 30, 2021 | |
Severin Holdings, LLC | |
Property, Plant and Equipment [Line Items] | |
PROPERTY AND EQUIPMENT—NET | PROPERTY AND EQUIPMENT—NET Property and equipment by category are as follows (in thousands): June 30, 2021 December 31, 2020 Building $ 7,519 $ 7,519 Land 294 294 Computer and software 19,549 16,544 Furniture and fixtures 2,912 2,933 Leasehold improvements 4,177 4,228 Property and equipment 34,451 31,518 Less accumulated depreciation (17,668) (14,449) Property and equipment—net $ 16,783 $ 17,069 |
CAPITALIZED PRODUCT DEVELOPMENT
CAPITALIZED PRODUCT DEVELOPMENT COSTS—NET | 6 Months Ended |
Jun. 30, 2021 | |
Severin Holdings, LLC | |
Research and Development Arrangement, Contract to Perform for Others [Line Items] | |
CAPITALIZED PRODUCT DEVELOPMENT COSTS—NET | CAPITALIZED PRODUCT DEVELOPMENT COSTS—NET Capitalized product development costs and related accumulated amortization consist of the following (in thousands): June 30, 2021 December 31, 2020 Gross capitalized product development costs $ 91,222 $ 71,929 Less accumulated amortization (20,354) (13,035) Capitalized product development costs—net $ 70,868 $ 58,894 Amortization of capitalized product development costs, included in the cost of revenue section of the consolidated statements of operations and comprehensive loss, were $3.8 million and $7.3 million for the three and six months ended June 30, 2021, and $1.9 million and $3.6 million for the three and six months ended June 30, 2020, respectively. Intangible assets are amortized using the straight-line method based on the expected useful lives of the assets. The carrying values of acquired amortizing intangible assets are as follows (in thousands): June 30, 2021 Weighted- Average Useful Life December 31, 2020 Weighted- Average Useful Life Intangible Assets—Gross Developed technology $ 283,100 8 years $ 239,200 8 years Customer relationships 737,400 14 years 661,900 15 years Trademarks 52,300 9 years 44,300 9 years $ 1,072,800 $ 945,400 Accumulated Amortization Developed technology $ (83,878) $ (67,421) Customer relationships (127,975) (102,408) Trademarks (14,800) (12,112) $ (226,653) $ (181,941) Intangible Assets—Net Developed technology $ 199,222 $ 171,779 Customer relationships 609,425 559,492 Trademarks 37,500 32,188 $ 846,147 $ 763,459 Amortization of developed technology is recorded in cost of revenue, while the amortization of trademarks and customer relationships is included in selling, general and administrative expense on the Company’s consolidated statements of operations and comprehensive loss. The following table summarizes the amortization expense of intangible assets (in thousands): Three months ended Six months ended June 30, 2021 2020 2021 2020 Cost of revenue $ 8,603 $ 7,283 $ 16,459 $ 14,566 Selling, general, and administrative expense 14,931 12,356 28,262 24,714 Total amortization of acquired intangible assets $ 23,534 $ 19,639 $ 44,721 $ 39,280 The estimated future amortization of intangible assets as of June 30, 2021, is as follows (in thousands): Years Ending December 31, 2021 (remaining six months) $ 46,590 2022 92,042 2023 92,042 2024 91,997 2025 91,862 Thereafter 431,614 Total $ 846,147 |
GOODWILL
GOODWILL | 6 Months Ended |
Jun. 30, 2021 | |
Severin Holdings, LLC | |
Goodwill [Line Items] | |
GOODWILL | GOODWILL The changes in the carrying amounts of goodwill were as follows (in thousands): Balance—December 31, 2020 $ 2,213,367 Additions due to acquisitions 234,064 Other adjustments 1 (562) Balance—June 30, 2021 $ 2,446,869 _____________ 1 The $0.6 million change includes adjustments of acquisition date fair value within the one-year measurement period, including a $0.1 million adjustment for the final settlement of working capital related to the Hoonuit acquisition, which had no impact to earnings in any of the periods presented. Other fair value adjustments did not have a material impact to the current-period or previous period statement of operations. |
OTHER INTANGIBLE ASSETS_NET
OTHER INTANGIBLE ASSETS—NET | 6 Months Ended |
Jun. 30, 2021 | |
Severin Holdings, LLC | |
Finite-Lived Intangible Assets [Line Items] | |
OTHER INTANGIBLE ASSETS—NET | CAPITALIZED PRODUCT DEVELOPMENT COSTS—NET Capitalized product development costs and related accumulated amortization consist of the following (in thousands): June 30, 2021 December 31, 2020 Gross capitalized product development costs $ 91,222 $ 71,929 Less accumulated amortization (20,354) (13,035) Capitalized product development costs—net $ 70,868 $ 58,894 Amortization of capitalized product development costs, included in the cost of revenue section of the consolidated statements of operations and comprehensive loss, were $3.8 million and $7.3 million for the three and six months ended June 30, 2021, and $1.9 million and $3.6 million for the three and six months ended June 30, 2020, respectively. Intangible assets are amortized using the straight-line method based on the expected useful lives of the assets. The carrying values of acquired amortizing intangible assets are as follows (in thousands): June 30, 2021 Weighted- Average Useful Life December 31, 2020 Weighted- Average Useful Life Intangible Assets—Gross Developed technology $ 283,100 8 years $ 239,200 8 years Customer relationships 737,400 14 years 661,900 15 years Trademarks 52,300 9 years 44,300 9 years $ 1,072,800 $ 945,400 Accumulated Amortization Developed technology $ (83,878) $ (67,421) Customer relationships (127,975) (102,408) Trademarks (14,800) (12,112) $ (226,653) $ (181,941) Intangible Assets—Net Developed technology $ 199,222 $ 171,779 Customer relationships 609,425 559,492 Trademarks 37,500 32,188 $ 846,147 $ 763,459 Amortization of developed technology is recorded in cost of revenue, while the amortization of trademarks and customer relationships is included in selling, general and administrative expense on the Company’s consolidated statements of operations and comprehensive loss. The following table summarizes the amortization expense of intangible assets (in thousands): Three months ended Six months ended June 30, 2021 2020 2021 2020 Cost of revenue $ 8,603 $ 7,283 $ 16,459 $ 14,566 Selling, general, and administrative expense 14,931 12,356 28,262 24,714 Total amortization of acquired intangible assets $ 23,534 $ 19,639 $ 44,721 $ 39,280 The estimated future amortization of intangible assets as of June 30, 2021, is as follows (in thousands): Years Ending December 31, 2021 (remaining six months) $ 46,590 2022 92,042 2023 92,042 2024 91,997 2025 91,862 Thereafter 431,614 Total $ 846,147 |
ACCRUED EXPENSES
ACCRUED EXPENSES | 6 Months Ended |
Jun. 30, 2021 | |
Severin Holdings, LLC | |
Payables and Accruals [Line Items] | |
ACCRUED EXPENSES | ACCRUED EXPENSES The following table presents the detail of accrued expenses (in thousands): June 30, 2021 December 31, 2020 Accrued compensation $ 25,345 $ 29,345 Accrued interest 3,025 2,779 Accrued taxes 1,489 3,517 Other accrued expenses 29,694 18,057 Total accrued expenses $ 59,553 $ 53,698 |
LONG-TERM DEBT AND REVOLVING CR
LONG-TERM DEBT AND REVOLVING CREDIT AGREEMENT | 6 Months Ended |
Jun. 30, 2021 | |
Severin Holdings, LLC | |
Debt Instrument [Line Items] | |
LONG-TERM DEBT AND REVOLVING CREDIT AGREEMENT | LONG-TERM DEBT AND REVOLVING CREDIT AGREEMENT Long-Term Debt —The following table presents the outstanding long-term debt (in thousands): June 30, 2021 December 31, 2020 Total outstanding principal—First Lien $ 755,625 $ 759,500 Total outstanding principal—Incremental Facility 69,125 69,475 Total outstanding principal—Second Lien 365,000 365,000 Total outstanding principal—Bridge Loan 320,000 — Total outstanding principal 1,509,750 1,193,975 Less current portion of long-term debt (8,450) (8,450) Less unamortized debt discount (4,456) (4,941) Less unamortized debt issuance costs (21,370) (20,258) Total long-term debt—net $ 1,475,474 $ 1,160,326 First Lien Credit Agreement (“First Lien”) On August 1, 2018, the Company entered into a loan agreement with a consortium of lenders which provided $775.0 million of term loans. The First Lien was issued at a discount of $1.9 million which was deducted from the carrying amount. The Company is amortizing the discount over the term using the effective interest method. Debt issuance costs of $18.7 million were recorded as a reduction to the face amount of the First Lien. The principal amounts of the initial term loans are payable on the last business day of each March, June, September, and December commencing on March 31, 2019, in an amount equal to 0.25% of the amount outstanding on the August 1, 2018, the closing date. The First Lien matures on July 31, 2025. The interest rate for Eurocurrency loans under the First Lien is the rate per annum equal to the LIBOR, as administered by the Intercontinental Exchange (ICE) Benchmark Administration for deposits in dollar, plus the applicable margin. The applicable margin is 3.25% per annum in the case of Eurocurrency loans. The interest rate for the First Lien as of June 30, 2021 and December 31, 2020 was 3.33% and 3.40%, respectively. The First Lien is collateralized on a first lien basis by certain assets and property of the Company. Second Lien Credit Agreement (“Second Lien”) On August 1, 2018, the Company entered into a loan agreement with a consortium of lenders that provided $365.0 million of term loans. The Second Lien was issued at a discount of $3.7 million which was deducted from the carrying amount. The Company is amortizing the discount over the term using the effective interest method. Debt issuance costs of $11.0 million were deducted from the face amount of the Second Lien. The principal amounts of the term loans are payable on the maturity date which is July 31, 2026. The interest rate for the Eurocurrency component of the Second Lien is the rate per annum equal to the LIBOR, as administered by the ICE Benchmark Administration for deposits in dollar, plus the applicable margin (Eurocurrency Rate). The applicable margin is 6.75% per annum in the case of Eurocurrency loans. The interest rate for the Second Lien as of June 30, 2021 and December 31, 2020 was 6.82% and 6.90%, respectively. The Second Lien is collateralized by certain assets and property of the Company on a junior basis to the First Lien and the Incremental Facility described below. Incremental Term Facility Amendment No. 1 (“Incremental Facility”) On November 22, 2019, the Company entered into an incremental loan agreement to the First Lien which provided for $70.0 million of incremental first lien term loans. The Incremental Facility was issued at a discount of $1.4 million which was deducted from the carrying amount. The Company is amortizing the discount over the term using the effective interest method. Debt issuance costs of $0.5 million were deducted from face amount of the Incremental Facility. The principal amounts of the Incremental Facility are payable on the last business day of each March, June, September, and December commencing on June 30, 2020, in an amount equal to 0.25% of the amount outstanding on November 22, 2019, the close date. The Incremental Facility matures at the same time as the First Lien, on July 31, 2025. The interest rate for Eurocurrency loans under the Incremental Facility is the rate per annum equal to the LIBOR, as administered by the ICE Benchmark Administration for deposits in dollar, with a floor of 1.00%, plus the applicable margin. The applicable margin is 4.50% per annum in the case of Eurocurrency loans. The interest rate for the Incremental Facility as of June 30, 2021 and December 31, 2020 was 5.50%, and 5.50%, respectively. The Incremental Facility is collateralized by certain assets and property of the Company on a pari passu basis with the First Lien. Bridge Loan Credit Agreement (the “Bridge Loan”) On March 3, 2021, the Company entered into the Bridge Loan Credit Agreement for an aggregate principal amount of $320.0 million in connection with its Hobsons acquisition. The Company incurred $0.5 million of issuance fees paid to third parties and $4.8 million in fees paid to lenders. The Bridge Loan matures on August 31, 2022. The interest rate for Eurocurrency loans is the rate per annum equal to the LIBOR, as administered by the ICE Benchmark Administration for deposits in dollar, plus the applicable margin. The initial margin is 3.00% per annum in the case of Eurocurrency loans. The interest rate for the Bridge Loan as of June 30, 2021 was 3.08%. The Bridge Loan is collateralized by certain assets and property of the Company. Maturities on long-term debt as of June 30, 2021 are as follows (in thousands): Years Ending December 31, 2021 (remaining six months) $ 4,225 2022 328,450 2023 8,450 2024 8,450 2025 795,175 Thereafter 365,000 Total $ 1,509,750 Revolving Credit Agreement On August 1, 2018, the Company entered into a Revolving Credit Agreement allowing the Company to borrow from time to time. On November 25, 2020, the Company amended its Revolving Credit Agreement to increase its borrowing capacity by $60.0 million to $180.0 million. On March 30, 2021, the Company further amended its Revolving Credit Agreement to increase its borrowing capacity, effective upon consummation of the IPO, by $109.0 million to $289.0 million and extended the maturity date to May 2, 2025 from July 31, 2023 . Pricing and other terms and conditions of the Revolving Credit Agreement remain unchanged. Under the terms of the agreement, the Company was permitted to borrow up to $180.0 million as of June 30, 2021 and December 31, 2020, respectively. Issuance costs were $2.7 million. The interest rate is the rate per annum equal to the LIBOR, as administered by the ICE for deposits in dollars plus the applicable margin. The applicable margin is 3.25% per annum. During the six months ended June 30, 2021, the Company borrowed $55.0 million on the Revolving Credit Agreement. The balance of the revolving credit facility as of June 30, 2021 and December 31, 2020 was $95.0 million and $40.0 million, respectively. We are also required to pay a commitment fee on the unused portion of the Revolving Credit Agreement of 0.50% per annum, payable quarterly in arrears. The Revolving Credit Agreement requires the Company to maintain a First Lien Net Leverage Ratio (as defined therein) of not more than 7.75 to 1.00 if the Company has an outstanding balance on the Revolving Credit Agreement of greater than 35% of the borrowing capacity (excluding certain letters of credit) at a quarter end. As of December 31, 2020, the Company had $40.0 million outstanding which is less than 35% of the borrowing capacity. As of June 30, 2021, the Company had $95.0 million outstanding which is greater than 35% of the borrowing capacity however, the First Lien Net Leverage Ratio was 5.69 to 1.00. See Note 17 to our condensed consolidated financial statements for a description of the repayment of certain of the outstanding debt as of June 30, 2021 with proceeds from the IPO. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Jun. 30, 2021 | |
Severin Holdings, LLC | |
Commitments and Contingencies [Line Items] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Leases The Company leases its office and data center facilities under non-cancelable operating leases that expire at various times through 2026. The Company is also responsible for certain real estate taxes, utilities, and maintenance costs related to its office facilities. The Company’s gross amount of assets recorded and future minimum lease payments due under capital leases was not material for any of the periods presented. Rent expense was $2.0 million and $4.0 million for the three and six months ended June 30, 2021 and $2.1 million and $4.2 million for the three and six months ended June 30, 2020, respectively. Future minimum lease payments under non-cancelable operating lease agreements as of June 30, 2021 are as follows (in thousands): Years Ending December 31, 2021 (remaining six months) $ 4,459 2022 5,904 2023 3,131 2024 2,251 2025 941 Thereafter 225 Total $ 16,911 Other contractual obligations We have contractual obligations related to, among others, data centers, cloud hosting arrangements and other services we purchase as part of our normal operations. In certain cases, these arrangements require a minimum annual purchase commitment by us. As of June 30, 2021, the remaining aggregate minimum purchase commitment under these arrangements was approximately $64.6 million through 2026. Sale-leaseback Transactions In October 2019, the Company entered into a sale-leaseback arrangement for one of its facilities, under which the Company sold the property at below-market value, and subsequently leased back the property at a below-market rent. Due to the existence of a prohibited form of continuing involvement, this transaction did not qualify for sale-leaseback accounting and as a result has been accounted for as a financing transaction under lease accounting standards. Under the financing method, until the related lease is terminated, the assets will remain on its balance sheets, and proceeds received from the sale are reported as financing obligations. As of June 30, 2021 and December 31, 2020, the balance of the remaining financing obligations was $4.5 million. At the end of the leaseback period, or when continuing involvement under the leaseback agreement ends, this transaction will be reported as a noncash sale and extinguishment of financing obligations, and the difference between the then net book value of the properties and the unamortized balance of the financing obligations will be recognized as a gain. Self-Insured Health Plan The Company is generally self-insured for losses and liabilities related to health benefits. The estimated liability for incurred, but not reported, medical claims is $1.7 million and $1.5 million as of June 30, 2021 and December 31, 2020, respectively. Indemnification The Company enters into indemnification arrangements within customer contracts as part of the ordinary course of its business. Under the Company’s standard contractual terms, these arrangements typically consist of the Company agreeing to indemnify, hold harmless and reimburse the indemnified customer(s) for losses suffered or incurred directly, in connection with any trade secret, copyright, patent, or other intellectual property infringement claim by any third-party with respect to the Company’s technology. The term of these indemnification agreements is generally concurrent with the term of the contract, but in some cases, may survive the expiration or termination of the underlying contract. The maximum potential amount of future payments the Company could be required to make under these agreements is not determinable because it involves claims that may be made against the Company in the future, but have not yet been made. The Company carries Directors and Officers insurance policies pursuant to the Company’s certificate of formation, bylaws, and applicable Delaware law. Legal Proceedings From time to time, the Company is involved in disputes, litigation, and other legal actions. The Company records a charge equal to at least the minimum estimated liability for a loss contingency only when both of the following conditions are met: (i) information available prior to issuance of the consolidated financial statements indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the consolidated financial statements, and (ii) the range of loss can be reasonably estimated. As of June 30, 2021 and December 31, 2020, there were no material reserves for estimated legal obligations. |
UNIT-BASED COMPENSATION
UNIT-BASED COMPENSATION | 6 Months Ended |
Jun. 30, 2021 | |
Severin Holdings, LLC | |
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |
UNIT-BASED COMPENSATION | UNIT-BASED COMPENSATION The Company has historically maintained an equity incentive plan for purposes of retaining and incentivizing certain employees of the Company. Up to 37,999,757 award units were authorized to be issued as of June 30, 2021. If a liquidity event occurs, holders of vested awards begin sharing in the proceeds of the liquidity event once the total amount distributed to early investors reach specified liquidation thresholds. Any excess is distributed pro rata among the investment group and the unitholders. Unitholders do not have to exercise the award or pay any consideration to participate in pro rata distributions. The Company’s parent entity is required to settle any vested awards upon a liquidity event as all awards represent profits interests in that entity. Under no circumstances is the Company obligated to reimburse its parent entity for any required payments made to holders of vested awards. Management Incentive Units (MIU) The Company provides for the granting of MIUs. MIUs are designed as profits interests, which entitle a holder to receive distributions in excess of a specific participation threshold, subject to the provisions of the agreement with its parent entity. The participation threshold is set at the time of grant and typically reflects the fair value of the Company at the date of grant. MIUs granted consist of a combination of time- based units (approximately 60% of the total as of December 31, 2020), which vest over a four-year period and performance-based units based on the equity value of the Company if a liquidity event occurs (approximately 40% of the total as of December 31, 2020). In the six months ended June 30, 2021, there have been no additional MIU grants. The performance condition occurs upon the date on which a certain equity return multiple has been met, provided that the employee is and has been continuously employed. All MIUs with a performance condition that are not vested shall terminate on (i) the first date following an IPO on which our majority owners, Vista and Onex (defined in Note 15 to our condensed consolidated financial statements ), beneficially own, in the aggregate, less than 25% of the total number of equity securities that they owned on the date of the IPO and (ii) the date on which a sale of the Company occurs. See Note 17 to our condensed consolidated financial statements for a description of the exchange and treatment of the MIUs following the IPO. As of June 30, 2021, the Company recognizes compensation expense for time-based units on a straight-line basis over the respective requisite service periods of the awards. For performance-based units, where vesting is contingent upon both a service and a performance condition, compensation expense is recognized over the respective requisite service period of the award when achievement of the performance condition is considered probable. As the performance-based vesting condition is not deemed probable, no expense has been recorded for the three and six months ended June 30, 2021 and 2020. In the event the employee is terminated, the Company may, at its option, repurchase the MIUs under the terms of the agreement with its parent entity. Vested MIUs have no expiration date. MIU activity for the six months ended June 30, 2021 is as follows: Number of Underlying Units Weighted-Average Grant-Date Fair Value Outstanding—December 31, 2020 28,143,250 $ 1.25 Units canceled (166,430) $ 1.28 Outstanding—June 30, 2021 27,976,820 $ 1.26 Vested—December 31, 2020 9,069,112 $ 1.28 Vested—June 30, 2021 11,021,997 $ 1.27 Units cancelled during the six months ended June 30, 2021 include a $0.4 million repurchase of management incentive units from former PowerSchool employees . The aggregate intrinsic value of the outstanding MIUs at June 30, 2021 and December 31, 2020 is approximately $71.3 million and $139.1 million, respectively. The Company uses the Black-Scholes option-pricing model to determine the fair value of the MIUs. The determination of the fair value using the Black-Scholes option-pricing model is affected by the Company’s estimated common unit price, as well as by assumptions regarding several complex and subjective variables. These variables include the Company’s expected unit price volatility over the term of the MIU, expected dividend yield, risk-free interest rates, and expected term. The fair value of MIUs granted during the year was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: Six Months Ended June 30, 2021 Year-ended December 31, 2020 Volatility — 45.0 % Expected dividend yield — — % Risk-free rate — 1.56 % Expected term (in years) — 1.5 years Fair value of underlying unit — $0.92 - $1.04 The assumptions and estimates were determined as follows: Fair value of units - As the Company’s participating units are not publicly traded, the fair value was determined by the Company’s board of directors, with input from management and valuation reports prepared by third-party valuation specialists. Expected volatility - The Company performed an analysis using the average historical volatilities of a peer group of representative unrelated public companies with sufficient trading history over the expected term to develop an expected volatility assumption. Expected term - The expected term is the estimated holding period of the MIUs established based on the Company’s expectations of the time to a liquidity event. Risk-free interest rate - The risk-free interest rate for the expected term of the MIU is based on the U.S. Treasury yield curve whose term is consistent with the expected life of the MIU at the time of grant. Expected dividend yield - The Company has never declared or paid cash dividends and does not presently plan to pay cash dividends, as such, the expected dividend yield was zero. The following table presents the classification of MIU-based compensation related to MIUs in the Company’s accompanying consolidated statements of operations and comprehensive loss (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Cost of revenue Subscription and support $ 9 $ 17 $ 19 $ 33 Service 70 64 141 128 Research and development 240 240 478 484 Selling, general, and administrative 1,054 1,089 2,099 2,177 Total MIU-based compensation $ 1,373 $ 1,410 $ 2,737 $ 2,822 As of June 30, 2021, the total future compensation cost related to unvested units is $6.7 million, which is expected to be recognized over a weighted-average period of 1.3 years. Participating Units On August 1, 2020, and August 1, 2019, the Company’s board of directors approved to grant a total of 39,688 and 37,058 participating units to a Board Member at $5.89 and $4.46 per share, respectively. The per-share amount reflects the fair value of the Company’s participating units on the date of grants. The compensation expense related to these grants were less than $0.1 million and $0.1 million in the three and six months ended June 30, 2021, and less than $0.1 million and $0.1 million for in the three and six months ended June 30, 2020, respectively. The expense is included in selling, general, and administrative expense. Long-Term Incentive Plan (LTIP) On August 1, 2018, the Company approved a Long-Term Incentive Plan that granted incentives to key members of management. The incentives are payable in cash and vest only when a qualified event has occurred, including sale of at least 50% of the investors’ equity interest or upon an initial public offering only if the aggregate shares sold in the public offering represent at least 50% of the investors’ equity interest, and a certain equity return multiple has been met with respect to the LTIP provided that the employee is and has been continuously employed. No compensation expense was recorded related to these LTIPs for the three or the six months ended June 30, 2020 and 2021, as the performance based vesting provisions were not probable at this time. The aggregate intrinsic value of the outstanding LTIP as of June 30, 2021 and December 31, 2020 is $5.5 million and $10.7 million, respectively. |
INCOME TAXES
INCOME TAXES | 6 Months Ended |
Jun. 30, 2021 | |
Severin Holdings, LLC | |
Income Tax Examination [Line Items] | |
INCOME TAXES | INCOME TAXES The Company recorded income tax benefit of a $1.7 million and $17.3 million for the three and six months ended June 30, 2021, respectively, and insignificant amounts for the three and six months ended June 30, 2020. The Company’s effective tax rate of 89.4% for the six months ended June 30, 2021 differs from the U.S. statutory rate primarily due to a valuation allowance release as a result of the business combination completed during the six month period. The business combination resulted in the recognition of a net deferred tax liability, which is as a source of future taxable income to realize a portion of the Company’s existing deferred tax assets. As such, a portion of the valuation allowance was released, resulting in an income tax benefit of $11.7 million. As of June 30, 2021, the Company had gross unrecognized tax benefits of $1.7 million, all of which, if recognized, would impact the effective tax rate. The amount of interest and penalties accrued related to the Company’s unrecognized tax benefits are not material to the consolidated financial statements in all periods presented. |
RELATED-PARTY TRANSACTIONS
RELATED-PARTY TRANSACTIONS | 6 Months Ended |
Jun. 30, 2021 | |
Severin Holdings, LLC | |
Related Party Transaction [Line Items] | |
RELATED-PARTY TRANSACTIONS | RELATED-PARTY TRANSACTIONS The Company has entered into arrangements with Vista Equity Partners for certain services, and the Vista Consulting Group for management consulting, systems implementation, and manpower support (collectively, “Vista”). These services were provided on a time and material basis and were generally related to integration of the various companies acquired by the Company. Total costs of these related party services were $0.1 million and $0.1 million, for the three and six months ended June 30, 2021, respectively, and $0.2 million and $0.2 million for the three and six months ended June 30, 2020, respectively. Following the IPO, we may continue to engage Vista from time to time, subject to compliance with our related party transactions policy. The Company also entered into arrangements with Onex Partners Manager LP (“Onex”) for general management services, acquisition advisory, and treasury services. Total costs of these related-party services were de minimis for all periods presented. We will terminate these management arrangements following the completion of the IPO. Total aggregate amounts due to Vista and Onex entities were $0.1 million as of June 30, 2021 and December 31, 2020. The Company also purchased services from entities that share common ownership with Vista and Onex. The cost was $0.3 million and $0.7 million for all other services purchased from entities with common ownership for the three and six months ended June 30, 2021, respectively, and $0.4 million and $0.6 million for the three and six months ended June 30, 2020, respectively. Substantially all of the Vista services are included in selling, general, and administrative expense in the consolidated statements of operations and comprehensive loss. Amounts due to entities that share common ownership were less than $0.1 million and $1.2 million as of June 30, 2021 and December 31, 2020, respectively, and are included in account payables and accrued liabilities in the consolidated balance sheet. There were no sales to or outstanding accounts receivable arising from this agreement during or as of the end of any of the periods presented. On March 3, 2021, the Company entered into a strategic partnership with EAB Global, Inc. (“EAB”), a portfolio company of Vista, by executing a Reseller Agreement (the “Agreement”). Pursuant to the Agreement, EAB will serve as, among other terms, the exclusive reseller of the Intersect product in the United States and Canada. The Agreement has a ten-year term and includes annual minimum revenue commitments from EAB. The commitment amount for the first 12-month period was $32.4 million, and will increase upon the anniversary of the Agreement. The Company may begin to revoke its exclusivity with EAB after the fourth year of the Agreement or terminate the relationship upon material breach of the contract. Under the terms of the Agreement, the Company pays a fee to EAB for selling products to third party customers on the Company’s behalf. The Company recognized the revenue from the customers on a gross basis as it is considered principal in the arrangement. The Company also recognized $2.4 million and $3.2 million in selling, general, and administrative expense and, to a lesser extent, cost of revenue, for fees owed to EAB under the Agreement for the three and six months ended June 30, 2021, respectively. On March 3, 2021, the Company entered into a Transition Service Agreement (“TSA”) with EAB for a period of 18 months. Pursuant to the TSA, the Company will provide certain administrative and other services including cloud hosting, business systems, general information technology, accounting, sales and marketing to support the standalone operation of the Starfish solution, which was separately acquired by EAB. The Company invoices EAB on a monthly basis for these agreed upon services. Additionally, the Company may cross charge EAB for direct expenses incurred by us on EAB’s behalf and collect cash from customers to be remitted to EAB. Amounts owed from and to EAB may be settled on a net basis due to the existing contractual right to offset within the agreement. As of June 30, 2021, the Company had a net amount receivable of $0.8 million. This amount was recorded in prepaid expenses and other current assets in the consolidated balance sheet. On March 3, 2021 the Company entered into an agreement with EAB to provide Starfish employees access to the Company’s office facilities for a period of one year (“Access and Use Agreement”). Under the terms of the Use and Access Agreement, EAB paid the Company a one-time upfront fee of $1.0 million, which was recognized as a credit to our rent expense which is being amortized monthly over the term of the agreement in selling, general and administrative expense line item on our consolidated statement of operations. The Company recognized rent expense in the amount of $0.3 million for the three and six months ended June 30, 2021 related to the upfront fee. |
EMPLOYEE BENEFIT PLANS
EMPLOYEE BENEFIT PLANS | 6 Months Ended |
Jun. 30, 2021 | |
Severin Holdings, LLC | |
Defined Contribution Plan Disclosure [Line Items] | |
EMPLOYEE BENEFIT PLANS | EMPLOYEE BENEFIT PLANS Defined Contribution Plan —The Company has a defined contribution plan under Section 401(k) of the Internal Revenue Code (“401(k) Plan”) covering all full-time employees who meet certain eligibility requirements. Eligible employees may defer a percentage of their pretax compensation, up to the annual maximum allowed by the Internal Revenue Service. Under the 401(k) Plan, the Company matches a portion of the employee contributions up to a defined maximum. The Company made matching contributions for the three and six months ended June 30, 2021 of $2.3 million and $4.3 million respectively, and $1.9 million and $3.6 million for the three and six months ended June 30, 2020, respectively. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 6 Months Ended |
Jun. 30, 2021 | |
Subsequent Event [Line Items] | |
SUBSEQUENT EVENTS | Subsequent Events The Company has evaluated subsequent events from the consolidated balance sheets date through September 9, 2021, the date at which the consolidated financial statements were available to be issued. (a) Organizational Transactions and IPO On July 17, 2021, in connection with the Organizational Transactions described below, the Company amended and restated its certificate of incorporation to authorize (i) 50,000,000 shares of preferred stock, par value $0.0001 per share, (ii) 500,000,000 shares of Class A common stock, par value $0.0001 per share, and (iii) 300,000,000 shares of Class B common stock, par value $0.0001 per share. At the completion of the IPO and following the exercise of the underwriters option to purchase additional shares, there were 158,473,360 shares of Class A common stock outstanding and 39,928,472 shares of Class B outstanding. On July 30, 2021, the Company completed the IPO of 39,473,685 shares of Class A common stock, par value $0.0001 per share, at an offering price of $18.00 per share, and received $673.2 million in IPO proceeds, net of $37.3 million in underwriting discounts and commissions. In connection with the consummation of the IPO on July 30, 2021, the Company consummated the following Organizational Transactions: • Holdings LLC's operating agreement was amended and restated to (i) modify its capital structure by replacing the membership interests currently held by its existing owners with a new class of membership interests (“LLC Units”) held initially by Severin Topco LLC (“Topco LLC”), a portion of which have a participation threshold (the “Participation Units”) and (ii) appoint the Company as the sole managing member of Holdings LLC. • The Company engaged in a series of transactions that resulted in holders of time-based management incentive units (“MIUs”) in Topco LLC receiving, in the aggregate, (i) 1,208,770 shares of unrestricted Class A common stock and (ii) 657,661 restricted shares of Class A common stock in exchange for vested and unvested time-based MIUs, respectively. The restricted shares are subject to the same time-based vesting schedule. The existing performance-based MIUs will remain as non-voting limited liability company interests in Topco LLC. In connection with the Organizational Transaction, the vesting conditions on these MIUs were modified. • The Company issued 39,928,472 shares of Class B common stock, par value $0.0001 per share, which provides no economic rights, to Topco LLC, on a one-to-one basis with the number of LLC Units (other than Participation Units) the Company owns, for nominal consideration. • Certain entities (the “Blocker Entities”) through which the funds associated with Onex Partners Manager LP and Vista Equity Partners, known collectively as the “Principal Stockholders”, hold their ownership interests in Topco LLC, engaged in a series of transactions (the “Blocker Contributions”) that resulted in each of the Blocker Entities becoming subsidiaries of the Company. • The Company entered into an exchange agreement (the “Exchange Agreement”) with Topco LLC pursuant to which Topco LLC is entitled to exchange LLC Units (other than Participation Units), together with an equal number of shares of Class B common stock, for shares of Class A common stock on a one-for-one basis or, at its election, for cash from a substantially concurrent public offering or private sale (based on the price of its Class A common stock in such public offering or private sale). Participation Units may be exchanged for a number of shares of Class A common stock equal to the then current value of a share of Class A common stock less the applicable participation threshold multiplied by the number of Participation Units being exchanged, divided by the then current value of Class A common stock. • The Company entered into a tax receivable agreement (the “Tax Receivable Agreement”) with Topco LLC, and the Principal Shareholders that provides for the payment by the Company to Topco LLC and the Principal Shareholders, collectively, of 85% of the amount of cash savings, if any, in U.S. federal, state and local income taxes. As a result of the Organizational Transactions described above, (i) the investors in the IPO own approximately 39,473,685 shares of the Class A common stock; (ii) Topco LLC owns 39,928,472 LLC Units (other than Participation Units), 39,928,472 shares of Class B common stock, and 3,730,246 Participation Units; (iii) Class A common stock collectively represents approximately 79.3% of the voting power in the Company; and (iv) Class B common stock collectively represents approximately 20.7% of the voting power in the Company. The Company’s corporate structure following the IPO is commonly referred to as an “Up-C” structure, which is commonly used by partnerships and limited liability companies when they undertake an initial public offering of their business. The Up-C structure, together with the Tax Receivable Agreement, allows the owners of Holdings LLC at the time of the IPO to continue to realize tax benefits associated with owning interests in an entity that is treated as a partnership, or “pass-through” entity, for income tax purposes following the IPO. One of these benefits is that future taxable income of Holdings LLC that is allocated to such owners will be taxed on a flow-through basis and therefore will not be subject to corporate taxes at the entity level. Additionally, because the LLC Units that the owners at the time of the IPO will continue to hold are exchangeable for shares of Class A common stock or, at its option, for cash, the Up-C structure also provides the owners of Holdings LLC at the time of the IPO potential liquidity that holders of non-publicly traded limited liability companies are not typically afforded. On August 2, 2021, we changed our name of one of our subsidiaries from Severin Holdings, LLC to PowerSchool Holdings LLC. (b) Exercise of Underwriters’ Option On August 10, 2021, the underwriters exercised the option to purchase an additional 5,447,581 shares of Class A common stock and we received an additional $92.9 million in the proceeds upon exercise of this option, net of $5.1 million in underwriting discounts and commissions. (c) Omnibus Incentive plan On July 27, 2021, we approved the 2021 Omnibus Incentive plan ("2021 Plan”), which reserves 19,315,000 shares of the Company’s Class A common stock. The 2021 Plan provides for the granting of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalents, other share-based awards, other cash-based awards, substitute awards, and performance awards to eligible employees, consultants, and directors. (d) Issuance of Restricted Stock Units In connection with the completion of the IPO, and under the 2021 Plan, the Company granted 3,203,671 restricted stock units ("RSUs") to certain employees and independent directors. The amounts include (i) 3,178,672 RSUs issued to certain employees with each award vesting 25% on the first anniversary of the grant date and in equal quarterly installments for the 36-month period thereafter, subject to the applicable employee’s continued service through the vesting date and (ii) 24,999 RSUs issued to certain of our independent directors that vest on the first anniversary of the grant date, subject to the applicable director's continued service through the vesting date. (e) Long-Term Debt and Revolving Credit Agreement Using primarily the net proceeds of the IPO and our cash from operations, in August 2021 we repaid in full the $320.0 million outstanding principal on our Bridge Loan, $365.0 million outstanding principal on our Second Lien and $69.1 million outstanding principal of our Incremental Facility. Upon repayment of the loans, we recognized a loss on the loan extinguishment resulting from the write-off of the related unamortized issuance costs and discounts. Additionally, in August 2021, we also repaid $85.0 million of our outstanding balance under the Revolving Credit Agreement. Upon the consummation of the IPO, the borrowing capacity under our Revolving Credit Agreement was increased by $109.0 million to a total of $289.0 million and the maturity date of the agreement was extended to May 2, 2025 from July 31, 2023. In connection with the increase of the borrowing capacity, we paid a revolver fee of $0.4 million, which was recorded as capitalized debt issuance cost on our consolidated balance sheet. |
Severin Holdings, LLC | |
Subsequent Event [Line Items] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTS The Company has evaluated subsequent events from the consolidated balance sheets date through September 9, 2021, the date at which the consolidated financial statements were available to be issued. (a) Organizational Transactions and IPO On July 17, 2021, in connection with the Organizational Transactions described below, PowerSchool Holdings, Inc. (“PubCo”) amended and restated its certificate of incorporation to authorize (i) 50,000,000 shares of preferred stock, par value $0.0001 per share, (ii) 500,000,000 shares of Class A common stock, par value $0.0001 per share, and (iii) 300,000,000 shares of Class B common stock, par value $0.0001 per share. At the completion of the IPO and following the exercise of the underwriters option to purchase additional shares, there were 158,473,360 shares of Class A common stock outstanding and 39,928,472 shares of Class B outstanding. On July 30, 2021, PubCo completed the IPO of 39,473,685 shares of Class A common stock, par value $0.0001 per share, at an offering price of $18.00 per share, and received $673.2 million in IPO proceeds, net of $37.3 million in underwriting discounts and commissions. In connection with the consummation of the IPO on July 30, 2021, PubCo consummated the following Organizational Transactions: • Holdings LLC's operating agreement was amended and restated to (i) modify its capital structure by replacing the membership interests currently held by its existing owners with a new class of membership interests (“LLC Units”) held initially by Severin Topco LLC (“Topco LLC”), a portion of which have a participation threshold (the “Participation Units”) and (ii) appoint PubCo as the sole managing member of Holdings LLC. • PubCo engaged in a series of transactions that resulted in holders of time-based management incentive units (“MIUs”) in Topco LLC receiving, in the aggregate, (i) 1,208,770 shares of unrestricted Class A common stock and (ii) 657,661 restricted shares of Class A common stock in exchange for vested and unvested time-based MIUs, respectively. The restricted shares are subject to the same time-based vesting schedule. The existing performance-based MIUs will remain as non-voting limited liability company interests in Topco LLC. In connection with the Organizational Transaction, the vesting conditions on these MIUs were modified. • PubCo issued 39,928,472 shares of Class B common stock, par value $0.0001 per share, which provides no economic rights, to Topco LLC, on a one-to-one basis with the number of LLC Units (other than Participation Units) the Company owns, for nominal consideration. • Certain entities (the “Blocker Entities”) through which the funds associated with Onex Partners Manager LP and Vista Equity Partners, known collectively as the “Principal Stockholders”, hold their ownership interests in Topco LLC, engaged in a series of transactions (the “Blocker Contributions”) that resulted in each of the Blocker Entities becoming subsidiaries of PubCo. • PubCo entered into an exchange agreement (the “Exchange Agreement”) with Topco LLC pursuant to which Topco LLC is entitled to exchange LLC Units (other than Participation Units), together with an equal number of shares of Class B common stock, for shares of Class A common stock on a one-for-one basis or, at its election, for cash from a substantially concurrent public offering or private sale (based on the price of its Class A common stock in such public offering or private sale). Participation Units may be exchanged for a number of shares of Class A common stock equal to the then current value of a share of Class A common stock less the applicable participation threshold multiplied by the number of Participation Units being exchanged, divided by the then current value of Class A common stock. • PubCo entered into a tax receivable agreement (the “Tax Receivable Agreement”) with Topco LLC, and the Principal Shareholders that provides for the payment by PubCo to Topco LLC and the Principal Shareholders, collectively, of 85% of the amount of cash savings, if any, in U.S. federal, state and local income taxes. As a result of the Organizational Transactions described above, (i) the investors in the IPO own approximately 39,473,685 shares of the Class A common stock in PubCo; (ii) Topco LLC owns 39,928,472 LLC Units (other than Participation Units), 39,928,472 shares of Class B common stock, and 3,730,246 Participation Units in PubCo; (iii) Class A common stock collectively represents approximately 79.3% of the voting power in PubCo; and (iv) Class B common stock collectively represents approximately 20.7% of the voting power in the PubCo. PubCo’s corporate structure following the IPO is commonly referred to as an “Up-C” structure, which is commonly used by partnerships and limited liability companies when they undertake an initial public offering of their business. The Up-C structure, together with the Tax Receivable Agreement, allows the owners of Holdings LLC at the time of the IPO to continue to realize tax benefits associated with owning interests in an entity that is treated as a partnership, or “pass-through” entity, for income tax purposes following the IPO. One of these benefits is that future taxable income of Holdings LLC that is allocated to such owners will be taxed on a flow-through basis and therefore will not be subject to corporate taxes at the entity level. Additionally, because the LLC Units that the owners at the time of the IPO will continue to hold are exchangeable for shares of Class A common stock or, at its option, for cash, the Up-C structure also provides the owners of Holdings LLC at the time of the IPO potential liquidity that holders of non-publicly traded limited liability companies are not typically afforded. On August 2, 2021, we changed our name from Severin Holdings, LLC to PowerSchool Holdings LLC. (b) Exercise of Underwriters’ Option On August 10, 2021, the underwriters exercised the option to purchase an additional 5,447,581 shares of PubCo’s Class A common stock and we received an additional $92.9 million in the proceeds upon exercise of this option, net of $5.1 million in underwriting discounts and commissions. (c) Omnibus Incentive plan On July 27, 2021, we approved the 2021 Omnibus Incentive plan ("2021 Plan”), which reserves 19,315,000 shares of PubCo’s Class A common stock. The 2021 Plan provides for the granting of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalents, other share-based awards, other cash-based awards, substitute awards, and performance awards to eligible employees, consultants, and directors. (d) Issuance of Restricted Stock Units In connection with the completion of the IPO, and under the 2021 Plan, PubCo granted 3,203,671 restricted stock units ("RSUs") to certain employees and independent directors. The amounts include (i) 3,178,672 RSUs issued to certain employees with each award vesting 25% on the first anniversary of the grant date and in equal quarterly installments for the 36-month period thereafter, subject to the applicable employee’s continued service through the vesting date and (ii) 24,999 RSUs issued to certain of our independent directors that vest on the first anniversary of the grant date, subject to the applicable director's continued service through the vesting date. (e) Long-Term Debt and Revolving Credit Agreement Using primarily the net proceeds of the IPO and our cash from operations, in August 2021 we repaid in full the $320.0 million outstanding principal on our Bridge Loan, $365.0 million outstanding principal on our Second Lien and $69.1 million outstanding principal of our Incremental Facility. Upon repayment of the loans, we recognized a loss on the loan extinguishment resulting from the write-off of the related unamortized issuance costs and discounts. Additionally, in August 2021, we also repaid $85.0 million of our outstanding balance under the Revolving Credit Agreement. Upon the consummation of the IPO, the borrowing capacity under our Revolving Credit Agreement was increased by $109.0 million to a total of $289.0 million and the maturity date of the agreement was extended to May 2, 2025 from July 31, 2023. In connection with the increase of the borrowing capacity, we paid a revolver fee of $0.4 million, which was recorded as capitalized debt issuance cost on our consolidated balance sheet. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Jun. 30, 2021 | |
Accounting Policies [Line Items] | |
Basis of Presentation | The accompanying condensed balance sheets are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Separate statements of income and comprehensive income, changes in stockholder’s equity, and cash flows have not been presented because there had been no activities in this entity for the period from its formation through June 30, 2021. |
Use of Estimates | The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in our financial statements and the accompanying notes. Actual results may differ materially from our estimates. |
Severin Holdings, LLC | |
Accounting Policies [Line Items] | |
Basis of Presentation | The accompanying interim condensed consolidated balance sheets as June 30, 2021 and December 31, 2020, the interim condensed consolidated statements of operations and comprehensive loss, and members’ equity for the three and six months ended June 30, 2020 and 2021, and cash flows for the six months ended June 30, 2020 and 2021, and the notes to such interim condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim financial information. As permitted under those rules, we condensed or omitted certain footnotes or other financial information that are normally required by GAAP for annual financial statements. We have included all adjustments necessary for a fair presentation of the results of the interim period. These adjustments consist of normal and recurring items. Our unaudited interim consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements and related notes. These unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in management’s opinion, include all adjustments necessary to state fairly the consolidated financial position of the Company as of June 30, 2021, the results of operations for the three and six months ended June 30, 2020 and 2021 and cash flows for the six months ended June 30, 2020 and 2021. The results of operations for the three and six months ended June 30, 2021 and cash flows for the six months ended June 30, 2021 are not necessarily indicative of the results expected for the year ending December 31, 2021 or any future interim or annual period. |
Principles of Consolidation | The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. |
Use of Estimates | Use of estimates is required in the preparation of the consolidated financial statements in conformity with GAAP. Management makes estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments. Management bases its estimates and judgments on historical experience and on various other factors that it believes are reasonable under the circumstances. The estimates the Company evaluates includes those related to revenue recognition, allowance for doubtful accounts, capitalized product development costs, goodwill and intangible asset valuation, management incentive unit-based compensation, and income taxes. Actual results could differ from those estimates under different assumptions or conditions including, but not limited to, the continued uncertainty surrounding the rapidly changing market and economic conditions due to the novel Coronavirus Disease 2019 (“COVID-19”) pandemic. |
Recent Accounting Pronouncements Not Yet Adopted and Recently Adopted | In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-02, Leases , which requires an entity to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. The guidance offers specific accounting guidance for a lessee, lessor, and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. Leases will be classified as either finance or operating, with the classification affecting the pattern of expense recognition in the income statement. The guidance is effective for the Company beginning on January 1, 2022 and requires a modified retrospective adoption, with early adoption permitted. Although the Company is currently evaluating the impact of this guidance on its consolidated financial statements, the Company expects that most of its operating lease commitments will be recognized as operating lease liabilities and right-of-use assets upon adoption of the new guidance. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13). This update changes the accounting for recognizing impairments of financial assets, such that credit losses for certain types of financial instruments will be estimated based on expected losses. The update also modifies the impairment models for available-for-sale debt securities and for purchased financial assets with credit deterioration since their origination. ASU 2016-13 is effective for the Company beginning on January 1, 2023. Early adoption is permitted after for periods beginning after December 15, 2018. The Company is currently evaluating the impact of ASU 2016-13 on its consolidated financial statements. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting (ASU 2020-04) and subsequently ASU No. 2021-01, Reference Rate Reform (Topic 848) in January 2021. The guidances provide optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference London Interbank Offered Rate (“LIBOR”) or other reference rate expected to be discontinued in 2022 or potentially 2023 (pending possible extension). The optional expedients within ASU 2020-04 are effective as of March 12, 2020 through December 31, 2022 and may be applied prospectively. The Company is currently evaluating the impact of adopting the guidances on its consolidated financial statements. On January 1, 2021, we adopted ASU No. 2018-15, Intangibles - Goodwill and Other - Internal- Use Software , ASU No. 2018-13, Fair Value Measurement (Topic 820) and ASU No. 2017-04, Intangibles—Goodwill and Other: Simplifying the Test for Goodwill Impairment . The adoption of these accounting pronouncements did not have a material impact on the Company’s consolidated financial statements. |
Revenue Recognition and Contract Balances | The Company generates revenue from the following sources: (i) software-as-a-service (“SaaS”) offerings in cloud and hosted environments; (ii) professional services including implementation, consulting, customization, training and data migration services; (iii) software license; (iv) software maintenance; and (v) reseller arrangements. Revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services by following a five-step process: 1. Identify the contract(s) with a customer 2. Identify the performance obligations in the contract 3. Determine the transaction price 4. Allocate the transaction price to the performance obligations in the contract 5. Recognize revenue when (or as) the Company satisfies a performance obligation The Company identifies enforceable contracts with a customer when the agreement is signed and has determined that contract terms are generally 12 months since customers are generally permitted to terminate after 12 months without incurring a penalty. The Company also evaluates whether any optional periods represent a material right. Some of the Company’s contracts with customers contain multiple performance obligations. For these contracts, the Company accounts for individual performance obligations separately if they are distinct. Transaction price includes both fixed and variable consideration. However, the Company only includes variable consideration in the transaction price to the extent that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. The Company determines the standalone selling prices based on its overall pricing objectives, taking into consideration market conditions and other factors, including the value of its contracts, the products sold, customer demographics, geographic locations, and the number and types of users within the Company’s contracts. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental entities (e.g., sales and other indirect taxes). The following describes the nature of the Company’s primary types of revenue and related revenue recognition policies: SaaS Offerings The Company offers SaaS-based solutions to customers that purchase remote access to its software and its functionality. For the Company’s SaaS offerings, the nature of its promise to the customer is to provide continuous access to its application platforms. Accordingly, the Company’s SaaS offerings are generally viewed as stand-ready performance obligations comprised of a series of distinct daily services. The Company typically satisfies its SaaS performance obligations over time as the services are provided. A time-elapsed output method is used to measure progress because its efforts are expended evenly throughout the period and customers benefit consistently throughout the contract term. As such, for fixed-fee contracts, revenue is recognized ratably over the contract period and classified as Subscriptions and Support revenue in the consolidated statements of operations and comprehensive loss. Professional Services Professional services revenue is comprised of implementation, consulting, customization, training, and data migration services associated with the Company’s SaaS offerings and licensed software. These services are generally recognized over time, with service durations spanning from several weeks to several months, depending on the scope and complexity of the work. Payment terms for professional services may be based on a fixed fee or charged on a time and materials basis. Professional services are typically considered distinct performance obligations. The Company’s professional services that are billed on a fixed fee basis are typically satisfied as services are rendered, and the Company generally uses efforts expended (labor hours) to measure progress toward completion as this is considered a faithful representation of the transfer of control of the services given the nature of the performance obligation. For professional services that are billed on a time and materials basis, the Company applies the ‘as-invoiced’ practical expedient. Accordingly, revenue is generally recognized based on the amount that the Company has a right to invoice, as this amount corresponds directly with the value to the customer of the Company’s performance completed to date and is classified as Service revenue in the consolidated statements of operations and comprehensive loss. Software License The Company licenses software that is distinct and has significant stand-alone functionality (i.e., functional IP). Revenue attributable to such arrangements is typically recognized at the point in time when the customer is able to use and benefit from the software, which is generally upon delivery to the customer or upon the commencement of the renewal term. Software license revenue is classified as License and Other revenue in the consolidated statements of operations and comprehensive loss. Software Maintenance Software maintenance is comprised of stand-ready services including technical support services and unspecified software updates and upgrades, which are provided on a when-and-if-available basis. Software maintenance is transferred evenly using a time-elapsed output method over the contract term given it is a stand-ready obligation and there is no discernible pattern of performance. Software maintenance revenue is generally based on fixed fees. Payments are typically required annually in advance of the Company’s performance of the relevant services and recognized as revenue ratably over the maintenance term. This revenue is classified as Subscription and Support revenue in the consolidated statements of operations and comprehensive loss. Reseller Arrangements The Company has reseller arrangements with several third-party partners. For certain reseller arrangements, the Company does not control the products or services prior to when they are transferred to the customer, Revenue from these arrangements is recorded on a net basis. Reseller revenue is recognized at a point in time when the products or services are resold to the end customer as there are no outstanding performance obligations under these arrangements after the resale. The revenue for these arrangements is classified as License and Other revenue in the consolidated statements of operations and comprehensive loss. Principal vs. Agent From time to time the Company enters into arrangements with third parties to offer their products both as integrated into the Company’s offerings as well as add-ons for specific configurations with separate pricing. The Company considers the terms of our arrangements and the economics of the transactions with the third parties to determine the nature of our promise to the customer and whether or not the Company has control of the products or services prior to the transfer to the customer. Where we determine that the nature of our promise is to provide the underlying good or service, we recognize revenue on a gross basis (as the principal) and where the nature of the promise is primarily to facilitate the sale, we recognize revenue on a net basis (as the agent). Contract Costs Contract and customer acquisition costs, consisting primarily of sales commissions, are incremental and recoverable costs of obtaining a contract. These costs are capitalized using the portfolio approach and are amortized over the expected period of benefit, which is the estimated life of the technology (determined to be approximately 7 years) provided in the underlying contract. The amortization is determined on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the asset relates. Deferred commissions that will amortize within the next 12-month period are classified as current and included in prepaid expenses and other current assets. The remaining balance is classified as noncurrent and are included in other assets. The Company also applies the practical expedient to expense certain costs as incurred when the amortization period is expected to be one year or less. The practical expedient typically applies to the Company’s professional services offerings. The timing of revenue recognition may differ from the timing of invoicing to customers. The Company records a receivable when it can contractually invoice a customer and payment will become due solely based on the passage of time, a contract asset when revenue is recognized prior to invoicing and payment is contingent upon transfer of control of another separate performance obligation, or deferred revenue (contract liability) when consideration is received from or amounts are billed to customers which precedes its performance to fully satisfy the associated performance obligation(s). Deferred revenue primarily results from the revenue from our SaaS offerings that is billed in advance of when such services are provided by the Company. Deferred revenue that will be realized during the succeeding 12-month period is recorded as current, and the remaining deferred revenue is recorded as non-current. Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 days. In instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined that contracts generally do not include a significant financing component. |
Fair Value Measurements | GAAP guidance for fair value measurements clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The Company has established a fair value hierarchy which prioritizes the inputs to the valuation techniques used to measure fair value into three levels. These levels are determined based on the lowest-level input that is significant to the fair value measurement. Levels within the hierarchy are defined as follows: Level 1 —Unadjusted quoted prices in active markets for identical assets and liabilities; Level 2 —Quoted prices for similar assets and liabilities in active markets (other than those included in Level 1) which are observable, either directly or indirectly; and Level 3 —Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. The Company does not have any assets or liabilities that are required to be recorded at fair value on a recurring basis using values determined by Level 2 or Level 3 inputs. The recorded amounts of cash and cash equivalents, accounts receivable, other current assets, accounts payable, and accrued expenses and other liabilities approximate the fair values principally because of their short-term nature. Short-term and long-term debt are reported at amortized costs in the Company’s consolidated balance sheets. The remaining financial instruments are reported in the Company’s consolidated balance sheets at amounts that approximate current fair values. |
Concentration of Credit Risk | The Company’s cash, cash equivalents, and accounts receivable are potentially subject to concentration of credit risk. Cash and cash equivalents are deposited with financial institutions that management believes are creditworthy. As of December 31, 2020, and June 30, 2021, substantially all the Company’s cash has been deposited in low-interest- bearing accounts. The Company maintains cash balances in excess of the Federal Deposit Insurance Corporation limits at certain financial institutions. We have deposits only with financial institutions believed to have high-quality credit. The Company maintains an allowance for doubtful accounts receivable based on various factors, including the Company’s review of credit profiles of its customers, contractual terms and conditions, current economic trends, and historical payment experience. The Company had no customers who accounted for more than 10% of accounts receivable as of December 31, 2020 and June 30, 2021. Since most of these receivables were satisfied in subsequent periods, the Company believes that this does not pose an undue concentration of credit risk on the Company. |
Cash and Cash Equivalents | The Company considers all highly liquid investment securities with remaining maturities at the date of purchase of three months or less to be cash equivalents. |
Accounts Receivable | Accounts receivable primarily includes trade accounts receivable from the Company’s customers. Allowances for doubtful accounts are established based on various factors, including, but not limited to, credit profiles of the Company’s customers, contractual terms and conditions, historical payments, and current economic trends including the impact of COVID-19. Accounts receivable are written off or credited on a case-by-case basis, net of any amounts that may be collected. |
Property and Equipment | Property and equipment is stated at cost, net of accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of software, equipment, and furniture and fixtures which is generally three Significant improvements that substantially extend the useful lives of assets are capitalized. Expenditures for maintenance and repairs are charged to expense as they are incurred. |
Intangible Assets | Intangible assets with estimable useful lives are amortized over their respective estimated useful lives to their estimated residual values using the straight-line method designed to match the amortization to the benefits received. |
Leases | An arrangement is or contains a lease if there are specified assets and the right to control the use of a specified asset is conveyed for a period in exchange for consideration. Upon lease inception, the Company classifies leases as either operating or capital leases. Leases are classified as capital leases when the terms of the lease transfers substantially all of the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. For leases that contain rent escalation or rent concession provisions, the Company records rent expense for the total rent payable during the lease term on a straight-line basis over the term of the lease. The Company records the difference between the rent paid and the straight line rent as a deferred rent liability in accrued expenses and other liabilities in the accompanying balance sheet for the current and non-current portions, respectively. Operating leases are not recognized on the consolidated balance sheet. For capital leases, the Company recognizes capital lease assets and corresponding lease liabilities within the consolidated balance sheet at lease commencement. For income statement purposes, the Company recognizes rent expense on a straight-line basis for operating leases. For capital leases, the Company recognizes interest expense associated with the capital lease liability and depreciation expense associated with the capital lease asset. For capital lease assets and leasehold improvements, the estimated useful lives are limited to either (i) the shorter of the useful life of the asset or (ii) the term of the lease. |
Leases | An arrangement is or contains a lease if there are specified assets and the right to control the use of a specified asset is conveyed for a period in exchange for consideration. Upon lease inception, the Company classifies leases as either operating or capital leases. Leases are classified as capital leases when the terms of the lease transfers substantially all of the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. For leases that contain rent escalation or rent concession provisions, the Company records rent expense for the total rent payable during the lease term on a straight-line basis over the term of the lease. The Company records the difference between the rent paid and the straight line rent as a deferred rent liability in accrued expenses and other liabilities in the accompanying balance sheet for the current and non-current portions, respectively. Operating leases are not recognized on the consolidated balance sheet. For capital leases, the Company recognizes capital lease assets and corresponding lease liabilities within the consolidated balance sheet at lease commencement. For income statement purposes, the Company recognizes rent expense on a straight-line basis for operating leases. For capital leases, the Company recognizes interest expense associated with the capital lease liability and depreciation expense associated with the capital lease asset. For capital lease assets and leasehold improvements, the estimated useful lives are limited to either (i) the shorter of the useful life of the asset or (ii) the term of the lease. |
Capitalized Product Development Costs | The Company’s software and website development costs are accounted for under the guidance for internal use software and website development costs. The costs in the preliminary stages of development are expensed as incurred. Once an application has reached the development stage, if: (1) the costs are direct and incremental and (2) management has determined that it is probable that the project will be completed and the software will be used to perform the function intended, internal and external costs are capitalized until the application is substantially complete and ready for its intended use. The Company makes ongoing evaluations of the recoverability of its capitalized software projects by comparing the net amount capitalized for each product to the estimated net realizable value of the product. If such evaluations indicate that the unamortized software development costs exceed the net realizable value, the Company writes off the amount by which the unamortized software development costs exceed net realizable value. Capitalized software development costs are being amortized on a straight-line basis over five years to cost of revenue. Useful lives are reviewed at least annually and adjusted if appropriate. |
Capitalized Cloud Computing Arrangement Implementation Costs | The Company capitalizes certain qualifying costs to implement cloud computing hosting arrangements that are service contracts. Such qualifying costs include direct costs for third-party consulting services, and does not include software maintenance and training costs, which are expensed as incurred. Capitalization of these costs ceases once the software of the hosting arrangement is ready for its intended use. Capitalized costs, net of accumulated amortization, are included in prepaid expenses and non-current assets on the Company’s consolidated balance sheets and amortized using the straight-line method over the expected term of the associated arrangement, including periods that are reasonably expected to be renewed. The amount capitalized is included as a component of net cash used in operating activities in the statements of cash flows. |
Capitalized Interest | Interest is capitalized on software products under development. Interest capitalization is based on rates applicable to borrowings outstanding during the period and the balance of qualified assets under development during the period. Capitalized interest is amortized over the useful lives of such assets and the amortization is reported as cost of revenue. |
Goodwill Assets | Goodwill is the excess of the purchase price in a business combination over the fair value of identifiable net assets acquired. Goodwill is subject to periodic testing for impairment. Goodwill is assessed at least annually, but also whenever events or changes in circumstances indicate the carrying values may not be recoverable. Factors that could trigger an impairment review, include (a) significant underperformance relative to historical or projected future operating results; (b) significant changes in the manner of or use of the acquired assets or the strategy for the Company’s overall business, and (c) significant negative industry or economic trends. |
Recoverability of Long-Lived and Intangible Assets | The Company evaluates the recoverability of its long-lived assets, including amortizable intangible and tangible assets in accordance with authoritative guidance on accounting for the impairment or disposal of long-lived assets. The Company evaluates long- lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. No long-lived asset impairment losses were recorded by the Company during any of the periods presented. |
Debt Issuance Costs and Debt Discount | The Company records debt issuance costs as a reduction to the carrying value of the related debt and such amounts are being amortized over the term of the related debt using the straight-line method of amortization, which approximates the effective interest method. Amortization of debt issuance costs are included in interest expense - net on the consolidated statements of operations and comprehensive loss. The Company accounts for the discounts as an adjustment to the carrying amount and then amortizes the discounts over the terms using the effective interest method. |
Deferred Offering Costs | The Company records deferred offering costs as other assets on its consolidated balance sheets. They consist of costs incurred in connection with the anticipated sale of the Company’s common stock in an IPO, including certain legal, accounting, printing, and other IPO related costs. After completion of the IPO, these costs will be recorded in stockholders’ deficit as a reduction from the IPO proceeds. |
Business Combinations | The Company accounts for acquisitions under the purchase method of accounting in accordance with ASC 805, Business Combinations. The consolidated statements of operations and comprehensive loss include the results of operations of the acquirees since the date of acquisition. The net assets of the acquisition were recorded at their estimated fair values as of the acquisition date. |
Unit-Based Compensation | Employees are granted unit-based awards by the Company’s parent entity as profit interests based on the estimated fair value of the awards at the date of grant. The Company utilizes the Black-Scholes pricing model for determining the estimated fair value of the unit-based awards on the date that the awards are granted. Given the absence of any active market for the shares underlying the awards, the fair value of the awards was determined with input from management and third-party valuations. The Company recognizes expense over the requisite service period on a straight-line basis. Unit- based compensation expense is recognized within cost of revenue; research and development; and selling, general, and administrative expense on the consolidated statements of operations and comprehensive loss based on the function of the employees receiving awards. |
Income Taxes | The Company is a limited liability company that is treated as a partnership for federal income tax purposes. The Company is also treated as a partnership in the majority of the states in which it operates; however, certain state jurisdictions tax the Company’s operations as a limited liability company. The Company has purchased corporate entities that operate in the United States and are taxed at corporate tax rates. The Company also has operations in Canada through an entity that is treated as a corporation for Canadian income tax purposes. Under this partnership structure, federal and most state income tax liabilities and/or benefits of the Company are passed through to its owners. As such, the recognition of income tax expense (or benefit) represents income tax related to the Company’s US corporate entities, Canadian operations, foreign withholding taxes, and state corporate taxes that are imposed on the Company. Interest and penalties related to unrecognized tax benefits are recorded as income tax expense. The tax provision for interim periods is determined using an estimate of the Company’s annual effective tax rate, adjusted for discrete items, if any, that arise during the period. Each quarter, the Company updates its estimate of its annual effective tax rate, and if the estimated annual effective tax rate changes, the Company makes a cumulative adjustment in such period. The quarterly tax provision and estimate of the Company’s annual effective tax rate are subject to variation due to several factors including variability in pre-tax income (or loss), the mix of jurisdictions to which such income relates, changes in how the Company conducts business, and tax law developments. |
Cost of Revenue | The Company includes costs directly related to revenue as a component of cost of revenue. Personnel costs associated with cost of revenue consist of salaries, benefits, bonuses, payroll taxes and stock-based compensation expense. Subscriptions and support Subscription and support cost of revenue consists of costs directly related to subscription services, including personnel costs related to operating data centers and customer support operations, hosting and data center related costs, third-party software licenses and allocated facilities and overhead costs. Service Service cost of revenue consists of personnel costs related to the delivery of the Company’s service offerings, software, equipment, and information technology related expenses, third-party contractor costs, as well as travel and allocated facilities and overhead costs. License and other License and other cost of revenue consists primarily of personnel costs associated with delivering licenses, reseller arrangements, and allocated facilities and overhead costs. Depreciation and amortization Depreciation and amortization cost of revenue includes allocated depreciation of its computer and software equipment related to the Company’s customer support operations, hosting and data center related costs and amortization of the Company’s capitalized product development costs and technology intangible assets. |
Research and Development | Research and development expenses consist primarily of personnel costs and the related overhead costs to support our staff, software and hardware costs, third-party professional fees, and allocated facilities and overhead costs. |
Selling, General, and Administrative | S elling, ge neral, and administrative expenses consist primarily of personnel costs and the related overhead costs to support the Company’s staff across the corporate functions of sales, executive, finance, human resources, information technology, internal operations and legal, as well as sales commissions, third-party professional fees, bad debt expense, marketing and promotional activities, travel, and allocated costs for facilities and overhead costs. |
Depreciation and Amortization | Depreciation and amortization costs include allocated depreciation of the Company’s property and equipment and amortization of customer relationship and trademark intangible assets. |
Advertising Expense | Advertising costs are expensed as they are incurred. The Company incurred advertising costs of $0.7 million and $1.2 million for the three and six months ended June 30, 2021 and $0.2 million and $1.4 million for the three and six months ended June 30, 2020, respectively. Advertising costs are included within sales, general, and administrative expenses on the consolidated statements of operations and comprehensive loss. |
Foreign Currencies | The functional currency of our foreign entities is the local currency. Monetary assets and liabilities and transactions denominated in currencies other than an entity’s functional currency are remeasured into its functional currency using current exchange rates, whereas non-monetary assets and liabilities are remeasured using historical exchange rates. The gains and losses resulting from such remeasurements are classified within other expense (income) – net in the Company’s consolidated statements of operations and comprehensive loss in the period of occurrence. The assets and liabilities of our foreign entities are translated into the Company’s reporting currency, US dollars, at exchange rates in effect on the balance sheet date. Revenues and expenses are translated at the average exchange rate during the period. Equity transactions are translated using the historical exchange rate. Adjustments resulting from translating foreign entity’s financial statements into US dollars are included in accumulated other comprehensive income (loss) as a separate component of members’ equity. |
Comprehensive Income (Loss) | Comprehensive income (loss) consists of two components, net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) refers to certain changes that are recorded as an element of members’ equity but are excluded from net income (loss). The Company’s other comprehensive loss consists of foreign currency translation adjustments from those subsidiaries not using the US dollar as their functional currency. The Company has disclosed accumulated comprehensive income (loss) as a component of members’ equity. |
Segment Information | Operating segments are defined as components of an entity for which discrete financial information is available that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Company’s Chief Executive Officer is the Company’s CODM. The CODM reviews financial information on a consolidated basis for purposes of making operating decisions, allocating resources and evaluating financial performance. As such, the Company has one operating and reportable segment. The Company does not have material long-lived assets in geographic areas outside of the United States. |
Earnings Per Unit | The Company does not include Earnings Per Unit (“EPU”) as part of its consolidated financial statements. The Company is a single member LLC and it does not have units or shares outstanding. The Company’s members’ equity is held solely by its parent entity. Accordingly, the Company believes that inclusion of EPU would not be relevant or provide a benefit to the users of the consolidated financial statements. |
BUSINESS COMBINATIONS (Tables)
BUSINESS COMBINATIONS (Tables) | 6 Months Ended |
Jun. 30, 2021 | |
Severin Holdings, LLC | |
Business Acquisition [Line Items] | |
Schedule of Assets Acquired and Liabilities Assumed | The Company has accounted for this acquisition as a business combination. The acquisition date fair values of the assets acquired and liabilities assumed are as follows (in thousands): Consideration $ 81,101 Cash 5,227 Accounts receivable 5,737 Prepaid expenses and other assets 643 Property and equipment 300 Intangible assets 26,500 Accounts payable 1,958 Accrued expenses 2,414 Deferred revenue 5,024 Other 7 Non-current tax payable 2,202 Goodwill $ 54,300 Consideration $ 318,861 Accounts receivable 8,058 Prepaid expenses and other assets 13,967 Property and equipment 670 Other assets 26 Intangible assets 127,400 Accounts payable 1,814 Accrued expenses 4,427 Deferred revenue 29,618 Deferred taxes 29,465 Goodwill $ 234,064 |
REVENUE (Tables)
REVENUE (Tables) - Severin Holdings, LLC | 6 Months Ended |
Jun. 30, 2021 | |
Disaggregation of Revenue [Line Items] | |
Disaggregation of Revenue | The Company believes this depicts the nature, amount, timing and uncertainty of revenue and cash flows consistent with how we evaluate our financial statements (in thousands): Three months ended Six months ended June 30, 2021 2020 2021 2020 SaaS $ 94,823 $ 59,899 $ 170,652 $ 119,594 Professional services 16,083 11,841 29,036 22,404 Software maintenance 26,940 28,634 54,202 56,660 License and other 7,557 2,762 9,660 4,553 Total revenue $ 145,403 $ 103,136 $ 263,550 $ 203,211 |
Revenue by Geographical Area | Revenue by principal geographic areas based on where the customer is located was as follows (in thousands): Three months ended Six months ended June 30, 2021 2020 2021 2020 United States $ 134,061 $ 94,115 $ 241,811 $ 186,090 Canada 9,392 7,303 17,668 14,076 Other 1,950 1,718 4,071 3,045 Total revenue $ 145,403 $ 103,136 $ 263,550 $ 203,211 |
Schedules of Deferred Revenue | The changes in the deferred revenue balance were as follows (in thousands): June 30, 2021 December 31, 2020 Balance at beginning of period $ 235,190 $ 198,665 Decrease from revenue recognized (177,843) (194,930) Increase from acquisitions 25,880 5,024 Increase from current year net deferred revenue additions 90,943 226,431 Balance at end of period $ 174,170 $ 235,190 |
Contract Cost Assets | Contract cost assets are included in prepaid expenses and other current assets and other assets, respectively, on the consolidated balance sheets as follows (in thousands): June 30, 2021 December 31, 2020 Contract costs, current $ 4,111 $ 2,903 Contract costs, noncurrent 16,880 14,548 Total contract costs $ 20,991 $ 17,451 |
ACCOUNTS RECEIVABLE (Tables)
ACCOUNTS RECEIVABLE (Tables) - Severin Holdings, LLC | 6 Months Ended |
Jun. 30, 2021 | |
Financing Receivable, Allowance for Credit Loss [Line Items] | |
Schedule of Accounts Receivable, Net | Accounts receivable, net, is as follows (in thousands): June 30, 2021 December 31, 2020 Accounts receivable $ 61,482 $ 55,846 Less allowance (4,133) (7,869) Accounts receivable—net $ 57,349 $ 47,977 |
Accounts Receivable, Allowance for Credit Loss | The following tables presents the changes in the allowance for doubtful accounts (in thousands): June 30, 2021 December 31, 2020 Allowance for doubtful accounts, beginning balance $ 7,869 $ 6,901 Additions to (removals from) allowance for doubtful accounts (3,712) 1,157 Writeoffs of bad debt expense (24) (189) Allowance for doubtful accounts, ending balance $ 4,133 $ 7,869 |
PROPERTY AND EQUIPMENT_NET (Tab
PROPERTY AND EQUIPMENT—NET (Tables) | 6 Months Ended |
Jun. 30, 2021 | |
Severin Holdings, LLC | |
Property, Plant and Equipment [Line Items] | |
Schedule of Property and Equipment by Category | Property and equipment by category are as follows (in thousands): June 30, 2021 December 31, 2020 Building $ 7,519 $ 7,519 Land 294 294 Computer and software 19,549 16,544 Furniture and fixtures 2,912 2,933 Leasehold improvements 4,177 4,228 Property and equipment 34,451 31,518 Less accumulated depreciation (17,668) (14,449) Property and equipment—net $ 16,783 $ 17,069 |
CAPITALIZED PRODUCT DEVELOPME_2
CAPITALIZED PRODUCT DEVELOPMENT COSTS—NET (Tables) | 6 Months Ended |
Jun. 30, 2021 | |
Severin Holdings, LLC | |
Research and Development Arrangement, Contract to Perform for Others [Line Items] | |
Schedule of Capitalized Product Development Costs | Capitalized product development costs and related accumulated amortization consist of the following (in thousands): June 30, 2021 December 31, 2020 Gross capitalized product development costs $ 91,222 $ 71,929 Less accumulated amortization (20,354) (13,035) Capitalized product development costs—net $ 70,868 $ 58,894 June 30, 2021 Weighted- Average Useful Life December 31, 2020 Weighted- Average Useful Life Intangible Assets—Gross Developed technology $ 283,100 8 years $ 239,200 8 years Customer relationships 737,400 14 years 661,900 15 years Trademarks 52,300 9 years 44,300 9 years $ 1,072,800 $ 945,400 Accumulated Amortization Developed technology $ (83,878) $ (67,421) Customer relationships (127,975) (102,408) Trademarks (14,800) (12,112) $ (226,653) $ (181,941) Intangible Assets—Net Developed technology $ 199,222 $ 171,779 Customer relationships 609,425 559,492 Trademarks 37,500 32,188 $ 846,147 $ 763,459 |
GOODWILL (Tables)
GOODWILL (Tables) | 6 Months Ended |
Jun. 30, 2021 | |
Severin Holdings, LLC | |
Goodwill [Line Items] | |
Schedule of Goodwill | The changes in the carrying amounts of goodwill were as follows (in thousands): Balance—December 31, 2020 $ 2,213,367 Additions due to acquisitions 234,064 Other adjustments 1 (562) Balance—June 30, 2021 $ 2,446,869 _____________ 1 The $0.6 million change includes adjustments of acquisition date fair value within the one-year measurement period, including a $0.1 million adjustment for the final settlement of working capital related to the Hoonuit acquisition, which had no impact to earnings in any of the periods presented. Other fair value adjustments did not have a material impact to the current-period or previous period statement of operations. |
OTHER INTANGIBLE ASSETS_NET (Ta
OTHER INTANGIBLE ASSETS—NET (Tables) - Severin Holdings, LLC | 6 Months Ended |
Jun. 30, 2021 | |
Finite-Lived Intangible Assets [Line Items] | |
Schedule of Carrying Values of Acquired Intangible Assets | Capitalized product development costs and related accumulated amortization consist of the following (in thousands): June 30, 2021 December 31, 2020 Gross capitalized product development costs $ 91,222 $ 71,929 Less accumulated amortization (20,354) (13,035) Capitalized product development costs—net $ 70,868 $ 58,894 June 30, 2021 Weighted- Average Useful Life December 31, 2020 Weighted- Average Useful Life Intangible Assets—Gross Developed technology $ 283,100 8 years $ 239,200 8 years Customer relationships 737,400 14 years 661,900 15 years Trademarks 52,300 9 years 44,300 9 years $ 1,072,800 $ 945,400 Accumulated Amortization Developed technology $ (83,878) $ (67,421) Customer relationships (127,975) (102,408) Trademarks (14,800) (12,112) $ (226,653) $ (181,941) Intangible Assets—Net Developed technology $ 199,222 $ 171,779 Customer relationships 609,425 559,492 Trademarks 37,500 32,188 $ 846,147 $ 763,459 |
Schedule of Amortization Expense of Intangible Assets | The following table summarizes the amortization expense of intangible assets (in thousands): Three months ended Six months ended June 30, 2021 2020 2021 2020 Cost of revenue $ 8,603 $ 7,283 $ 16,459 $ 14,566 Selling, general, and administrative expense 14,931 12,356 28,262 24,714 Total amortization of acquired intangible assets $ 23,534 $ 19,639 $ 44,721 $ 39,280 |
Schedule of Estimated Future Amortization of Intangible Assets | The estimated future amortization of intangible assets as of June 30, 2021, is as follows (in thousands): Years Ending December 31, 2021 (remaining six months) $ 46,590 2022 92,042 2023 92,042 2024 91,997 2025 91,862 Thereafter 431,614 Total $ 846,147 |
ACCRUED EXPENSES (Tables)
ACCRUED EXPENSES (Tables) | 6 Months Ended |
Jun. 30, 2021 | |
Severin Holdings, LLC | |
Payables and Accruals [Line Items] | |
Schedule of Accrued Expenses | The following table presents the detail of accrued expenses (in thousands): June 30, 2021 December 31, 2020 Accrued compensation $ 25,345 $ 29,345 Accrued interest 3,025 2,779 Accrued taxes 1,489 3,517 Other accrued expenses 29,694 18,057 Total accrued expenses $ 59,553 $ 53,698 |
LONG-TERM DEBT AND REVOLVING _2
LONG-TERM DEBT AND REVOLVING CREDIT AGREEMENT (Tables) - Severin Holdings, LLC | 6 Months Ended |
Jun. 30, 2021 | |
Debt Instrument [Line Items] | |
Schedule of Outstanding Long-Term Debt | The following table presents the outstanding long-term debt (in thousands): June 30, 2021 December 31, 2020 Total outstanding principal—First Lien $ 755,625 $ 759,500 Total outstanding principal—Incremental Facility 69,125 69,475 Total outstanding principal—Second Lien 365,000 365,000 Total outstanding principal—Bridge Loan 320,000 — Total outstanding principal 1,509,750 1,193,975 Less current portion of long-term debt (8,450) (8,450) Less unamortized debt discount (4,456) (4,941) Less unamortized debt issuance costs (21,370) (20,258) Total long-term debt—net $ 1,475,474 $ 1,160,326 |
Schedule of Maturities of Long-Term Debt | Maturities on long-term debt as of June 30, 2021 are as follows (in thousands): Years Ending December 31, 2021 (remaining six months) $ 4,225 2022 328,450 2023 8,450 2024 8,450 2025 795,175 Thereafter 365,000 Total $ 1,509,750 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 6 Months Ended |
Jun. 30, 2021 | |
Severin Holdings, LLC | |
Commitments and Contingencies [Line Items] | |
Schedule of Future Minimum Lease Payments Under Non-Cancelable Operating Leases | Future minimum lease payments under non-cancelable operating lease agreements as of June 30, 2021 are as follows (in thousands): Years Ending December 31, 2021 (remaining six months) $ 4,459 2022 5,904 2023 3,131 2024 2,251 2025 941 Thereafter 225 Total $ 16,911 |
UNIT-BASED COMPENSATION (Tables
UNIT-BASED COMPENSATION (Tables) - Severin Holdings, LLC | 6 Months Ended |
Jun. 30, 2021 | |
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | |
Schedule of MIU Activity | MIU activity for the six months ended June 30, 2021 is as follows: Number of Underlying Units Weighted-Average Grant-Date Fair Value Outstanding—December 31, 2020 28,143,250 $ 1.25 Units canceled (166,430) $ 1.28 Outstanding—June 30, 2021 27,976,820 $ 1.26 Vested—December 31, 2020 9,069,112 $ 1.28 Vested—June 30, 2021 11,021,997 $ 1.27 |
Schedule of Weighted-Average Assumptions Used to Determine Fair Value of MIUs Granted | The fair value of MIUs granted during the year was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: Six Months Ended June 30, 2021 Year-ended December 31, 2020 Volatility — 45.0 % Expected dividend yield — — % Risk-free rate — 1.56 % Expected term (in years) — 1.5 years Fair value of underlying unit — $0.92 - $1.04 |
Schedule of MIU-based Compensation Expense | The following table presents the classification of MIU-based compensation related to MIUs in the Company’s accompanying consolidated statements of operations and comprehensive loss (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Cost of revenue Subscription and support $ 9 $ 17 $ 19 $ 33 Service 70 64 141 128 Research and development 240 240 478 484 Selling, general, and administrative 1,054 1,089 2,099 2,177 Total MIU-based compensation $ 1,373 $ 1,410 $ 2,737 $ 2,822 |
Stockholder_s Equity (Details)
Stockholder’s Equity (Details) - $ / shares | Jun. 30, 2021 | Dec. 31, 2020 |
Equity [Abstract] | ||
Common stock, shares authorized (in shares) | 1,000 | 1,000 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares issued (in shares) | 1,000 | 1,000 |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Severin Holdings, LLC $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2021USD ($) | Jun. 30, 2020USD ($) | Jun. 30, 2021USD ($)segment | Jun. 30, 2020USD ($) | Dec. 31, 2020USD ($) | |
Property, Plant and Equipment [Line Items] | |||||
Goodwill impairment | $ 0 | $ 0 | $ 0 | $ 0 | |
Finite lived intangible asset impairment losses | 0 | 0 | 0 | 0 | |
Deferred offering costs | 10.4 | 10.4 | $ 0.3 | ||
Advertising expenses | 0.7 | 0.2 | 1.2 | 1.4 | |
Foreign currency exchange gains (losses) | $ 0.2 | $ (0.7) | $ (0.2) | $ 1.1 | |
Number of operating segments | segment | 1 | ||||
Number of reportable segments | segment | 1 | ||||
Technology | |||||
Property, Plant and Equipment [Line Items] | |||||
Estimated useful lives | 7 years | ||||
Building | |||||
Property, Plant and Equipment [Line Items] | |||||
Estimated useful lives | 20 years | ||||
Software Development | |||||
Property, Plant and Equipment [Line Items] | |||||
Estimated useful lives | 5 years | ||||
Minimum | Software, Equipment and Site Improvements | |||||
Property, Plant and Equipment [Line Items] | |||||
Estimated useful lives | 3 years | ||||
Minimum | Leasehold Improvements | |||||
Property, Plant and Equipment [Line Items] | |||||
Estimated useful lives | 1 year | ||||
Maximum | Software, Equipment and Site Improvements | |||||
Property, Plant and Equipment [Line Items] | |||||
Estimated useful lives | 10 years | ||||
Maximum | Leasehold Improvements | |||||
Property, Plant and Equipment [Line Items] | |||||
Estimated useful lives | 9 years |
BUSINESS COMBINATIONS - Narrati
BUSINESS COMBINATIONS - Narrative (Details) - Severin Holdings, LLC $ in Thousands | Mar. 03, 2021USD ($) | Oct. 28, 2020USD ($) | Jun. 30, 2021USD ($) | Jun. 30, 2020USD ($) | Jun. 30, 2021USD ($)acquisition | Jun. 30, 2020USD ($) | Dec. 31, 2020USD ($)acquisition |
Business Acquisition [Line Items] | |||||||
Number of acquisitions | acquisition | 1 | 1 | |||||
Acquisition costs | $ 177 | $ 0 | $ 5,780 | $ 2 | |||
Goodwill | 2,446,869 | 2,446,869 | $ 2,213,367 | ||||
Hoonuit Holdings, LLC | |||||||
Business Acquisition [Line Items] | |||||||
Percentage of voting interest acquired | 100.00% | ||||||
Consideration transferred | $ 81,100 | ||||||
Acquisition costs | 2,400 | ||||||
Goodwill | $ 54,300 | ||||||
Hobsons, Inc. | |||||||
Business Acquisition [Line Items] | |||||||
Percentage of voting interest acquired | 100.00% | ||||||
Consideration transferred | $ 318,900 | ||||||
Acquisition costs | $ 4,900 | $ 4,900 | |||||
Goodwill | $ 234,064 |
BUSINESS COMBINATIONS - Assets
BUSINESS COMBINATIONS - Assets Acquired and Liabilities Assumed (Details) - Severin Holdings, LLC - USD ($) $ in Thousands | Jun. 30, 2021 | Mar. 03, 2021 | Dec. 31, 2020 | Oct. 28, 2020 |
Business Acquisition [Line Items] | ||||
Goodwill | $ 2,446,869 | $ 2,213,367 | ||
Hoonuit Holdings, LLC | ||||
Business Acquisition [Line Items] | ||||
Consideration | $ 81,101 | |||
Cash | 5,227 | |||
Accounts receivable | 5,737 | |||
Prepaid expenses and other assets | 643 | |||
Property and equipment | 300 | |||
Intangible assets | 26,500 | |||
Accounts payable | 1,958 | |||
Accrued expenses | 2,414 | |||
Deferred revenue | 5,024 | |||
Other | 7 | |||
Non-current tax payable | 2,202 | |||
Goodwill | $ 54,300 | |||
Hobsons, Inc. | ||||
Business Acquisition [Line Items] | ||||
Consideration | $ 318,861 | |||
Accounts receivable | 8,058 | |||
Prepaid expenses and other assets | 13,967 | |||
Property and equipment | 670 | |||
Other assets | 26 | |||
Intangible assets | 127,400 | |||
Accounts payable | 1,814 | |||
Accrued expenses | 4,427 | |||
Deferred revenue | 29,618 | |||
Deferred taxes | 29,465 | |||
Goodwill | $ 234,064 |
REVENUE - Disaggregation of Rev
REVENUE - Disaggregation of Revenue (Details) - Severin Holdings, LLC - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2021 | Jun. 30, 2020 | Jun. 30, 2021 | Jun. 30, 2020 | |
Disaggregation of Revenue [Line Items] | ||||
Total revenue | $ 145,403 | $ 103,136 | $ 263,550 | $ 203,211 |
United States | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 134,061 | 94,115 | 241,811 | 186,090 |
Canada | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 9,392 | 7,303 | 17,668 | 14,076 |
Other | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 1,950 | 1,718 | 4,071 | 3,045 |
SaaS | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 94,823 | 59,899 | 170,652 | 119,594 |
Professional services | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 16,083 | 11,841 | 29,036 | 22,404 |
Software maintenance | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 26,940 | 28,634 | 54,202 | 56,660 |
License and other | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | $ 7,557 | $ 2,762 | $ 9,660 | $ 4,553 |
REVENUE - Changes in Deferred R
REVENUE - Changes in Deferred Revenues (Details) - Severin Holdings, LLC - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Contract with Customer, Liability [Roll Forward] | ||
Balance at beginning of period | $ 235,190 | $ 198,665 |
Decrease from revenue recognized | (177,843) | (194,930) |
Increase from acquisitions | 25,880 | 5,024 |
Increase from current year net deferred revenue additions | 90,943 | 226,431 |
Balance at end of period | $ 174,170 | $ 235,190 |
REVENUE - Performance Obligatio
REVENUE - Performance Obligations (Details) - Severin Holdings, LLC - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-07-01 | Jun. 30, 2021 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Percentage of remaining performance obligations expected to be recognized | 98.00% |
Performance obligations expected to be recognized, expected timing | 12 months |
REVENUE - Contract Cost Assets
REVENUE - Contract Cost Assets (Details) - Severin Holdings, LLC - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2021 | Jun. 30, 2020 | Jun. 30, 2021 | Jun. 30, 2020 | Dec. 31, 2020 | |
Capitalized Contract Cost [Line Items] | |||||
Contract costs, current | $ 4,111 | $ 4,111 | $ 2,903 | ||
Contract costs, noncurrent | 16,880 | 16,880 | 14,548 | ||
Total contract costs | 20,991 | 20,991 | $ 17,451 | ||
Amortization expense for contract costs | $ 800 | $ 400 | $ 1,500 | $ 800 |
ACCOUNTS RECEIVABLE - Schedule
ACCOUNTS RECEIVABLE - Schedule of Accounts Receivable, Net (Details) - Severin Holdings, LLC - USD ($) $ in Thousands | Jun. 30, 2021 | Dec. 31, 2020 | Dec. 31, 2019 |
Financing Receivable, Allowance for Credit Loss [Line Items] | |||
Accounts receivable | $ 61,482 | $ 55,846 | |
Less allowance | (4,133) | (7,869) | $ (6,901) |
Accounts receivable—net | $ 57,349 | $ 47,977 |
ACCOUNTS RECEIVABLE - Schedul_2
ACCOUNTS RECEIVABLE - Schedule of Allowance for Credit Loss (Details) - Severin Holdings, LLC - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Accounts Receivable, Allowance for Credit Loss [Roll Forward] | ||
Allowance for doubtful accounts, beginning balance | $ 7,869 | $ 6,901 |
Additions to (removals from) allowance for doubtful accounts | (3,712) | 1,157 |
Writeoffs of bad debt expense | (24) | (189) |
Allowance for doubtful accounts, ending balance | $ 4,133 | $ 7,869 |
PROPERTY AND EQUIPMENT_NET (Det
PROPERTY AND EQUIPMENT—NET (Details) - Severin Holdings, LLC - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2021 | Jun. 30, 2020 | Jun. 30, 2021 | Jun. 30, 2020 | Dec. 31, 2020 | |
Property, Plant and Equipment [Line Items] | |||||
Property and equipment | $ 34,451 | $ 34,451 | $ 31,518 | ||
Less accumulated depreciation | (17,668) | (17,668) | (14,449) | ||
Property and equipment—net | 16,783 | 16,783 | 17,069 | ||
Depreciation of property and equipment | 1,700 | $ 2,000 | 3,283 | $ 3,874 | |
Building | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment | 7,519 | 7,519 | 7,519 | ||
Land | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment | 294 | 294 | 294 | ||
Computer and software | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment | 19,549 | 19,549 | 16,544 | ||
Furniture and fixtures | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment | 2,912 | 2,912 | 2,933 | ||
Leasehold improvements | |||||
Property, Plant and Equipment [Line Items] | |||||
Property and equipment | $ 4,177 | $ 4,177 | $ 4,228 |
CAPITALIZED PRODUCT DEVELOPME_3
CAPITALIZED PRODUCT DEVELOPMENT COSTS—NET - Schedule of Capitalized Product Development Costs (Details) - Severin Holdings, LLC - USD ($) $ in Thousands | Jun. 30, 2021 | Dec. 31, 2020 |
Research and Development Arrangement, Contract to Perform for Others [Line Items] | ||
Gross capitalized product development costs | $ 91,222 | $ 71,929 |
Less accumulated amortization | (20,354) | (13,035) |
Capitalized product development costs—net | $ 70,868 | $ 58,894 |
GOODWILL (Details)
GOODWILL (Details) - Severin Holdings, LLC $ in Thousands | 6 Months Ended |
Jun. 30, 2021USD ($) | |
Goodwill [Roll Forward] | |
Beginning balance | $ 2,213,367 |
Additions due to acquisitions | 234,064 |
Other adjustments | (562) |
Ending balance | 2,446,869 |
Adjustment for final settlement of working capital | $ 100 |
OTHER INTANGIBLE ASSETS_NET - C
OTHER INTANGIBLE ASSETS—NET - Carrying Values of Acquired Intangible Assets (Details) - Severin Holdings, LLC - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Finite-Lived Intangible Assets [Line Items] | ||
Intangible Assets—Gross | $ 1,072,800 | $ 945,400 |
Accumulated Amortization | (226,653) | (181,941) |
Intangible Assets—Net | 846,147 | 763,459 |
Developed technology | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible Assets—Gross | 283,100 | 239,200 |
Accumulated Amortization | (83,878) | (67,421) |
Intangible Assets—Net | $ 199,222 | $ 171,779 |
Weighted- Average Useful Life | 8 years | 8 years |
Customer relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible Assets—Gross | $ 737,400 | $ 661,900 |
Accumulated Amortization | (127,975) | (102,408) |
Intangible Assets—Net | $ 609,425 | $ 559,492 |
Weighted- Average Useful Life | 14 years | 15 years |
Trademarks | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible Assets—Gross | $ 52,300 | $ 44,300 |
Accumulated Amortization | (14,800) | (12,112) |
Intangible Assets—Net | $ 37,500 | $ 32,188 |
Weighted- Average Useful Life | 9 years | 9 years |
OTHER INTANGIBLE ASSETS_NET - A
OTHER INTANGIBLE ASSETS—NET - Amortization Expense of Intangible Assets (Details) - Severin Holdings, LLC - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2021 | Jun. 30, 2020 | Jun. 30, 2021 | Jun. 30, 2020 | |
Finite-Lived Intangible Assets [Line Items] | ||||
Total amortization of acquired intangible assets | $ 23,534 | $ 19,639 | $ 44,721 | $ 39,280 |
Cost of revenue | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Total amortization of acquired intangible assets | 8,603 | 7,283 | 16,459 | 14,566 |
Selling, general, and administrative expense | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Total amortization of acquired intangible assets | $ 14,931 | $ 12,356 | $ 28,262 | $ 24,714 |
OTHER INTANGIBLE ASSETS_NET - E
OTHER INTANGIBLE ASSETS—NET - Estimated Future Amortization of Intangible Assets (Details) - Severin Holdings, LLC - USD ($) $ in Thousands | Jun. 30, 2021 | Dec. 31, 2020 |
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract] | ||
2021 (remaining six months) | $ 46,590 | |
2022 | 92,042 | |
2023 | 92,042 | |
2024 | 91,997 | |
2025 | 91,862 | |
Thereafter | 431,614 | |
Intangible Assets—Net | $ 846,147 | $ 763,459 |
ACCRUED EXPENSES (Details)
ACCRUED EXPENSES (Details) - Severin Holdings, LLC - USD ($) $ in Thousands | Jun. 30, 2021 | Dec. 31, 2020 |
Payables and Accruals [Line Items] | ||
Accrued compensation | $ 25,345 | $ 29,345 |
Accrued interest | 3,025 | 2,779 |
Accrued taxes | 1,489 | 3,517 |
Other accrued expenses | 29,694 | 18,057 |
Total accrued expenses | $ 59,553 | $ 53,698 |
LONG-TERM DEBT AND REVOLVING _3
LONG-TERM DEBT AND REVOLVING CREDIT AGREEMENT - Schedule of Outstanding Long-Term Debt (Details) - Severin Holdings, LLC - USD ($) $ in Thousands | Jun. 30, 2021 | Dec. 31, 2020 | Nov. 22, 2019 | Aug. 01, 2018 |
Debt Instrument [Line Items] | ||||
Total outstanding principal | $ 1,509,750 | $ 1,193,975 | ||
Less current portion of long-term debt | (8,450) | (8,450) | ||
Less unamortized debt discount | (4,456) | (4,941) | ||
Less unamortized debt issuance costs | (21,370) | (20,258) | ||
Total long-term debt—net | 1,475,474 | 1,160,326 | ||
Secured Debt | First Lien | ||||
Debt Instrument [Line Items] | ||||
Total outstanding principal | 755,625 | 759,500 | ||
Less unamortized debt discount | $ (1,900) | |||
Less unamortized debt issuance costs | (18,700) | |||
Secured Debt | Incremental Facility | ||||
Debt Instrument [Line Items] | ||||
Total outstanding principal | 69,125 | 69,475 | ||
Less unamortized debt discount | $ (1,400) | |||
Less unamortized debt issuance costs | $ (500) | |||
Secured Debt | Second Lien | ||||
Debt Instrument [Line Items] | ||||
Total outstanding principal | 365,000 | 365,000 | ||
Less unamortized debt discount | (3,700) | |||
Less unamortized debt issuance costs | $ (11,000) | |||
Bridge Loan | Bridge Loan | ||||
Debt Instrument [Line Items] | ||||
Total outstanding principal | $ 320,000 | $ 0 |
LONG-TERM DEBT AND REVOLVING _4
LONG-TERM DEBT AND REVOLVING CREDIT AGREEMENT - Narrative (Details) - USD ($) $ in Thousands | Mar. 03, 2021 | Nov. 22, 2019 | Aug. 01, 2018 | Jun. 30, 2021 | Mar. 30, 2021 | Dec. 31, 2020 | Nov. 25, 2020 | Jun. 30, 2020 |
Severin Holdings, LLC | ||||||||
Debt Instrument [Line Items] | ||||||||
Debt discounts | $ 4,456 | $ 4,941 | ||||||
Debt issuance costs | 21,370 | 20,258 | ||||||
Outstanding balance | $ 95,000 | $ 40,000 | ||||||
Secured Debt | First Lien | Severin Holdings, LLC | ||||||||
Debt Instrument [Line Items] | ||||||||
Aggregate principal amount | $ 775,000 | |||||||
Debt discounts | 1,900 | |||||||
Debt issuance costs | $ 18,700 | |||||||
Percentage of principal due quarterly | 0.25% | |||||||
Secured Debt | First Lien | LIBOR | Severin Holdings, LLC | ||||||||
Debt Instrument [Line Items] | ||||||||
Applicable margin | 3.25% | |||||||
Interest rate | 3.33% | 3.40% | ||||||
Secured Debt | Second Lien | Severin Holdings, LLC | ||||||||
Debt Instrument [Line Items] | ||||||||
Aggregate principal amount | $ 365,000 | |||||||
Debt discounts | 3,700 | |||||||
Debt issuance costs | $ 11,000 | |||||||
Secured Debt | Second Lien | LIBOR | Severin Holdings, LLC | ||||||||
Debt Instrument [Line Items] | ||||||||
Applicable margin | 6.75% | |||||||
Interest rate | 6.82% | 6.90% | ||||||
Secured Debt | Incremental Facility | Severin Holdings, LLC | ||||||||
Debt Instrument [Line Items] | ||||||||
Aggregate principal amount | $ 70,000 | |||||||
Debt discounts | 1,400 | |||||||
Debt issuance costs | $ 500 | |||||||
Percentage of principal due quarterly | 0.25% | |||||||
Secured Debt | Incremental Facility | LIBOR | Severin Holdings, LLC | ||||||||
Debt Instrument [Line Items] | ||||||||
Applicable margin | 4.50% | |||||||
Interest rate | 5.50% | 5.50% | ||||||
Secured Debt | Incremental Facility | LIBOR | Minimum | Severin Holdings, LLC | ||||||||
Debt Instrument [Line Items] | ||||||||
Applicable margin | 1.00% | |||||||
Bridge Loan | Bridge Loan | Severin Holdings, LLC | ||||||||
Debt Instrument [Line Items] | ||||||||
Aggregate principal amount | $ 320,000 | |||||||
Bridge Loan | Bridge Loan | Third Parties | Severin Holdings, LLC | ||||||||
Debt Instrument [Line Items] | ||||||||
Debt issuance costs | 500 | |||||||
Bridge Loan | Bridge Loan | Lenders | Severin Holdings, LLC | ||||||||
Debt Instrument [Line Items] | ||||||||
Debt issuance costs | $ 4,800 | |||||||
Bridge Loan | Bridge Loan | LIBOR | ||||||||
Debt Instrument [Line Items] | ||||||||
Interest rate | 3.08% | |||||||
Bridge Loan | Bridge Loan | LIBOR | Severin Holdings, LLC | ||||||||
Debt Instrument [Line Items] | ||||||||
Applicable margin | 3.00% | |||||||
Line of Credit | Revolving Credit Facility | Severin Holdings, LLC | ||||||||
Debt Instrument [Line Items] | ||||||||
Increase in borrowing capacity | $ 109,000 | $ 60,000 | ||||||
Maximum borrowing capacity | $ 180,000 | $ 289,000 | $ 180,000 | $ 180,000 | ||||
Revolving credit, debt issuance costs | 2,700 | |||||||
Borrowings from revolving credit facility | 55,000 | |||||||
Outstanding balance | $ 95,000 | $ 40,000 | ||||||
Commitment fee percentage | 0.50% | |||||||
First lien net coverage ratio | 7.75 | 5.69 | ||||||
Outstanding balance as a percentage of borrowing capacity | 35.00% | |||||||
Line of Credit | Revolving Credit Facility | LIBOR | Severin Holdings, LLC | ||||||||
Debt Instrument [Line Items] | ||||||||
Applicable margin | 3.25% |
LONG-TERM DEBT AND REVOLVING _5
LONG-TERM DEBT AND REVOLVING CREDIT AGREEMENT - Maturities of Long-Term Debt (Details) - Severin Holdings, LLC - USD ($) $ in Thousands | Jun. 30, 2021 | Dec. 31, 2020 |
Maturities of Long-term Debt [Abstract] | ||
2021 (remaining six months) | $ 4,225 | |
2022 | 328,450 | |
2023 | 8,450 | |
2024 | 8,450 | |
2025 | 795,175 | |
Thereafter | 365,000 | |
Total | $ 1,509,750 | $ 1,193,975 |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Narrative (Details) - Severin Holdings, LLC - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2021 | Jun. 30, 2020 | Jun. 30, 2021 | Jun. 30, 2020 | Dec. 31, 2020 | |
Commitments and Contingencies [Line Items] | |||||
Rent expense | $ 2 | $ 2.1 | $ 4 | $ 4.2 | |
Remaining balance of financing obligations | 4.5 | 4.5 | $ 4.5 | ||
Estimated liability for incurred, but not reported, medical claims | 1.7 | 1.7 | $ 1.5 | ||
Data Center, Cloud Hosting Arrangements and Other Services | |||||
Commitments and Contingencies [Line Items] | |||||
Remaining aggregate minimum purchase commitment | $ 64.6 | $ 64.6 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES - Future Minimum Lease Payments (Details) - Severin Holdings, LLC $ in Thousands | Jun. 30, 2021USD ($) |
Lessee, Operating Lease, Liability, Payment, Due [Abstract] | |
2021 (remaining six months) | $ 4,459 |
2022 | 5,904 |
2023 | 3,131 |
2024 | 2,251 |
2025 | 941 |
Thereafter | 225 |
Total | $ 16,911 |
UNIT-BASED COMPENSATION - Narra
UNIT-BASED COMPENSATION - Narrative (Details) - Severin Holdings, LLC - USD ($) $ / shares in Units, $ in Thousands | Aug. 01, 2020 | Aug. 01, 2019 | Jun. 30, 2021 | Jun. 30, 2020 | Jun. 30, 2021 | Jun. 30, 2020 | Dec. 31, 2020 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Number of units authorized for issuance (in shares) | 37,999,757 | 37,999,757 | |||||
Repurchase of management incentive units | $ 448 | $ 989 | |||||
Compensation expense (less than) | $ 1,373 | $ 1,410 | 2,737 | 2,822 | |||
Long-Term Incentive Plan | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Aggregate intrinsic value of outstanding MIUs | $ 5,500 | $ 5,500 | $ 10,700 | ||||
Percentage of investor's equity interest | 50.00% | 50.00% | |||||
Management Incentive Units | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Vesting period | 4 years | ||||||
Repurchase of management incentive units | $ 400 | ||||||
Aggregate intrinsic value of outstanding MIUs | $ 71,300 | 71,300 | $ 139,100 | ||||
Future compensation cost related to unvested units | 6,700 | $ 6,700 | |||||
Future compensation cost recognition period | 1 year 3 months 18 days | ||||||
Time-Based Units | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Percentage of total units granted | 60.00% | ||||||
Performance-Based Units | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Percentage of total units granted | 40.00% | ||||||
Participating Units | |||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||
Number of units granted (in shares) | 39,688 | 37,058 | |||||
Number of units granted (in dollars per share) | $ 5.89 | $ 4.46 | |||||
Compensation expense (less than) | $ 100 | $ 100 | $ 100 | $ 100 |
UNIT-BASED COMPENSATION - Sched
UNIT-BASED COMPENSATION - Schedule of MIU Activity (Details) - Management Incentive Units - Severin Holdings, LLC - $ / shares | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Number of Underlying Units | ||
Beginning balance (in shares) | 28,143,250 | |
Units canceled (in shares) | (166,430) | |
Ending balance (in shares) | 27,976,820 | 28,143,250 |
Weighted-average grant date-fair value, vested (in shares) | 11,021,997 | 9,069,112 |
Weighted-Average Grant-Date Fair Value | ||
Beginning balance (in dollars per share) | $ 1.25 | |
Units canceled (in dollars per share) | 1.28 | |
Ending balance (in dollars per share) | 1.26 | $ 1.25 |
Weighted-average grant date-fair value, vested (in dollars per share) | $ 1.27 | $ 1.28 |
UNIT-BASED COMPENSATION - Weigh
UNIT-BASED COMPENSATION - Weighted-Average Assumptions (Details) - Management Incentive Units - Severin Holdings, LLC - $ / shares | 6 Months Ended | 12 Months Ended |
Jun. 30, 2021 | Dec. 31, 2020 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Volatility | 0.00% | 45.00% |
Expected dividend yield | 0.00% | 0.00% |
Risk-free rate | 0.00% | 1.56% |
Expected term (in years) | 0 years | 1 year 6 months |
Fair value of underlying unit (in dollars per share) | $ 0 | |
Maximum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Fair value of underlying unit (in dollars per share) | $ 1.04 | |
Minimum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Fair value of underlying unit (in dollars per share) | $ 0.92 |
UNIT-BASED COMPENSATION - MIU-b
UNIT-BASED COMPENSATION - MIU-based Compensation Expense (Details) - Severin Holdings, LLC - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2021 | Jun. 30, 2020 | Jun. 30, 2021 | Jun. 30, 2020 | |
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Total MIU-based compensation | $ 1,373 | $ 1,410 | $ 2,737 | $ 2,822 |
Cost of revenue | Subscriptions and support | ||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Total MIU-based compensation | 9 | 17 | 19 | 33 |
Cost of revenue | Service | ||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Total MIU-based compensation | 70 | 64 | 141 | 128 |
Research and development | ||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Total MIU-based compensation | 240 | 240 | 478 | 484 |
Selling, general, and administrative expense | ||||
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items] | ||||
Total MIU-based compensation | $ 1,054 | $ 1,089 | $ 2,099 | $ 2,177 |
INCOME TAXES (Details)
INCOME TAXES (Details) - Severin Holdings, LLC - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2021 | Jun. 30, 2020 | Jun. 30, 2021 | Jun. 30, 2020 | |
Income Tax Examination [Line Items] | ||||
Income tax benefit | $ 1,690 | $ 18 | $ 17,349 | $ 42 |
Effective tax rate | 89.40% | |||
Release of valuation allowance resulting in income tax benefit | $ 11,700 | |||
Unrecognized tax benefits | 1,700 | 1,700 | ||
Unrecognized tax benefits that would impact effective tax rate | $ 1,700 | $ 1,700 |
RELATED-PARTY TRANSACTIONS (Det
RELATED-PARTY TRANSACTIONS (Details) - Severin Holdings, LLC - USD ($) $ in Millions | Mar. 03, 2021 | Jun. 30, 2021 | Jun. 30, 2020 | Jun. 30, 2021 | Jun. 30, 2020 | Dec. 31, 2020 |
Consulting and Implementation Services | Affiliated Entity | ||||||
Related Party Transaction [Line Items] | ||||||
Costs of related party services | $ 0.1 | $ 0.2 | $ 0.1 | $ 0.2 | ||
Amounts due from (to) related parties | (0.1) | (0.1) | $ (0.1) | |||
Consulting and Implementation Services | Affiliated Entity with Common Ownership | ||||||
Related Party Transaction [Line Items] | ||||||
Amounts due from (to) related parties | (0.1) | (0.1) | $ (1.2) | |||
Purchases from related parties | 0.3 | $ 0.4 | 0.7 | $ 0.6 | ||
Reseller Agreement | Affiliated Entity | ||||||
Related Party Transaction [Line Items] | ||||||
Term of related party agreement | 10 years | |||||
Amount of transactions with related parties | $ 32.4 | |||||
Selling, general and administrative expenses recognized | 2.4 | 3.2 | ||||
Transition Service Agreement | Affiliated Entity | ||||||
Related Party Transaction [Line Items] | ||||||
Amounts due from (to) related parties | 0.8 | 0.8 | ||||
Term of related party agreement | 18 months | |||||
Access and Use Agreement | Affiliated Entity | ||||||
Related Party Transaction [Line Items] | ||||||
Term of related party agreement | 1 year | |||||
Amount of transactions with related parties | $ 1 | |||||
Selling, general and administrative expenses recognized | $ 0.3 | $ 0.3 |
EMPLOYEE BENEFIT PLANS (Details
EMPLOYEE BENEFIT PLANS (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2021 | Jun. 30, 2020 | Jun. 30, 2021 | Jun. 30, 2020 | |
Severin Holdings, LLC | ||||
Defined Contribution Plan Disclosure [Line Items] | ||||
Employer matching contributions | $ 2.3 | $ 1.9 | $ 4.3 | $ 3.6 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - USD ($) $ / shares in Units, $ in Millions | Aug. 10, 2021 | Jul. 30, 2021 | Aug. 31, 2021 | Jul. 27, 2021 | Jul. 17, 2021 | Jun. 30, 2021 | Dec. 31, 2020 |
Subsequent Event [Line Items] | |||||||
Common stock, shares authorized (in shares) | 1,000 | 1,000 | |||||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | |||||
Common stock, shares outstanding (in shares) | 1,000 | 1,000 | |||||
Common stock, shares issued (in shares) | 1,000 | 1,000 | |||||
Subsequent Event | |||||||
Subsequent Event [Line Items] | |||||||
Preferred stock, shares authorized (in shares) | 50,000,000 | ||||||
Preferred stock, par value (in dollars per share) | $ 0.0001 | ||||||
Percentage of cash savings payable | 85.00% | ||||||
Subsequent Event | Restricted Stock Units (RSUs) | |||||||
Subsequent Event [Line Items] | |||||||
Number of units granted (in shares) | 3,203,671 | ||||||
Subsequent Event | Restricted Stock Units (RSUs) | Employee | |||||||
Subsequent Event [Line Items] | |||||||
Number of units granted (in shares) | 3,178,672 | ||||||
Vesting percentage | 25.00% | ||||||
Vesting period | 36 months | ||||||
Subsequent Event | Restricted Stock Units (RSUs) | Director | |||||||
Subsequent Event [Line Items] | |||||||
Number of units granted (in shares) | 24,999 | ||||||
Subsequent Event | Common Class A | |||||||
Subsequent Event [Line Items] | |||||||
Common stock, shares authorized (in shares) | 500,000,000 | ||||||
Common stock, par value (in dollars per share) | $ 0.0001 | ||||||
Common stock, shares outstanding (in shares) | 158,473,360 | ||||||
Percentage of voting power | 79.30% | ||||||
Shares reserved for future issuance (in shares) | 19,315,000 | ||||||
Subsequent Event | Common Class B | |||||||
Subsequent Event [Line Items] | |||||||
Common stock, shares authorized (in shares) | 300,000,000 | ||||||
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 | |||||
Common stock, shares outstanding (in shares) | 39,928,472 | ||||||
Percentage of voting power | 20.70% | ||||||
Subsequent Event | LLC Units | Topco LLC | |||||||
Subsequent Event [Line Items] | |||||||
Common stock, shares outstanding (in shares) | 39,928,472 | ||||||
Subsequent Event | Participation Units | Topco LLC | |||||||
Subsequent Event [Line Items] | |||||||
Common stock, shares outstanding (in shares) | 3,730,246 | ||||||
Subsequent Event | Topco LLC | Common Class B | |||||||
Subsequent Event [Line Items] | |||||||
Number of shares issued (in shares) | 39,928,472 | ||||||
Subsequent Event | Topco LLC | Common Class A, Unrestricted | |||||||
Subsequent Event [Line Items] | |||||||
Number of shares issued (in shares) | 1,208,770 | ||||||
Subsequent Event | Topco LLC | Common Class A, Restricted | |||||||
Subsequent Event [Line Items] | |||||||
Number of shares issued (in shares) | 657,661 | ||||||
Subsequent Event | Line of Credit | Revolving Credit Facility | |||||||
Subsequent Event [Line Items] | |||||||
Repayments of lines of credit | $ 85 | ||||||
Increase in borrowing capacity | $ 109 | ||||||
Maximum borrowing capacity | 289 | ||||||
Payment of debt issuance costs | 0.4 | ||||||
Subsequent Event | Bridge Loan | Bridge Loan | |||||||
Subsequent Event [Line Items] | |||||||
Repayments of debt | 320 | ||||||
Subsequent Event | Second Lien | Secured Debt | |||||||
Subsequent Event [Line Items] | |||||||
Repayments of debt | 365 | ||||||
Subsequent Event | Incremental Facility | Secured Debt | |||||||
Subsequent Event [Line Items] | |||||||
Repayments of debt | $ 69.1 | ||||||
Subsequent Event | IPO | |||||||
Subsequent Event [Line Items] | |||||||
Proceeds received from issuance of common stock | 673.2 | ||||||
Underwriting discounts and commissions | $ 37.3 | ||||||
Subsequent Event | IPO | Common Class A | |||||||
Subsequent Event [Line Items] | |||||||
Common stock, shares outstanding (in shares) | 39,473,685 | ||||||
Offering price (in dollars per share) | $ 18 | ||||||
Subsequent Event | IPO | Common Class B | Topco LLC | |||||||
Subsequent Event [Line Items] | |||||||
Common stock, shares outstanding (in shares) | 39,928,472 | ||||||
Subsequent Event | IPO | Investor | Common Class A | |||||||
Subsequent Event [Line Items] | |||||||
Common stock, shares outstanding (in shares) | 39,473,685 | ||||||
Subsequent Event | Over-Allotment Option | |||||||
Subsequent Event [Line Items] | |||||||
Proceeds received from issuance of common stock | $ 92.9 | ||||||
Underwriting discounts and commissions | $ 5.1 | ||||||
Subsequent Event | Over-Allotment Option | Common Class A | |||||||
Subsequent Event [Line Items] | |||||||
Number of shares issued (in shares) | 5,447,581 |
Uncategorized Items - pwsc-2021
Label | Element | Value |
Severin Holdings, LLC [Member] | ||
Capitalized Computer Software, Amortization | us-gaap_CapitalizedComputerSoftwareAmortization1 | $ 3,800,000 |
Capitalized Computer Software, Amortization | us-gaap_CapitalizedComputerSoftwareAmortization1 | $ 1,900,000 |