Form 10-Q
0.00500.0050falseQ3--12-310001645070 0001645070 2021-09-30 0001645070 2020-12-31 0001645070 2021-01-01 2021-09-30 0001645070 2020-01-01 2020-09-30 0001645070 2021-07-01 2021-09-30 0001645070 2020-07-01 2020-09-30 0001645070 2020-01-01 2020-03-31 0001645070 2020-04-01 2020-06-30 0001645070 2021-04-01 2021-06-30 0001645070 2021-01-01 2021-03-31 0001645070 2021-11-08 0001645070 2021-09-10 2021-09-10 0001645070 2021-01-01 2021-01-31 0001645070 2020-09-30 0001645070 2020-01-01 2020-12-31 0001645070 2019-12-31 0001645070 2021-03-31 0001645070 2021-06-30 0001645070 2020-03-31 0001645070 2020-06-30 0001645070 us-gaap:FurnitureAndFixturesMember 2020-12-31 0001645070 ster:ComputerAndEquipmentMember 2020-12-31 0001645070 us-gaap:LeaseholdImprovementsMember 2020-12-31 0001645070 ster:FirstLienTermLoanMember 2020-12-31 0001645070 ster:FirstLienTermLoanDueJuneNineteenTwoThousandAndTwentyFourMember 2020-12-31 0001645070 ster:TheCreditAgreementMember 2020-12-31 0001645070 ster:TheCreditAgreementMember ster:FirstLienTermLoanMember 2020-12-31 0001645070 ster:TheCreditAgreementMember us-gaap:RevolvingCreditFacilityMember 2020-12-31 0001645070 ster:RevolvingCreditFacilityNetLettersOfCreditsMember 2020-12-31 0001645070 us-gaap:TechnologyBasedIntangibleAssetsMember 2020-12-31 0001645070 us-gaap:InternetDomainNamesMember 2020-12-31 0001645070 us-gaap:OffMarketFavorableLeaseMember 2020-12-31 0001645070 us-gaap:TrademarksMember 2020-12-31 0001645070 us-gaap:CustomerListsMember 2020-12-31 0001645070 ster:GoldmanSachsAndStockholderOneMember ster:FourthAmendedAndRestatedManagementServicesTerminationAgreementMember 2020-12-31 0001645070 ster:StockholderOneAndAffiliatesMember srt:MaximumMember 2020-12-31 0001645070 ster:GoldmanSachsAndAffiliatesMember 2020-12-31 0001645070 us-gaap:DesignatedAsHedgingInstrumentMember 2020-12-31 0001645070 us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:OtherCurrentAssetsMember 2020-12-31 0001645070 us-gaap:OtherLiabilitiesMember 2020-12-31 0001645070 us-gaap:OtherCurrentLiabilitiesMember 2020-12-31 0001645070 ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember ster:StockSharesIssuedToEmployeesConsiderationInTheFormOfPromissoryNoteMember 2020-12-31 0001645070 us-gaap:NonUsMember 2020-12-31 0001645070 country:IN 2020-12-31 0001645070 country:CA 2020-12-31 0001645070 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:ForeignExchangeContractMember 2020-12-31 0001645070 us-gaap:FairValueMeasurementsRecurringMember us-gaap:ForeignExchangeContractMember us-gaap:FairValueInputsLevel1Member 2020-12-31 0001645070 us-gaap:FairValueMeasurementsRecurringMember us-gaap:ForeignExchangeContractMember us-gaap:FairValueInputsLevel3Member 2020-12-31 0001645070 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember us-gaap:InterestRateSwapMember 2020-12-31 0001645070 us-gaap:FairValueMeasurementsRecurringMember us-gaap:InterestRateSwapMember us-gaap:FairValueInputsLevel1Member 2020-12-31 0001645070 us-gaap:FairValueMeasurementsRecurringMember us-gaap:InterestRateSwapMember us-gaap:FairValueInputsLevel3Member 2020-12-31 0001645070 ster:FirstLienTermLoanMember us-gaap:FairValueInputsLevel2Member 2020-12-31 0001645070 us-gaap:OtherCurrentAssetsMember 2020-12-31 0001645070 us-gaap:OtherNoncurrentAssetsMember 2020-12-31 0001645070 ster:GoldmanSachsGroupIncAndCdpqMember 2021-09-30 0001645070 us-gaap:FurnitureAndFixturesMember 2021-09-30 0001645070 ster:ComputerAndEquipmentMember 2021-09-30 0001645070 us-gaap:LeaseholdImprovementsMember 2021-09-30 0001645070 ster:FirstLienTermLoanMember 2021-09-30 0001645070 ster:FirstLienTermLoanDueJuneNineteenTwoThousandAndTwentyFourMember 2021-09-30 0001645070 ster:LettersOfCreditUnderTheRevolverMember 2021-09-30 0001645070 ster:OptionNumberOneMember ster:FirstLienTermLoanMember 2021-09-30 0001645070 ster:OptionNumberTwoMember ster:FirstLienTermLoanMember 2021-09-30 0001645070 ster:OptionNumberOneMember us-gaap:RevolvingCreditFacilityMember 2021-09-30 0001645070 ster:OptionNumberTwoMember us-gaap:RevolvingCreditFacilityMember 2021-09-30 0001645070 ster:RevolvingCreditFacilityNetLettersOfCreditsMember 2021-09-30 0001645070 ster:TheCreditAgreementMember 2021-09-30 0001645070 us-gaap:RevolvingCreditFacilityMember ster:TheCreditAgreementMember 2021-09-30 0001645070 us-gaap:TechnologyBasedIntangibleAssetsMember 2021-09-30 0001645070 us-gaap:InternetDomainNamesMember 2021-09-30 0001645070 us-gaap:OffMarketFavorableLeaseMember 2021-09-30 0001645070 us-gaap:TrademarksMember 2021-09-30 0001645070 us-gaap:CustomerListsMember 2021-09-30 0001645070 srt:MaximumMember 2021-09-30 0001645070 ster:GoldmanSachsAndStockholderOneMember ster:FourthAmendedAndRestatedManagementServicesTerminationAgreementMember 2021-09-30 0001645070 srt:MaximumMember ster:SalesEffectedToRelatedPartyMember 2021-09-30 0001645070 ster:GoldmanSachsAndAffiliatesMember 2021-09-30 0001645070 ster:TwoThousandAndFifteenLongTermEquityIncentivePlanMember 2021-09-30 0001645070 us-gaap:RestrictedStockUnitsRSUMember ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember 2021-09-30 0001645070 us-gaap:EmployeeStockOptionMember ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember 2021-09-30 0001645070 us-gaap:RestrictedStockMember ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember 2021-09-30 0001645070 ster:AmendedTwoThousandAndFifteenLongTermEquityIncentivePlanMember 2021-09-30 0001645070 ster:TwoThousandAndTwentyOneEmployeeStockPurchasePlanMember 2021-09-30 0001645070 ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember ster:IncentiveStockOptionsMember 2021-09-30 0001645070 ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember ster:ServiceBasedVestingStockOptionsMember 2021-09-30 0001645070 us-gaap:NondesignatedMember us-gaap:InterestRateSwapMember 2021-09-30 0001645070 us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:ForeignExchangeContractMember 2021-09-30 0001645070 us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:ForeignExchangeContractMember us-gaap:LongMember 2021-09-30 0001645070 us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:ForeignExchangeContractMember us-gaap:ShortMember 2021-09-30 0001645070 us-gaap:DesignatedAsHedgingInstrumentMember 2021-09-30 0001645070 us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:OtherCurrentAssetsMember 2021-09-30 0001645070 us-gaap:OtherCurrentLiabilitiesMember 2021-09-30 0001645070 ster:ServiceBasedVestingStockOptionsMember 2021-09-30 0001645070 ster:IncentiveStockOptionsMember 2021-09-30 0001645070 us-gaap:NonUsMember 2021-09-30 0001645070 country:IN 2021-09-30 0001645070 country:CA 2021-09-30 0001645070 us-gaap:ForeignExchangeContractMember us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2021-09-30 0001645070 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member us-gaap:ForeignExchangeContractMember 2021-09-30 0001645070 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member us-gaap:ForeignExchangeContractMember 2021-09-30 0001645070 us-gaap:InterestRateSwapMember us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2021-09-30 0001645070 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel1Member us-gaap:InterestRateSwapMember 2021-09-30 0001645070 us-gaap:FairValueMeasurementsRecurringMember us-gaap:FairValueInputsLevel3Member us-gaap:InterestRateSwapMember 2021-09-30 0001645070 ster:NqsoMember ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember 2021-09-30 0001645070 ster:FirstLienTermLoanMember us-gaap:FairValueInputsLevel2Member 2021-09-30 0001645070 us-gaap:OtherCurrentAssetsMember 2021-09-30 0001645070 us-gaap:OtherNoncurrentAssetsMember 2021-09-30 0001645070 ster:FirstLienTermLoanDueJuneNineteenTwoThousandAndTwentyFourMember 2020-01-01 2020-09-30 0001645070 ster:ScreeningServicesMember 2020-01-01 2020-09-30 0001645070 ster:OtherServicesMember 2020-01-01 2020-09-30 0001645070 country:US 2020-01-01 2020-09-30 0001645070 ster:AllOtherCountriesMember 2020-01-01 2020-09-30 0001645070 us-gaap:TechnologyBasedIntangibleAssetsMember 2020-01-01 2020-09-30 0001645070 us-gaap:TechnologyBasedIntangibleAssetsMember ster:InternalCostMember 2020-01-01 2020-09-30 0001645070 us-gaap:TechnologyBasedIntangibleAssetsMember ster:ExternalCostMember 2020-01-01 2020-09-30 0001645070 ster:StockholderOneAndAffiliatesMember ster:SalesEffectedToRelatedPartyMember 2020-01-01 2020-09-30 0001645070 ster:GoldmanSachsAndAffiliatesMember ster:SalesEffectedToRelatedPartyMember 2020-01-01 2020-09-30 0001645070 us-gaap:EmployeeStockOptionMember 2020-01-01 2020-09-30 0001645070 ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember ster:IncentiveStockOptionsMember 2020-01-01 2020-09-30 0001645070 ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember ster:ServiceBasedVestingStockOptionsMember 2020-01-01 2020-09-30 0001645070 us-gaap:NondesignatedMember 2020-01-01 2020-09-30 0001645070 us-gaap:ForeignExchangeContractMember us-gaap:NondesignatedMember 2020-01-01 2020-09-30 0001645070 us-gaap:DesignatedAsHedgingInstrumentMember 2020-01-01 2020-09-30 0001645070 us-gaap:ForeignExchangeContractMember us-gaap:DesignatedAsHedgingInstrumentMember 2020-01-01 2020-09-30 0001645070 us-gaap:SellingGeneralAndAdministrativeExpensesMember us-gaap:DesignatedAsHedgingInstrumentMember 2020-01-01 2020-09-30 0001645070 us-gaap:CostOfSalesMember us-gaap:DesignatedAsHedgingInstrumentMember 2020-01-01 2020-09-30 0001645070 us-gaap:NondesignatedMember us-gaap:SellingGeneralAndAdministrativeExpensesMember 2020-01-01 2020-09-30 0001645070 us-gaap:NondesignatedMember us-gaap:CostOfSalesMember 2020-01-01 2020-09-30 0001645070 us-gaap:ForeignPlanMember 2020-01-01 2020-09-30 0001645070 ster:TwoThousandAndFifteenLongTermEquityIncentivePlanMember ster:ServiceBasedVestingStockOptionsMember 2020-01-01 2020-09-30 0001645070 ster:TwoThousandAndFifteenLongTermEquityIncentivePlanMember ster:IncentiveStockOptionsMember 2020-01-01 2020-09-30 0001645070 ster:ServiceBasedVestingStockOptionsMember 2020-01-01 2020-09-30 0001645070 ster:GainLossOnInterestRateSwapsMember 2020-01-01 2020-09-30 0001645070 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2020-01-01 2020-09-30 0001645070 us-gaap:CostOfSalesMember 2020-01-01 2020-09-30 0001645070 us-gaap:CustomerConcentrationRiskMember us-gaap:RevenueFromContractWithCustomerMember ster:CustomerMember 2020-01-01 2020-09-30 0001645070 us-gaap:AdditionalPaidInCapitalMember 2020-07-01 2020-09-30 0001645070 us-gaap:RetainedEarningsMember 2020-07-01 2020-09-30 0001645070 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-07-01 2020-09-30 0001645070 ster:ScreeningServicesMember 2020-07-01 2020-09-30 0001645070 ster:OtherServicesMember 2020-07-01 2020-09-30 0001645070 country:US 2020-07-01 2020-09-30 0001645070 ster:AllOtherCountriesMember 2020-07-01 2020-09-30 0001645070 ster:StockholderOneAndAffiliatesMember ster:SalesEffectedToRelatedPartyMember 2020-07-01 2020-09-30 0001645070 ster:GoldmanSachsAndAffiliatesMember ster:SalesEffectedToRelatedPartyMember 2020-07-01 2020-09-30 0001645070 us-gaap:EmployeeStockOptionMember 2020-07-01 2020-09-30 0001645070 us-gaap:NondesignatedMember 2020-07-01 2020-09-30 0001645070 us-gaap:ForeignExchangeContractMember us-gaap:NondesignatedMember 2020-07-01 2020-09-30 0001645070 us-gaap:DesignatedAsHedgingInstrumentMember 2020-07-01 2020-09-30 0001645070 us-gaap:ForeignExchangeContractMember us-gaap:DesignatedAsHedgingInstrumentMember 2020-07-01 2020-09-30 0001645070 us-gaap:SellingGeneralAndAdministrativeExpensesMember us-gaap:DesignatedAsHedgingInstrumentMember 2020-07-01 2020-09-30 0001645070 us-gaap:CostOfSalesMember us-gaap:DesignatedAsHedgingInstrumentMember 2020-07-01 2020-09-30 0001645070 us-gaap:NondesignatedMember us-gaap:SellingGeneralAndAdministrativeExpensesMember 2020-07-01 2020-09-30 0001645070 us-gaap:NondesignatedMember us-gaap:CostOfSalesMember 2020-07-01 2020-09-30 0001645070 us-gaap:ForeignPlanMember 2020-07-01 2020-09-30 0001645070 ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember ster:ServiceBasedVestingStockOptionsMember 2020-07-01 2020-09-30 0001645070 ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember ster:IncentiveStockOptionsMember 2020-07-01 2020-09-30 0001645070 ster:GainLossOnInterestRateSwapsMember 2020-07-01 2020-09-30 0001645070 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2020-07-01 2020-09-30 0001645070 us-gaap:CostOfSalesMember 2020-07-01 2020-09-30 0001645070 us-gaap:CustomerConcentrationRiskMember us-gaap:RevenueFromContractWithCustomerMember ster:CustomerMember 2020-07-01 2020-09-30 0001645070 ster:FirstLienTermLoanDueJuneNineteenTwoThousandAndTwentyFourMember 2021-01-01 2021-09-30 0001645070 ster:FirstLienTermLoanMember 2021-01-01 2021-09-30 0001645070 ster:OptionNumberOneMember ster:FirstLienTermLoanMember us-gaap:LondonInterbankOfferedRateLIBORMember 2021-01-01 2021-09-30 0001645070 ster:OptionNumberOneMember us-gaap:RevolvingCreditFacilityMember us-gaap:LondonInterbankOfferedRateLIBORMember 2021-01-01 2021-09-30 0001645070 ster:OptionNumberOneMember us-gaap:FederalFundsEffectiveSwapRateMember ster:FirstLienTermLoanMember 2021-01-01 2021-09-30 0001645070 us-gaap:RevolvingCreditFacilityMember us-gaap:FederalFundsEffectiveSwapRateMember ster:OptionNumberOneMember 2021-01-01 2021-09-30 0001645070 ster:OptionNumberTwoMember us-gaap:LondonInterbankOfferedRateLIBORMember ster:FirstLienTermLoanMember 2021-01-01 2021-09-30 0001645070 us-gaap:RevolvingCreditFacilityMember us-gaap:LondonInterbankOfferedRateLIBORMember ster:OptionNumberTwoMember 2021-01-01 2021-09-30 0001645070 ster:OptionNumberOneMember ster:FirstLienTermLoanMember 2021-01-01 2021-09-30 0001645070 ster:FirstLienTermLoanMember ster:OptionNumberTwoMember 2021-01-01 2021-09-30 0001645070 ster:OptionNumberOneMember us-gaap:RevolvingCreditFacilityMember 2021-01-01 2021-09-30 0001645070 ster:FirstLienTermLoanMember ster:TheCreditAgreementMember 2021-01-01 2021-09-30 0001645070 ster:TheCreditAgreementMember 2021-01-01 2021-09-30 0001645070 us-gaap:RevolvingCreditFacilityMember 2021-01-01 2021-09-30 0001645070 srt:MinimumMember us-gaap:RevolvingCreditFacilityMember 2021-01-01 2021-09-30 0001645070 srt:MaximumMember us-gaap:RevolvingCreditFacilityMember 2021-01-01 2021-09-30 0001645070 srt:MaximumMember us-gaap:OffMarketFavorableLeaseMember 2021-01-01 2021-09-30 0001645070 srt:MinimumMember us-gaap:OffMarketFavorableLeaseMember 2021-01-01 2021-09-30 0001645070 srt:MaximumMember us-gaap:InternetDomainNamesMember 2021-01-01 2021-09-30 0001645070 srt:MinimumMember us-gaap:InternetDomainNamesMember 2021-01-01 2021-09-30 0001645070 srt:MaximumMember us-gaap:TechnologyBasedIntangibleAssetsMember 2021-01-01 2021-09-30 0001645070 srt:MinimumMember us-gaap:TechnologyBasedIntangibleAssetsMember 2021-01-01 2021-09-30 0001645070 srt:MaximumMember us-gaap:TrademarksMember 2021-01-01 2021-09-30 0001645070 srt:MinimumMember us-gaap:TrademarksMember 2021-01-01 2021-09-30 0001645070 srt:MaximumMember us-gaap:CustomerListsMember 2021-01-01 2021-09-30 0001645070 srt:MinimumMember us-gaap:CustomerListsMember 2021-01-01 2021-09-30 0001645070 ster:ScreeningServicesMember 2021-01-01 2021-09-30 0001645070 ster:OtherServicesMember 2021-01-01 2021-09-30 0001645070 country:US 2021-01-01 2021-09-30 0001645070 ster:AllOtherCountriesMember 2021-01-01 2021-09-30 0001645070 us-gaap:TechnologyBasedIntangibleAssetsMember 2021-01-01 2021-09-30 0001645070 us-gaap:TechnologyBasedIntangibleAssetsMember ster:InternalCostMember 2021-01-01 2021-09-30 0001645070 us-gaap:TechnologyBasedIntangibleAssetsMember ster:ExternalCostMember 2021-01-01 2021-09-30 0001645070 ster:StockholderOneMember ster:FourthAmendedAndRestatedManagementServicesTerminationAgreementMember 2021-01-01 2021-09-30 0001645070 ster:GoldmanSachsMember ster:FourthAmendedAndRestatedManagementServicesTerminationAgreementMember 2021-01-01 2021-09-30 0001645070 ster:StockholderOneAndAffiliatesMember ster:SalesEffectedToRelatedPartyMember 2021-01-01 2021-09-30 0001645070 ster:GoldmanSachsAndAffiliatesMember ster:SalesEffectedToRelatedPartyMember 2021-01-01 2021-09-30 0001645070 us-gaap:RestrictedStockUnitsRSUMember 2021-01-01 2021-09-30 0001645070 us-gaap:RestrictedStockMember 2021-01-01 2021-09-30 0001645070 us-gaap:EmployeeStockOptionMember 2021-01-01 2021-09-30 0001645070 ster:TwoThousandAndFifteenLongTermEquityIncentivePlanMember 2021-01-01 2021-09-30 0001645070 ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember us-gaap:ShareBasedCompensationAwardTrancheOneMember ster:ServiceBasedVestingStockOptionsMember 2021-01-01 2021-09-30 0001645070 us-gaap:RestrictedStockUnitsRSUMember us-gaap:ShareBasedCompensationAwardTrancheTwoMember ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember 2021-01-01 2021-09-30 0001645070 us-gaap:RestrictedStockUnitsRSUMember us-gaap:ShareBasedCompensationAwardTrancheOneMember ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember 2021-01-01 2021-09-30 0001645070 us-gaap:RestrictedStockUnitsRSUMember ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember 2021-01-01 2021-09-30 0001645070 us-gaap:EmployeeStockOptionMember us-gaap:ShareBasedCompensationAwardTrancheThreeMember ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember 2021-01-01 2021-09-30 0001645070 us-gaap:EmployeeStockOptionMember us-gaap:ShareBasedCompensationAwardTrancheTwoMember ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember 2021-01-01 2021-09-30 0001645070 us-gaap:EmployeeStockOptionMember us-gaap:ShareBasedCompensationAwardTrancheOneMember ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember 2021-01-01 2021-09-30 0001645070 us-gaap:RestrictedStockMember us-gaap:ShareBasedCompensationAwardTrancheTwoMember ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember 2021-01-01 2021-09-30 0001645070 us-gaap:RestrictedStockMember us-gaap:ShareBasedCompensationAwardTrancheOneMember ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember 2021-01-01 2021-09-30 0001645070 us-gaap:RestrictedStockMember ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember 2021-01-01 2021-09-30 0001645070 ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember ster:ServiceBasedVestingStockOptionsMember us-gaap:ShareBasedCompensationAwardTrancheThreeMember 2021-01-01 2021-09-30 0001645070 ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember ster:ServiceBasedVestingStockOptionsMember us-gaap:ShareBasedCompensationAwardTrancheTwoMember 2021-01-01 2021-09-30 0001645070 ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember ster:IncentiveStockOptionsMember 2021-01-01 2021-09-30 0001645070 ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember ster:ServiceBasedVestingStockOptionsMember 2021-01-01 2021-09-30 0001645070 us-gaap:NondesignatedMember 2021-01-01 2021-09-30 0001645070 us-gaap:DesignatedAsHedgingInstrumentMember 2021-01-01 2021-09-30 0001645070 us-gaap:NondesignatedMember us-gaap:InterestRateSwapMember 2021-01-01 2021-09-30 0001645070 us-gaap:ForeignExchangeContractMember us-gaap:NondesignatedMember 2021-01-01 2021-09-30 0001645070 us-gaap:ForeignExchangeContractMember us-gaap:DesignatedAsHedgingInstrumentMember 2021-01-01 2021-09-30 0001645070 us-gaap:SellingGeneralAndAdministrativeExpensesMember us-gaap:DesignatedAsHedgingInstrumentMember 2021-01-01 2021-09-30 0001645070 us-gaap:CostOfSalesMember us-gaap:DesignatedAsHedgingInstrumentMember 2021-01-01 2021-09-30 0001645070 us-gaap:NondesignatedMember us-gaap:SellingGeneralAndAdministrativeExpensesMember 2021-01-01 2021-09-30 0001645070 us-gaap:CostOfSalesMember us-gaap:NondesignatedMember 2021-01-01 2021-09-30 0001645070 us-gaap:ForeignPlanMember 2021-01-01 2021-09-30 0001645070 ster:TwoThousandAndFifteenLongTermEquityIncentivePlanMember ster:ServiceBasedVestingStockOptionsMember 2021-01-01 2021-09-30 0001645070 ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember 2021-01-01 2021-09-30 0001645070 ster:TwoThousandAndFifteenLongTermEquityIncentivePlanMember ster:IncentiveStockOptionsMember 2021-01-01 2021-09-30 0001645070 ster:ServiceBasedVestingStockOptionsMember 2021-01-01 2021-09-30 0001645070 ster:IncentiveStockOptionsMember 2021-01-01 2021-09-30 0001645070 ster:GainLossOnInterestRateSwapsMember 2021-01-01 2021-09-30 0001645070 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2021-01-01 2021-09-30 0001645070 us-gaap:CostOfSalesMember 2021-01-01 2021-09-30 0001645070 ster:InternallyDevelopedSoftwareAssetsMember 2021-01-01 2021-09-30 0001645070 us-gaap:IPOMember 2021-01-01 2021-09-30 0001645070 ster:CorporateTechnologyAndProductionSystemsMember 2021-01-01 2021-09-30 0001645070 ster:TwoThousandTwentyOneEquityPlanMember 2021-01-01 2021-09-30 0001645070 ster:TwoThousandAndTwentyOneEmployeeStockPurchasePlanMember 2021-01-01 2021-09-30 0001645070 us-gaap:CustomerConcentrationRiskMember us-gaap:RevenueFromContractWithCustomerMember ster:CustomerMember 2021-01-01 2021-09-30 0001645070 us-gaap:CustomerConcentrationRiskMember us-gaap:AccountsReceivableMember ster:CustomerMember 2021-01-01 2021-09-30 0001645070 us-gaap:EmployeeStockOptionMember ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember 2021-01-01 2021-09-30 0001645070 us-gaap:AdditionalPaidInCapitalMember 2021-07-01 2021-09-30 0001645070 us-gaap:CommonStockMember 2021-07-01 2021-09-30 0001645070 us-gaap:RetainedEarningsMember 2021-07-01 2021-09-30 0001645070 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-07-01 2021-09-30 0001645070 ster:ScreeningServicesMember 2021-07-01 2021-09-30 0001645070 ster:OtherServicesMember 2021-07-01 2021-09-30 0001645070 country:US 2021-07-01 2021-09-30 0001645070 ster:AllOtherCountriesMember 2021-07-01 2021-09-30 0001645070 ster:SalesEffectedToRelatedPartyMember ster:StockholderOneAndAffiliatesMember 2021-07-01 2021-09-30 0001645070 ster:GoldmanSachsAndAffiliatesMember ster:SalesEffectedToRelatedPartyMember 2021-07-01 2021-09-30 0001645070 us-gaap:RestrictedStockUnitsRSUMember 2021-07-01 2021-09-30 0001645070 us-gaap:RestrictedStockMember 2021-07-01 2021-09-30 0001645070 us-gaap:EmployeeStockOptionMember 2021-07-01 2021-09-30 0001645070 us-gaap:NondesignatedMember 2021-07-01 2021-09-30 0001645070 us-gaap:ForeignExchangeContractMember us-gaap:NondesignatedMember 2021-07-01 2021-09-30 0001645070 us-gaap:DesignatedAsHedgingInstrumentMember 2021-07-01 2021-09-30 0001645070 us-gaap:ForeignExchangeContractMember us-gaap:DesignatedAsHedgingInstrumentMember 2021-07-01 2021-09-30 0001645070 us-gaap:SellingGeneralAndAdministrativeExpensesMember us-gaap:DesignatedAsHedgingInstrumentMember 2021-07-01 2021-09-30 0001645070 us-gaap:CostOfSalesMember us-gaap:DesignatedAsHedgingInstrumentMember 2021-07-01 2021-09-30 0001645070 us-gaap:NondesignatedMember us-gaap:SellingGeneralAndAdministrativeExpensesMember 2021-07-01 2021-09-30 0001645070 us-gaap:NondesignatedMember us-gaap:CostOfSalesMember 2021-07-01 2021-09-30 0001645070 us-gaap:ForeignPlanMember 2021-07-01 2021-09-30 0001645070 ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember ster:ServiceBasedVestingStockOptionsMember 2021-07-01 2021-09-30 0001645070 ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember ster:IncentiveStockOptionsMember 2021-07-01 2021-09-30 0001645070 ster:GainLossOnInterestRateSwapsMember 2021-07-01 2021-09-30 0001645070 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2021-07-01 2021-09-30 0001645070 us-gaap:CostOfSalesMember 2021-07-01 2021-09-30 0001645070 ster:TwoThousandFifteenAgreementMember us-gaap:SellingGeneralAndAdministrativeExpensesMember 2021-07-01 2021-09-30 0001645070 ster:CorporateTechnologyAndProductionSystemsMember 2021-07-01 2021-09-30 0001645070 us-gaap:CustomerConcentrationRiskMember us-gaap:RevenueFromContractWithCustomerMember ster:CustomerMember 2021-07-01 2021-09-30 0001645070 ster:TwoThousandAndTwentyOneEmployeeStockPurchasePlanMember 2021-07-01 2021-09-30 0001645070 us-gaap:EmployeeStockOptionMember ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember 2021-07-01 2021-09-30 0001645070 us-gaap:AdditionalPaidInCapitalMember 2020-01-01 2020-03-31 0001645070 us-gaap:CommonStockMember 2020-01-01 2020-03-31 0001645070 us-gaap:RetainedEarningsMember 2020-01-01 2020-03-31 0001645070 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-01-01 2020-03-31 0001645070 us-gaap:AdditionalPaidInCapitalMember 2020-04-01 2020-06-30 0001645070 us-gaap:RetainedEarningsMember 2020-04-01 2020-06-30 0001645070 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-04-01 2020-06-30 0001645070 us-gaap:RetainedEarningsMember 2021-01-01 2021-03-31 0001645070 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-01-01 2021-03-31 0001645070 us-gaap:AdditionalPaidInCapitalMember 2021-01-01 2021-03-31 0001645070 us-gaap:CommonStockMember 2021-01-01 2021-03-31 0001645070 us-gaap:AdditionalPaidInCapitalMember 2021-04-01 2021-06-30 0001645070 us-gaap:RetainedEarningsMember 2021-04-01 2021-06-30 0001645070 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-04-01 2021-06-30 0001645070 ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember us-gaap:RestrictedStockUnitsRSUMember 2021-09-22 0001645070 us-gaap:CommonStockMember us-gaap:IPOMember 2021-09-27 2021-09-27 0001645070 us-gaap:IPOMember 2021-09-27 2021-09-27 0001645070 ster:UnderwritersOptionMember us-gaap:IPOMember 2021-09-27 2021-09-27 0001645070 us-gaap:CommonStockMember us-gaap:IPOMember 2021-09-27 0001645070 ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember ster:StockSharesIssuedToEmployeesConsiderationInTheFormOfPromissoryNoteMember 2020-01-01 2020-12-31 0001645070 ster:TwoThousandAndFifteenLongTermEquityIncentivePlanMember ster:ServiceBasedVestingStockOptionsMember 2020-01-01 2020-12-31 0001645070 ster:TwoThousandAndFifteenLongTermEquityIncentivePlanMember ster:IncentiveStockOptionsMember 2020-01-01 2020-12-31 0001645070 us-gaap:CustomerConcentrationRiskMember us-gaap:AccountsReceivableMember ster:CustomerMember 2020-01-01 2020-12-31 0001645070 ster:TheSixthAmendmentMember us-gaap:RevolvingCreditFacilityMember 2021-09-23 0001645070 ster:TheCreditAgreementMember 2021-09-23 0001645070 ster:LettersOfCreditUnderTheRevolverMember 2020-09-30 0001645070 ster:ServiceBasedVestingStockOptionsMember 2020-09-30 0001645070 ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember ster:IncentiveStockOptionsMember 2020-11-01 2020-11-30 0001645070 ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember ster:ServiceBasedVestingStockOptionsMember 2020-11-01 2020-11-30 0001645070 ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember ster:ServiceBasedVestingOptionsAndIncentiveStockOptionsMember 2020-11-01 2020-11-30 0001645070 ster:TwoThousandAndFifteenLongTermEquityIncentivePlanMember ster:ServiceBasedVestingStockOptionsMember 2019-01-01 2019-12-31 0001645070 ster:TwoThousandAndFifteenLongTermEquityIncentivePlanMember ster:IncentiveStockOptionsMember 2019-01-01 2019-12-31 0001645070 ster:StockholderOneMember ster:AnnualCashCompensationAgreementWithTheStockholderForAdditionalManagementServicesMember 2018-01-01 2019-03-31 0001645070 ster:StockholderOneMember ster:AnnualCashCompensationAgreementWithTheStockholderForAdditionalManagementServicesMember 2018-12-31 0001645070 us-gaap:CommonStockMember 2021-09-24 0001645070 ster:FirstLienTermLoanMember us-gaap:SubsequentEventMember 2021-11-01 2021-11-01 0001645070 ster:TwoThousandAndTwentyOneOmnibusIncentivePlanMember ster:StockSharesIssuedToEmployeesConsiderationInTheFormOfPromissoryNoteMember 2021-08-17 2021-08-17 0001645070 ster:AfterSixMonthsFromEffectivenessOfRegistrationStatementMember ster:TwoThousandAndFifteenLongTermEquityIncentivePlanMember 2021-08-04 2021-08-04 0001645070 ster:TwoThousandAndFifteenLongTermEquityIncentivePlanMember ster:OnOrAfterTheFirstAnniversaryToSecondAnniversaryOfTheEffectivenessOfRegistrationStatementMember 2021-08-04 2021-08-04 0001645070 ster:TwoThousandTwentyOneEquityPlanMember 2021-08-04 2021-08-04 0001645070 ster:TwoThousandAndTwentyOneEmployeeStockPurchasePlanMember srt:MinimumMember 2021-08-04 2021-08-04 0001645070 ster:TwoThousandTwentyOneEquityPlanMember 2021-08-04 0001645070 ster:TwoThousandAndTwentyOneEmployeeStockPurchasePlanMember 2021-08-04 0001645070 us-gaap:SubsequentEventMember ster:FirstLienTermLoanMember 2021-11-01 0001645070 ster:TwoThousandAndFifteenLongTermEquityIncentivePlanMember ster:ServiceBasedVestingStockOptionsMember 2019-12-31 0001645070 ster:TwoThousandAndFifteenLongTermEquityIncentivePlanMember ster:IncentiveStockOptionsMember 2019-12-31 0001645070 ster:TwoThousandAndFifteenLongTermEquityIncentivePlanMember ster:ServiceBasedVestingStockOptionsMember 2020-09-30 0001645070 ster:TwoThousandAndFifteenLongTermEquityIncentivePlanMember ster:IncentiveStockOptionsMember 2020-09-30 0001645070 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-09-30 0001645070 us-gaap:RetainedEarningsMember 2020-09-30 0001645070 us-gaap:TreasuryStockCommonMember 2020-09-30 0001645070 us-gaap:AdditionalPaidInCapitalMember 2020-09-30 0001645070 us-gaap:CommonStockMember 2020-09-30 0001645070 ster:TwoThousandAndFifteenLongTermEquityIncentivePlanMember ster:ServiceBasedVestingStockOptionsMember 2020-12-31 0001645070 ster:TwoThousandAndFifteenLongTermEquityIncentivePlanMember ster:IncentiveStockOptionsMember 2020-12-31 0001645070 ster:TwoThousandAndFifteenLongTermEquityIncentivePlanMember ster:ServiceBasedVestingStockOptionsMember 2021-09-30 0001645070 ster:TwoThousandAndFifteenLongTermEquityIncentivePlanMember ster:IncentiveStockOptionsMember 2021-09-30 0001645070 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-09-30 0001645070 us-gaap:RetainedEarningsMember 2021-09-30 0001645070 us-gaap:TreasuryStockCommonMember 2021-09-30 0001645070 us-gaap:AdditionalPaidInCapitalMember 2021-09-30 0001645070 us-gaap:CommonStockMember 2021-09-30 0001645070 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-12-31 0001645070 us-gaap:RetainedEarningsMember 2019-12-31 0001645070 us-gaap:TreasuryStockCommonMember 2019-12-31 0001645070 us-gaap:AdditionalPaidInCapitalMember 2019-12-31 0001645070 us-gaap:CommonStockMember 2019-12-31 0001645070 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-03-31 0001645070 us-gaap:RetainedEarningsMember 2020-03-31 0001645070 us-gaap:TreasuryStockCommonMember 2020-03-31 0001645070 us-gaap:AdditionalPaidInCapitalMember 2020-03-31 0001645070 us-gaap:CommonStockMember 2020-03-31 0001645070 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-06-30 0001645070 us-gaap:RetainedEarningsMember 2020-06-30 0001645070 us-gaap:TreasuryStockCommonMember 2020-06-30 0001645070 us-gaap:AdditionalPaidInCapitalMember 2020-06-30 0001645070 us-gaap:CommonStockMember 2020-06-30 0001645070 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-12-31 0001645070 us-gaap:RetainedEarningsMember 2020-12-31 0001645070 us-gaap:TreasuryStockCommonMember 2020-12-31 0001645070 us-gaap:AdditionalPaidInCapitalMember 2020-12-31 0001645070 us-gaap:CommonStockMember 2020-12-31 0001645070 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-03-31 0001645070 us-gaap:RetainedEarningsMember 2021-03-31 0001645070 us-gaap:TreasuryStockCommonMember 2021-03-31 0001645070 us-gaap:AdditionalPaidInCapitalMember 2021-03-31 0001645070 us-gaap:CommonStockMember 2021-03-31 0001645070 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-06-30 0001645070 us-gaap:RetainedEarningsMember 2021-06-30 0001645070 us-gaap:TreasuryStockCommonMember 2021-06-30 0001645070 us-gaap:AdditionalPaidInCapitalMember 2021-06-30 0001645070 us-gaap:CommonStockMember 2021-06-30 iso4217:USD xbrli:shares xbrli:pure utr:Year iso4217:INR iso4217:USD xbrli:shares ster:Office ster:Employees ster:Instruments ster:Segment
Table of Contents
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM
10-Q
 
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
or
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
                    
to
                    
Commission File Number:
001-40829
 
 
Sterling Check Corp.
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
 
37-1784336
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
1 State Street Plaza, 24
th
Floor
 
New York, New York
 
10004
(Address of principal executive offices)
 
(Zip Code)
1 (800)
853-3228
(Registrant’s telephone number, including area code)
 
Title of each class
 
Trading
Symbol(s)
 
Name of each exchange
on which registered
Common stock, $0.01 par value
 
STER
 
The Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☐    No  ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
 
Large accelerated filer
 
  
Accelerated filer
 
Non-accelerated filer
 
  
Smaller reporting company
 
    
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).    Yes  ☐    No  
The total number of outstanding shares of the registrant’s common stock, $0.01 par value per share, as of November 8, 2021 was 95,808,843.
 
 
 

Table of Contents
STERLING CHECK CORP. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM
10-Q
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021
TABLE OF CONTENTS
 
 
    
Item 1.   Financial Statements    5
  Sterling Check Corp. Unaudited Condensed Consolidated Balance Sheets as of December 31, 2020 and September 30, 2021    5
  Sterling Check Corp. Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2020 and 2021    6
  Sterling Check Corp. Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2020 and 2021    7
  Sterling Check Corp. Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2021    8
  Notes to the Unaudited Condensed Consolidated Financial Statements    9
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations    32
Item 3.   Quantitative and Qualitative Disclosures About Market Risk    52
Item 4.   Controls and Procedures    53
    
Item 1.   Legal Proceedings    54
Item 1A.   Risk Factors    54
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds    54
Item 3.   Defaults Upon Senior Securities    55
Item 4.   Mine Safety Disclosures    55
Item 5.   Other Information    55
Item 6.   Exhibits    55
 
2

Table of Contents
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This quarterly report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and we intend that all forward-looking statements we make will be subject to the safe harbor protections created thereby. You can generally identify forward-looking statements by our use of forward-looking terminology such as “aim,” “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “projection,” “seek,” “should,” “will” or “would,” or the negative thereof or other variations thereon or comparable terminology. In particular, statements regarding our expectations about market trends, and our expectations, beliefs, plans, strategies, objectives, prospects, assumptions, or future events or performance contained in this report under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are forward-looking statements.
We have based these forward-looking statements on our current expectations, assumptions, estimates and projections. While we believe these expectations, assumptions, estimates and projections are reasonable, such forward-looking statements are only predictions and involve known and unknown risks and uncertainties, many of which are beyond our control. These and other important factors, including those discussed in this report under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” may cause our actual results, performance or achievements to differ materially from those expressed or implied by these forward-looking statements, or could affect our share price. Some of the factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements include:
 
   
changes in economic, political and market conditions and the impact of these changes on our clients’ hiring trends;
 
   
the sufficiency of our cash to meet our liquidity needs;
 
   
the possibility of cyberattacks, security vulnerabilities and internet disruptions, including breaches of data security and privacy leaks, data loss and business interruptions;
 
   
our ability to comply with the extensive U.S. and foreign laws, regulations and policies applicable to our industry, and changes in such laws, regulations and policies;
 
   
our compliance with data privacy laws and regulations;
 
   
potential liability for failures to provide accurate information to our clients, which may not be covered, or may be only partially covered, by insurance;
 
   
the possible effects of negative publicity on our reputation and the value of our brand;
 
   
our failure to compete successfully;
 
   
our ability to keep pace with changes in technology and to provide timely enhancements to our products and services;
 
   
the impact of
COVID-19
on global markets, economic conditions and the response by governments and third parties;
 
   
our ability to cost-effectively attract new clients and retain our existing clients;
 
   
our ability to grow our
Identity-as-a-service
offerings;
 
   
our success in new product introductions and adjacent market penetrations;
 
   
our ability to expand into new geographies;
 
   
our ability to pursue strategic mergers and acquisitions;
 
   
design defects, errors, failures or delays with our products and services;
 
   
systems failures, interruptions, delays in services, catastrophic events and resulting interruptions;
 
   
natural or man-made disasters including pandemics and other significant public health emergencies, outbreaks of hostilities or effects of climate change and our ability to deal effectively with damage or disruption caused by the foregoing;
 
   
our ability to implement our business strategies profitably;
 
   
our ability to retain the services of certain members of our management;
 
   
inadequate protection of our intellectual property;
 
3

Table of Contents
   
our ability to implement, maintain and improve effective internal controls and remediate the material weakness described under “Risk Factors” in our final prospectus, filed with the SEC on September 24, 2021 pursuant to Rule 424(b) under the Securities Act (our “IPO Prospectus”), and elsewhere in this report;
 
   
our ability to comply with public company requirements in a timely and cost-effective manner, and expense strain on our resources and diversion of our management’s attention resulting from public company compliance requirements; and
 
   
the other risks described under “Risk Factors” in our IPO Prospectus.
Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements contained in this report are not guarantees of future performance and our actual results of operations, financial condition, and liquidity, and the development of the industry in which we operate, may differ materially from the forward-looking statements contained in this report. In addition, even if our results of operations, financial condition, and liquidity, and events in the industry in which we operate, are consistent with the forward-looking statements contained in this report, they may not be predictive of results or developments in future periods.
Any forward-looking statement that we make in this report speaks only as of the date of such statement. Except as required by law, we do not undertake any obligation to update or revise, or to publicly announce any update or revision to, any of the forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this report.
Investors and others should note that we announce material financial and operational information using our investor relations website, press releases, SEC filings and public conference calls and webcasts. Information about Sterling, our business, and our results of operations may also be announced by posts on Sterling’s accounts on the following social media channels: Instagram, LinkedIn and Twitter. The information that we post through these social media channels may be deemed material. As a result, we encourage investors, the media and others interested in Sterling to monitor these social media channels in addition to following our investor relations website, press releases, SEC filings and public conference calls and webcasts. The list of social media channels we use may be updated from time to time on our investor relations website.
 
4

Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
STERLING CHECK CORP.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 2020 and September 30, 2021
 
(in thousands, except share amounts)
  
December 31,
2020
 
 
September 30,
2021
 
 
  
 
 
 
 
 
ASSETS
  
 
CURRENT ASSETS:
  
 
Cash and cash equivalents
   $ 66,633     $ 192,397  
Accounts receivable (net of allowance for doubtful accounts of $1,861 and $2,255
as of
December 31, 2020 and September 30, 2021, respectively)
     80,381       119,812  
Insurance receivable
     750       —    
Prepaid expenses
     7,273       8,658  
Other current assets
     7,845       6,701  
    
 
 
   
 
 
 
Total current assets
     162,882       327,568  
Property and equipment, net
     14,130       10,414  
Goodwill
     831,800       830,679  
Intangible assets, net
     300,544       254,101  
Other noncurrent assets, net
     6,762       7,032  
    
 
 
   
 
 
 
TOTAL ASSETS
   $ 1,316,118     $ 1,429,794  
    
 
 
   
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
          
 
  
 
CURRENT LIABILITIES:
                
Accounts payable
   $ 14,708     $ 27,192  
Litigation settlement obligation
     750        
Accrued expenses
     35,899       52,837  
Current portion of long-term debt
     13,147       6,461  
Other current liabilities
     21,488       19,791  
    
 
 
   
 
 
 
Total current liabilities
     85,992       106,281  
Long-term debt, net
     602,306       599,202  
Deferred income taxes
     29,400       15,895  
Other liabilities
     15,236       7,171  
    
 
 
   
 
 
 
Total liabilities
   $ 732,934     $ 728,549  
    
 
 
   
 
 
 
COMMITMENTS AND CONTINGENCIES (NOTE 11)
            
STOCKHOLDERS’ EQUITY:
                
Preferred stock ($0.01 par value; 100,000,000 shares authorized; no shares issued or outstanding)
            
Common stock ($0.01 par value; 239,600,000 shares authorized
,
88,554,962 shares issued and outstanding as of December 31, 2020; 1,000,000,000 shares authorized
,
95,787,780 shares issued and outstanding as of September 30, 2021)
     1       68  
Additional
paid-in
capital
     770,714       911,233  
Common stock held in treasury (107,820
shares as of December 31, 2020
and
September 30, 2021)
     (897     (897
Accumulated deficit
     (187,691     (208,922
Accumulated other comprehensive income (loss)
     1,057       (237
    
 
 
   
 
 
 
Total stockholders’ equity
     583,184       701,245  
    
 
 
   
 
 
 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
   $ 1,316,118     $ 1,429,794  
 
  
 
 
 
 
 
 
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
5

Table of Contents
STERLING CHECK CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE LOSS
Three and Nine Months Ended September 30, 2020 and 2021
 
    
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
(in thousands except share and per share data)
  
2020
   
2021
   
2020
   
2021
 
REVENUES
   $ 117,602     $ 169,557     $ 325,550     $ 468,255  
OPERATING EXPENSES:
                                
Cost of revenues (exclusive of depreciation and amortization below)
     55,112       82,638       153,458       225,798  
Corporate technology and production systems
     10,842       12,084       32,922       32,435  
Selling, general and administrative
     25,391       84,983       86,848       153,194  
Depreciation and amortization
     22,863       20,346       68,441       61,193  
Impairments of long-lived assets
     621       15       680       2,940  
    
 
 
   
 
 
   
 
 
   
 
 
 
Total operating expenses
     114,829       200,066       342,349       475,560  
    
 
 
   
 
 
   
 
 
   
 
 
 
OPERATING INCOME (LOSS)
     2,773       (30,509     (16,799     (7,305
    
 
 
   
 
 
   
 
 
   
 
 
 
OTHER EXPENSE (INCOME):
                                
Interest expense, net
     7,817       7,668       25,110       22,841  
(Gain) loss on interest rate swaps
     (49     112       9,604       199  
Other income
     (336     (400     (998     (1,034
    
 
 
   
 
 
   
 
 
   
 
 
 
Total other expense, net
     7,432       7,380       33,716       22,006  
    
 
 
   
 
 
   
 
 
   
 
 
 
LOSS BEFORE INCOME TAXES
     (4,659     (37,889     (50,515     (29,311
Income tax provision (benefit)
     5,727       (12,633     718       (8,080
    
 
 
   
 
 
   
 
 
   
 
 
 
NET LOSS
   $ (10,386   $ (25,256   $ (51,233   $ (21,231
    
 
 
   
 
 
   
 
 
   
 
 
 
Unrealized gain (loss) on hedged transactions, net of tax
     231       (1     231       (323
Foreign currency translation adjustments, net of tax
     1,000       (1,565     (955     (971
    
 
 
   
 
 
   
 
 
   
 
 
 
Total other comprehensive income (loss)
     1,231       (1,566     (724     (1,294
    
 
 
   
 
 
   
 
 
   
 
 
 
COMPREHENSIVE LOSS
   $ (9,155   $ (26,822   $ (51,957   $ (22,525
    
 
 
   
 
 
   
 
 
   
 
 
 
Net loss per share attributable to stockholders
                                
Basic
   $ (0.12   $ (0.28   $ (0.58   $ (0.24
Diluted
   $ (0.12   $ (0.28   $ (0.58   $ (0.24
Weighted average number of shares outstanding
                                
Basic
     88,332,134       89,431,022       88,325,838       88,956,388  
Diluted
     88,332,134       89,431,022       88,325,838       88,956,388  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
6
STERLING CHECK CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Three and Nine Months Ended September 30, 2020 and 2021
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
 
 
 
Accumulated
 
 
 
 
 
  
 
 
  
 
 
  
Additional
 
  
Common Stock
 
 
 
 
 
Other
 
 
 
 
 
  
Shares
 
  
Par
 
  
Paid-in
 
  
Held in
 
 
Accumulated
 
 
Comprehensive
 
 
 
 
(in thousands, except share amounts)
  
Outstanding
 
  
Value
 
  
Capital
 
  
Treasury
 
 
Deficit
 
 
(Loss) Income
 
 
Total
 
BALANCE as of December 31, 2019
     88,188,374     
$
1     
$
764,769     
$
(897  
$
(135,398  
$
(1,364   $ 627,111  
Common stock issued for exercise of employee-based stock options
     143,760        —          1,200        —         —         —         1,200  
Stock-based compensation
     —          —          545        —         —         —         545  
Net loss
     —          —          —          —         (15,900     —         (15,900
Foreign currency translation adjustment
     —          —          —          —         —         (3,188     (3,188
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
 
BALANCE as of March 31, 2020
     88,332,134      $ 1      $ 766,514      $ (897   $ (151,298   $ (4,552   $ 609,768  
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
 
Stock-based compensation
     —          —          641        —         —         —         641  
Net loss
     —          —          —          —         (24,947     —         (24,947
Foreign currency translation adjustment
     —          —          —          —         —         1,234       1,234  
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
 
BALANCE as of June 30, 2020
     88,332,134      $ 1      $ 767,155      $ (897   $ (176,245   $ (3,318   $ 586,696  
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
 
Stock-based compensation
     —          —          570        —         —         —         570  
Net loss
     —          —          —          —         (10,386     —         (10,386
Unrealized gain on hedge transactions
     —          —          —          —         —         231       231  
Foreign currency translation adjustment
     —          —          —          —         —         1,000       1,000  
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
 
BALANCE as of September 30, 2020
     88,332,134      $ 1      $ 767,725      $ (897   $ (186,631   $ (2,087   $ 578,111  
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
  
 
 
  
 
 
 
 
 
 
 
 
 
Accumulated
 
 
 
 
 
  
 
 
  
 
 
  
Additional
 
 
Common Stock
 
 
 
 
 
Other
 
 
 
 
 
  
Shares
 
  
Par
 
  
Paid-in
 
 
Held in
 
 
Accumulated
 
 
Comprehensive
 
 
 
 
(in thousands, except share amounts)
  
Outstanding
 
  
Value
 
  
Capital
 
 
Treasury
 
 
Deficit
 
 
(Loss) Income
 
 
Total
 
BALANCE as of December 31, 2020
     88,554,962     
$
1     
$
770,714    
$
(897  
$
(187,691  
$
1,057     $ 583,184  
Issuance of common stock
     271,946        —          2,427       —         —         —         2,427  
Net income
     —          —          —         —         628       —         628  
Unrealized loss on hedged transactions
     —          —          —         —         —         (134     (134
Foreign currency translation adjustment
     —          —          —         —         —         372       372  
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
BALANCE as of March 31, 2021
     88,826,908      $ 1      $ 773,141     $ (897   $ (187,063   $ 1,295     $ 586,477  
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Stock-based compensation
     —          —          765       —         —         —         765  
Net income
     —          —          —         —         3,397       —         3,397  
Unrealized loss on hedged transactions
     —          —          —         —         —         (188     (188
Foreign currency translation adjustment
     —          —          —         —         —         222       222  
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
BALANCE as of June 30, 2021
     88,826,908      $ 1      $ 773,906     $ (897   $ (183,666   $ 1,329     $ 590,673  
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Common stock issued for exercise of employee-based stock options
     6,093        —          56       —         —         —         56  
Issuance of common stock in connection with
IPO
, net of offering costs, underwriting discounts and commissions
     4,760,000        48        94,475       —         —         —         94,523  
Issuance of common stock in connection with forgiveness of promissory notes
     370,182        —          8,409       —         —         —         8,409  
Capital contribution from Stockholder
     —          —          15,576       —         —         —         15,576  
Issuance of restricted shares
     1,824,597        19        (19     —         —         —         —    
Stock-based compensation
     —          —          18,830       —         —         —         18,830  
Net loss
     —          —          —         —         (25,256     —         (25,256
Unrealized loss on hedged transactions
     —          —          —         —         —         (1     (1
Foreign currency translation adjustment
     —          —          —         —         —         (1,565     (1,565
    
 
 
    
 
 
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
BALANCE as of September 30, 2021
     95,787,780      $ 68      $ 911,233     $ (897   $ (208,922   $ (237   $ 701,245  
  
 
 
 
  
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
7

STERLING CHECK CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 2020 and 2021
 
 
  
Nine Months Ended September 30,
 
(in thousands)
  
    2020    
 
 
    2021    
 
CASH FLOWS FROM OPERATING ACTIVITIES
                
Net loss
   $ (51,233   $ (21,231
Adjustments to reconcile net loss to net cash provided by operations
                
Depreciation and amortization
     68,441       61,193  
Deferred income taxes
     (4,117     (13,349
Stock-based compensation
     1,756       27,236  
Impairments of long-lived assets
     680       2,940  
Provision for bad debts
     623       604  
Amortization of financing fees
     373       362  
Amortization of debt discount
     1,767       1,741  
Deferred rent
     (76     (1,334
Unrealized translation gain on investment in foreign subsidiaries
     (514     (100
Changes in fair value of derivatives
     7,406       (5,024
Excess payment on contingent consideration for acquisition
     —         (1,159
Changes in operating assets and liabilities
 
Accounts receivable
     552       (40,383
Insurance receivable
     —         750  
Prepaid expenses
     (2,802     (1,421
Other assets
     2,380       1,464  
Accounts payable
     563       12,116  
Litigation settlement obligation
     —         (750
Accrued expenses
     (7,995     15,609  
Other liabilities
     8,049       (338
    
 
 
   
 
 
 
Net cash provided by operating activities
     25,853       38,926  
    
 
 
   
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES
 
Purchases of property and equipment
     (1,835     (2,619
Purchases of intangible assets and capitalized software
     (11,250     (11,987
Proceeds from disposition of property and equipment
     236       7  
    
 
 
   
 
 
 
Net cash used in investing activities
     (12,849     (14,599
    
 
 
   
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES
 
Issuance of common stock
     1,200       2,483  
Proceeds from issuance of common stock in IPO net of underwriting discounts and commissions
     —         102,638  
Payments of
IPO
issuance costs
     —         (6,120
Capital contribution from
certain stockholders
     —         15,576  
Payments of long-term debt
     (4,846     (11,531
Repayments of revolving credit facility
     (83,800     —    
Borrowings on revolving credit facility
     83,800       —    
Payment of contingent consideration for acquisition
     —         (738
Payments on equipment capital lease obligations
     (5     (8
    
 
 
   
 
 
 
Net cash (used in) provided by financing activities
     (3,651     102,300  
    
 
 
   
 
 
 
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
     (2,194     (863
    
 
 
   
 
 
 
NET CHANGE IN CASH AND CASH EQUIVALENTS
     7,159       125,764  
CASH AND CASH EQUIVALENTS
                
Beginning of period
     50,299       66,633  
    
 
 
   
 
 
 
Cash and cash equivalents at end of period
   $ 57,458     $ 192,397  
    
 
 
   
 
 
 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
                
Cash paid during the period for
                
Interest, net of capitalized amounts of $300 and $220 for the nine months ended September 30, 2020 and 2021, respectively
   $ 20,502     $ 21,494  
Income taxes
     3,702       4,663  
Offering costs included in accounts payable and accrued liabilities
     —         1,996  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 
8
STERLING CHECK CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
1.
Description of Business
Sterling Check Corp. (the “Company”), a Delaware corporation headquartered in New York City, New York, is a leading global provider of technology-enabled background and identity verification services. The Company provides the foundation of trust and safety its clients need to create effective environments for their most essential resource—people. The Company offers a comprehensive hiring and risk management solution that begins with identity verification, followed by criminal background screening, credential verification, drug and health screening, employee onboarding document processing and ongoing risk monitoring.
On August 23, 2021, the Company filed a Certificate of Amendment to its Certificate of Incorporation with the Secretary of State of Delaware to change the name of the Company from “Sterling Ultimate Parent Corp.” to “Sterling Check Corp.” The name change amendment was approved by the Company’s Board of Directors (“Board of Directors”) at a meeting held on August 4, 2021 and became effective on August 23, 2021.
The Company’s final prospectus related to the initial public offering (“IPO”) of its common stock, $0.01 par value per share (“common stock”) was filed with the Securities and Exchange Commission (“SEC”) on September 24, 2021 pursuant to Rule 424(b) under the Securities Act (our “IPO Prospectus”) and the common stock began trading on the Nasdaq Global Select Market on September 23, 2021. On September 27, 2021, the Company completed its IPO of an aggregate of 16,427,750 shares of common stock at a public offering price of $23.00 per share, pursuant to the IPO Prospectus. The Company sold 4,760,000 shares and certain existing stockholders sold an aggregate of 11,667,750 shares, including 2,142,750 shares that were sold pursuant to the full exercise of the underwriters’ option to purchase additional shares. The Company received aggregate net proceeds of $94.5 million after deducting underwriting discounts and commissions of $6.8 million and other offering expenses of $8.1 million, of which $2.0 million was unpaid
as of
September 30, 2021.
As of September 30, 2021, the Company is 63.8% owned by an investment group consisting of entities advised by or affiliated with The Goldman Sachs Group, Inc. (“Goldman Sachs”)
 
and Caisse de dépôt et placement du Québec
(“CDPQ”). CDPQ owns its equity interest in the Company indirectly through a limited partnership controlled by Goldman Sachs.
 
2.
Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and include accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
These unaudited condensed consolidated financial statements are unaudited; however, in the opinion of management, they reflect all adjustments consisting only of normal recurring adjustments necessary to state fairly the financial position, results of operations and cash flows for the periods presented in conformity with US GAAP applicable to interim periods. The results of operations for the interim periods presented are not necessarily indicative of results for the full year or future periods. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of December 31, 2020 and notes thereto included in the IPO Prospectus
.
On September 10, 2021, the Board of Directors authorized a stock split and the Company filed an amendment to its certificate of incorporation to effectuate a
1,198-for-1
split of its outstanding common stock. The stock split was effectuated such that (i) each then outstanding share of common stock was increased to 1,198 shares; (ii) the number of shares of common stock into which then-outstanding options to purchase common stock is exercisable was proportionately increased; and (iii) the exercise price of each then-outstanding option to purchase common stock was proportionately reduced. The accompanying unaudited condensed consolidated financial statements give retroactive effect as though the
1,198-for-1
stock split of the Company’s common stock occurred for all periods presented.
 
9

Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and judgements that can affect the reported amount of assets, liabilities, revenues, expenses and the disclosure of contingent assets and liabilities. Some of the significant estimates include the impairment of long-lived assets, goodwill impairment, the determination of the fair value of acquired assets and liabilities, collectability of receivables, the valuation of stock-based awards and stock-based compensation and sales and income tax liabilities. The Company also applies an estimated useful life of three years to internally developed software assets. This is based on the historical observed pace of change in the Company’s delivery, technology, and product offerings as well as market competition. The Company believes that the estimates used in the preparation of these unaudited condensed consolidated financial statements are reasonable; however, actual results could differ materially from these estimates.
Segment Information
The Company has one operating and reportable segment. The Company’s chief operating decision maker is its Chief Executive Officer, who reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance.
Cash and Cash Equivalents
Cash and cash equivalents of $66.6 million and $192.4 million as of December 31, 2020 and September 30, 2021, respectively, include money market instruments with maturities of three months or less. The Company maintained cash outside the United States (the “U.S.”) as of December 31, 2020 of $29.4 
million with the largest deposits being held in India and Canada, with balances of
$10.3 million and $7.0 million, respectively. Cash outside the U.S. was approximately $42.8 
million as of September 30, 2021, with the largest deposits being held in India and Canada, with balances of
$12.8 million and $14.1 million, respectively.
Deferred transaction costs
The Company capitalized certain legal, professional, accounting and other third-party fees directly related to the IPO as deferred transaction costs until the IPO was completed. Upon completion of the IPO, these costs were recorded as a reduction to additional paid-in capital generated from the offering within stockholders’ equity.
Foreign Currency
Assets and liabilities of operations having
non-USD
functional currencies are translated at
period-end
exchange rates, and income statement accounts are translated at weighted average exchange rates for the period. Gains or losses resulting from translating foreign currency financial statements, net of any related tax effects, are reflected in Accumulated other comprehensive income (loss), a separate component of stockholders’ equity on the balance sheet. Gains or losses resulting from foreign currency transactions incurred in currencies other than the local functional currency are included in Other income in the statements of operations and comprehensive loss. The cumulative translation adjustment resulted in a gain of $0.1 million and a loss of $0.9 million as of December 31, 2020 and September 30, 2021, respectively.
Revenue Recognition
Revenue is recognized in accordance with the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers” (“ASC 606”) when a performance obligation has been satisfied by transferring a promised good or service to a customer and the customer obtains control of the good or service. To recognize revenue, two parties must have an agreement that creates enforceable rights and obligations, the performance obligations must be identifiable and the transaction price
must
be determinable. The agreement must also have commercial substance and collection must be probable.
 
10

The Company contracts with customers to provide technology-enabled background and identity verification services. The Company offers a comprehensive hiring and risk management solution that begins with identity verification, followed by criminal background screening, credential verification, drug and health screening, employee onboarding document processing and ongoing risk monitoring. Results from services are provided through a screening report and the customer takes control of the product when the report is completed. Accordingly, revenue is generally recognized at the point in time when the customer receives and can use the report. Background and identity verification services comprised a substantial portion of the total revenues for the three and nine months ended September 30, 2020 and 2021. As such, significant changes in background and identity verification services could affect the nature, amount, timing, and uncertainty of revenue and related cash flows. Payment for background and identity verification services generally occurs once the reports have been received by the customer. The Company records third-party pass-through fees incurred as part of screening related products on a gross revenue basis, with the related expense recorded as third-party cost of revenue, as the Company has control over the transaction and is therefore considered to be acting as a principal.
The Company’s contracts generally do not include any obligations for returns, refunds, or similar obligations, nor does the Company have a practice of granting significant concessions. Payment terms and conditions vary by contract and customer, although terms generally include a requirement of payment within 30 to 60 days of the invoice date. Any advanced payments received from customers are initially deferred and subsequently recognized as revenue as the related performance obligations are satisfied. There is typically no variable consideration related to the Company’s contracts, nor do they include a significant financing component,
non-cash
consideration or consideration payable to a customer.
For revenue arrangements containing multiple products or
 
services, the Company accounts for the individual products or services as separate performance obligations if they are distinct, the product or service is separately identifiable from other terms in the contract and if a customer can benefit from it on its own or with other resources that are readily available to the customer. If these criteria are not met, the promised products or services are accounted for as a combined performance obligation. The Company allocates the contract price to each performance obligation based on the standalone selling prices of each distinct product or service in the contract.
Sales taxes collected from customers are remitted to governmental authorities and are therefore excluded from revenues in the statements of operations and comprehensive loss.
Corporate Technology and Production Systems Expense
Corporate technology and production systems expense includes costs related to maintaining the Company’s corporate information technology infrastructure and
non-capitalizable
costs to develop and maintain its production systems.
The following table sets forth expenses included in each category of this line item:
 
 
  
Three Months Ended September 30,
 
  
Nine Months Ended September 30,
 
 
  
 
 
  
 
 
  
 
 
  
 
 
(in thousands)
  
    2020    
 
  
    2021    
 
  
    2020    
 
  
    2021    
 
Corporate information technology
   $ 4,696      $ 6,122      $ 14,902      $ 15,611  
    
 
 
    
 
 
    
 
 
    
 
 
 
Development of platform and product initiatives
     4,150        3,906        12,170        11,242  
Production support and maintenance
     1,996        2,056        5,850        5,582  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total production systems
     6,146        5,962        18,020        16,824  
    
 
 
    
 
 
    
 
 
    
 
 
 
Corporate technology and production systems
   $ 10,842      $ 12,084      $ 32,922      $ 32,435  
    
 
 
    
 
 
    
 
 
    
 
 
 
Corporate information technology expenses consist of personnel costs supporting internal operations such as information technology support and the maintenance of information security and business continuity functions. Also included are third-party costs including cloud computing costs that support the Company’s corporate internal systems, software licensing and maintenance, telecommunications and other technology infrastructure
costs
.
 
11

Production systems costs consist of
non-capitalizable
personnel costs including contractor costs incurred for the development of platform and product initiatives and production support and maintenance. Platform and product initiatives facilitate the development of the Company’s technology platform and the launch of new screening products. Production support and maintenance includes costs to support and maintain the technology underlying the Company’s existing screening products and to enhance the ease of use of the Company’s cloud applications. Certain personnel costs related to new products and features are capitalized and amortized to depreciation and amortization.
Corporate technology and production systems expenses also include
non-capitalizable
production system and corporate information technology expenses related to Project Ignite, a three-phase strategic investment initiative. Phase one of Project Ignite modernized client and candidate experiences and is complete. Phase two of Project Ignite focused on decommissioning the Company’s
on-premises
data centers and migrating the Company’s production systems and corporate information technological infrastructure to a managed service provider in the cloud. As of June 30, 2021, the Company completed phase two related to the migration of its production and fulfillment systems to the cloud, and as a result, 95% of revenue was processed through platforms hosted in the cloud. The Company will continue to incur expenses related to phase two to complete the decommissioning of
on-premises
data centers for internal corporate technology infrastructure and migration to the cloud. This is expected to be completed by June 30, 2022. Phase three of Project Ignite is decommissioning of the platforms purchased over the prior ten years and the migration of the clients to one global platform. This third and final phase, which the Company expects to complete in 2022, will unify clients onto a single global platform. The future costs related to completing these initiatives will be included in corporate technology and production systems expense.     
 
3.
Recent Accounting Standards Updates
The Company qualifies as an emerging growth company under the Jumpstart Our Business Startups Act (the “JOBS Act”). The JOBS Act permits extended transition periods for complying with new or revised accounting standards affecting public companies. The Company has elected to use the extended transition periods and is adopting new or revised accounting standards on the FASB‘s
non-public
company timeline. As such, the Company’s financial statements may not be comparable to financial statements of public entities that comply with new or revised accounting standards on a
non-delayed
basis.    
Accounting Pronouncements Adopted
In August 2017, the FASB issued Accounting Standards Update (“ASU”)
No. 2017-12,
“Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities” (“ASU
No. 2017-12”),
which amends and simplifies existing guidance in order to allow companies to more accurately present the economic effects of risk management activities in the financial statements. ASU
No. 2017-12
was effective for
non-public
enterprises for annual periods after December 15, 2020, with early adoption permitted. The Company adopted this updated guidance effective January 1, 2021 and it did not have a material impact on the financial statements of the Company.
In August 2018, the FASB issued ASU
No. 2018-15,
“Intangibles-Goodwill and
Other-Internal-Use
Software (Topic
350-40)”
(“ASU
No. 2018-15”)
to help evaluate the accounting for costs of implementation activities incurred in a cloud computing arrangement that is a services contract. ASU
No. 2018-15
aligns the requirement for deferring implementation costs incurred in a cloud computing arrangement that is a services contract with those incurred to develop or obtain
internal-use
software. ASU
No. 2018-15
was effective for
non-public
enterprises for annual periods after December 15, 2020, with early adoption permitted. The Company adopted this updated guidance effective January 1, 2021 and it did not have a material impact on the financial statements of the Company.
 
12

Accounting Pronouncements Not Yet Adopted
In February 2016, the FASB issued ASU No.
2016-02, “Leases”
(“ASC 842”), on the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record
a right-of-use asset
and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for in a manner similar to the accounting under existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. ASC 842 supersedes the previous leases standard, ASC 840, Leases. The guidance is effective for the Company for annual periods beginning after December 15, 2021 and interim periods within annual periods beginning after December 15, 2022. The Company is currently evaluating the impact of the adoption of the new standard on its financial statements but has not yet determined what the effects of adopting this updated guidance will be. The Company plans to adopt this updated guidance for the annual period ending December 31, 2022 and anticipates that it will recognize a right of use asset and lease liability on the adoption date. The Company plans to apply practical expedients provided in the standards update that allow the Company, among other things, not to reassess contracts that commenced prior to the adoption. The Company also anticipates electing a policy not to recognize right of use assets and lease liabilities related to short-term and immaterial leases.
In June 2016, the FASB issued ASU No.
2016-13, “Financial
Instruments –
 
Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments” (“ASU No.
2016-13”)
.
 ASU No.
2016-13 requires
an entity to utilize a new impairment model known as the current expected credit loss (“CECL”) model to estimate its lifetime expected credit loss and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. The CECL model is expected to result in more timely recognition of credit losses. ASU No.
2016-13 also
requires new disclosures for financial assets measured at amortized cost, loans, and
available-for-sale debt
securities. As per the latest ASU
No. 2020-02,
“Financial Instruments – Credit Losses (Topic 326) and Leases (Topic 842),” the FASB deferred the timelines for certain small public and private entities. The new guidance will be adopted by the Company for the annual reporting period beginning January 1, 2023, including interim periods within that annual reporting period. The standard will apply as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. The Company is in the process of evaluating the impact of the adoption of ASU No.
2016-13 on
the Company’s financial statements and related disclosures.
In March 2020 and January 2021, the FASB issued ASU
No. 2020-04,
“Reference Rate Reform (Topic 848)” (“ASU
No. 2020-04”)
and ASU
No. 2021-01,
“Reference Rate Reform (Topic 848): Scope” (“ASU
No. 2021-01”),
respectively. These ASUs address concerns about the risk of cessation of the London Interbank Offered Rate (“LIBOR”) and the identification of alternative reference rates. The amendments in ASU
No. 2020-04
and ASU
No. 2021-01
provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform. The amendments in ASU
No. 2020-04
and ASU
No. 2021-01
are elective. The Company is evaluating the impact that adoption of any of the amendments within these ASUs will have on its financial statements ahead of the expected cessation of the one week and
two-month
LIBOR rates in December 2021.
 
4.
Property and Equipment, net
 
(in thousands)
  
December 31,
2020
    
September 30,
2021
 
Furniture and fixtures
   $ 3,925      $ 3,214  
Computers and equipment
     34,895        36,835  
Leasehold improvements
     10,928        7,762  
    
 
 
    
 
 
 
       49,748        47,811  
Less: Accumulated depreciation
     (35,618      (37,397
    
 
 
    
 
 
 
Total property and equipment, net
   $ 14,130      $ 10,414  
    
 
 
    
 
 
 
During the three months ended September 30, 2020 and 2021, depreciation expense on property and equipment was $1.7 million and $1.1 million, respectively. During the nine months ended September 30, 2020 and 2021, depreciation expense on property and equipment was $5.5 million and $3.5 million, respectively. Write down of abandoned property and equipment no longer in use was $0.6 million for the three months ended September 30, 2020. Write down of abandoned property and equipment no longer in use was $0.6 million and $2.8 million for the nine months ended September 30, 2020 and 2021, respectively.
 
13

5.
Goodwill and Intangible Assets
Goodwill
The changes in the carrying amount of goodwill for the nine months ended September 30, 2021 were as follows:
 
(in thousands)
      
Goodwill as of December 31, 2020
   $ 831,800  
Foreign currency translation adjustment
     (1,121
    
 
 
 
Goodwill as of September 30, 2021
   $ 830,679  
    
 
 
 
Intangible Assets
Intangible assets, net consisted of the following for the periods presented:
 
           
December 31, 2020
    
September 30, 2021
 
(dollars in thousands)
  
Estimated
Useful Lives
    
Gross
Carrying
Amount
    
Accumulated
Amortization
   
Net
    
Gross
Carrying
Amount
    
Accumulated
Amortization
   
Net
 
Customer lists
     7 - 17 years      $ 451,853     
$
(269,989   $ 181,864      $ 450,979      $ (295,584   $ 155,395  
Trademarks
     4 - 16 years        75,562        (26,855     48,707        75,302        (30,408     44,894  
Technology
     3 - 7 years        215,686        (155,309     60,377        227,147        (182,177     44,970  
Domain names
     3 - 15 years        10,118        (3,333     6,785        10,118        (3,840     6,278  
Favorable leases
     4 - 14 years        4,940        (2,129     2,811        4,940        (2,376     2,564  
             
 
 
    
 
 
   
 
 
    
 
 
    
 
 
   
 
 
 
              $ 758,159      $ (457,615   $ 300,544      $ 768,486      $ (514,385   $ 254,101  
             
 
 
    
 
 
   
 
 
    
 
 
    
 
 
   
 
 
 
Included within technology is $34.9 million and $32.2 million of
internal-use
software, net of accumulated amortization, as of December 31, 2020 and September 30, 2021, respectively. As of September 30, 2021, $6.4 million of technology assets have not yet been put in service.
The Company capitalized $11.3 million of costs to develop
internal-use
software included in technology during the nine months ended September 30, 2020 (consisting of internal costs of $8.1 million and external costs of $3.2 million) and $12.0 million during the nine months ended September 30, 2021 (consisting of internal costs of $9.3 million and external costs of $2.7 million).
For each of the nine months ended September 30, 2020 and 2021, the Company recorded a write-down related to the impairment of capitalized software in the amount of
$0.1 million.
Amortization expense was $21.2 million and $19.2 million for the three months ended September 30, 2020 and
2021
, respectively, and $62.9 million and $57.7 million for the nine months ended September 30, 2020 and 2021, respectively. Except for the customer lists, which are amortized utilizing an accelerated method, all other intangible assets are amortized on a straight-line basis, which approximates the pattern in which the related economic benefits are consumed. The following is a schedule of estimated
future
amortization
expense
as of
September 30, 2021:
 
(in thousands)
  
 
 
Year Ending December 31,
  
     
2021
  
$
19,608
 
2022
  
 
58,541
 
2023
  
 
39,884
 
2024
  
 
31,176
 
2025
  
 
24,711
 
Thereafter
  
 
80,181
 
 
  
 
 
 
 
  
$
254,101
 
    
 
 
 
 
14

6.
Accrued Expenses
Accrued expenses on the unaudited condensed consolidated balance sheets as of December 31, 2020 and September 30, 2021, consisted of the following:
 
    
December 31,
    
September 30,
 
(in thousands)
  
2020
    
2021
 
Accrued compensation
   $ 15,959      $ 25,190  
Accrued cost of revenues
     10,834        10,341  
Accrued interest
     11        4,844  
Accrued IPO offering expenses
     —          1,424  
Other accrued expenses
     9,095        11,038  
    
 
 
    
 
 
 
Total accrued expenses
   $ 35,899      $ 52,837  
    
 
 
    
 
 
 
 
7.
Debt
The table below sets forth the Company’s long-term debt as presented in the
 
unaudited condensed consolidated balance sheets for the periods presented:
 
(in thousands)
  
December 31,
2020
    
September 30,
2021
 
Current portion of long-term debt
                 
First lien term loan
   $ 13,147      $ 6,461  
    
 
 
    
 
 
 
Long-term debt
                 
First
 
lien
 
term
 
loan,
 
due
 
June 19, 2024
(4.68%
 
and
 
4.50%
 
for
 
the
 
nine
months ended September 30, 2020 and 2021, respectively
)
     610,340        605,494  
Unamortized discount and debt issuance costs on first lien term loan
     (8,034      (6,292
    
 
 
    
 
 
 
Total long-term debt, net
   $ 602,306      $ 599,202  
    
 
 
    
 
 
 
First Lien Term Loan
The First Lien Credit Agreement, as amended (the “Credit Agreement”) provided for aggregate principal borrowings of $740.0 million, comprised of a $655.0 million term loan (the “First Lien Term Loan”) and an $85.0 million revolving credit facility (the “Revolver”). On August 11, 2021, the Company entered into the Sixth Amendment to the First Lien Credit Agreement (the “Sixth Amendment”). Pursuant to the Sixth Amendment, the aggregate amount of borrowings permitted by the Revolver automatically increased from $85.0 million to $140.0 million upon the consummation of the IPO and thus, the aggregate principal borrowings allowed under the Credit Agreement increased to $795.0 million.
Amounts outstanding under the First Lien Term Loan bear interest using either of the following two options which are chosen quarterly in advance at the election of the borrower: (1) an applicable rate of 2.5% plus the greater of (a) the prime rate or (b) the federal funds rate plus
1
/
2
 of 1% or (c) the
one-month
London Interbank Offered Rate (“LIBOR”)
plus 1%, or (d) a 2% floor; (2) an applicable rate of 3.5% plus
one-month
LIBOR
which is subject to a 1% floor. The Company chooses the method of interest for a period of either one month, two months, three months or six months. Interest is payable on the last business day of the period selected except for the
six-month
period, where it is payable on the last day of the third and sixth month.
The First Lien Term Loan requires a $1.6 million repayment of principal on the last business day of each March, June, September and December. Per the Credit Agreement, the Company must make a mandatory principal prepayment to the extent the Company has excess cash flow, as defined by the agreement, in any completed fiscal year. For the year ended December 31, 2020, the mandatory principal prepayment was $6.7 million and was paid in April 2021. On November 1, 2021, the Company utilized proceeds from the IPO
and cash on hand to repay
$100.0 million of outstanding borrowings under the First Lien Term Loan. See Note 18, “Subsequent Events” for additional information. All outstanding principal is due at maturity on June 19, 2024.
 
15

Outstanding borrowings under the Credit Agreement are collateralized by a first-priority security interest in substantially all of the equity interests of the Company.
The estimated fair value of the Company’s First Lien Term Loan was $609.5 million and $612.0 million as of December 31, 2020 and September 30, 2021, respectively. These fair values were determined based on quoted prices in markets with similar instruments that are less active (Level 2 inputs as defined below) as an observable price of the First Lien Term Loan or similar liabilities is not readily available.
Revolving Credit Facility
Pursuant to the Sixth Amendment, the aggregate amount of borrowings permitted by the Revolver automatically increased from $85.0 million to $140.0 million upon the consummation of the IPO on September 23, 2021.    
Amounts outstanding under the Revolver bear interest at a tiered floating interest rate based on the net leverage ratio of the borrower. The rate may be chosen monthly in advance at the election of the borrower, as follows: (1) an applicable rate of 2.5% plus the greater of (a) the prime rate (b) the federal funds rate plus
1
2
of 1% (c) the
one-month
LIBOR
plus 1% or (d) a 2% floor or (2) an applicable rate of 3.5% plus
one-month
LIBOR
. In addition, there is a quarterly fee of 0.50% or 0.375% on the unused portion of the commitments based on the first lien net leverage ratio. Unused and therefore available borrowings under the Revolver, net Letters of Credit (as defined below), were $84.0 million and $139.3 million as of December 31, 2020 and September 30, 2021, respectively. The Revolver matures on the earlier of August 11, 2026
and
December 31, 2023 unless, on or prior to December 31, 2023, the First Lien Term Loan has been refinanced with a final maturity date that is no earlier than February 11, 2027 or amended, modified or waived, such that the final maturity date of the First Lien Term Loan is no earlier than February 11, 2027.
Letters of Credit
For the nine months ended September 30, 2020 and 2021, $1.0 million and $0.7 million, respectively, of
stand-by
letters of credit (“Letters of Credit”) were issued under the Revolver to support two office space leases. The Revolver has a sublimit for Letters of Credit equal to the lesser of $20.0 million or the aggregate amount of the revolving credit commitments under the Revolver. As of September 30, 2020 and 2021, the Revolver provided additional capacity for Letters of Credit of $19.0 million and $19.3 million, respectively.
The Company’s Credit Agreement contains financial covenants and covenants that, among other things, restrict the Company’s ability to: incur certain additional indebtedness; transfer money between its various subsidiaries; pay dividends on, repurchase or make distributions with respect to its subsidiaries’ capital stock or make other restricted payments; issue stock of subsidiaries; make certain investments, loans or advances; transfer and sell certain assets; create or permit liens on assets; consolidate, merge, sell or otherwise dispose of all or substantially all of its assets; enter into certain transactions with its affiliates; and amend certain documents. The financial covenants also require that the Company remains within a specified leverage ratio of 6.75:1.00 once it draws down on 35% or more of the Revolver. The Company was in compliance with all financial covenants under the Credit Agreement as of September 30, 2021.
Obligations under the Company’s Credit Agreement are collateralized by a first lien on substantially all of the assets and outstanding capital stock of the Company subject to exceptions. The Company’s Credit Agreement also contains various events of default with respect to the indebtedness, including, without limitation, the failure to pay interest or principal when the same is due, cross default and cross acceleration provisions, the failure of representations and warranties contained in the agreements to be true and certain insolvency events. If an event of default occurs and is continuing, the principal amounts outstanding thereunder, together with all accrued and unpaid interest and other amounts owed thereunder, may be declared immediately due and payable by the lenders.
 
8.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. An asset or liability’s level in the hierarchy is based on the lowest level of input that is significant to the fair value measurement. The three levels of inputs used to measure fair value are as follows:
 
Level 1    Quoted prices in active markets for identical assets and liabilities.
 
16

Level 2
  
Quoted prices in active markets for similar assets and liabilities, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3
  
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flows methodologies and similar techniques that use significant unobservable inputs.
The Company considers the recorded value of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses to approximate the fair value of the respective assets and liabilities as of December 31, 2020 and September 30, 2021 based upon the short-term nature of such assets and liabilities (Level 1). See Note 7, “Debt” for discussion of the fair value of the Company’s debt.
Interest rate swaps and foreign currency forward contracts are measured at fair value on a recurring basis in the Company’s financial statements and are considered Level 2 financial instruments. Interest rate swaps are measured based on quoted prices for similar financial instruments and other observable inputs recognized. The currency forward agreements are typically cash settled in U.S. dollars for their fair value at or close to their settlement date.
The following table presents information about the Company’s
 
financial assets and liabilities that are measured at fair value on a recurring basis and their assigned levels within the valuation hierarchy as of December 31, 2020:
 
(in thousands)
  
Level 1
    
Level 2
    
Level 3
 
Assets
                          
Foreign exchange contracts
     -        $648        -  
Liabilities
                          
Interest rate swaps
     -        $11,524        -  
The following table presents information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis and their assigned levels within the valuation hierarchy as of September 30, 2021:
 
(in thousands)
  
Level 1
    
Level 2
    
Level 3
 
Assets
                          
Foreign exchange contracts
             $ 229            
Liabilities
                          
Interest rate swaps
             $ 6,500            
During the three and nine months ended September 30, 2020 and 2021, we did not
re-measure
any financial assets or liabilities at fair value on a nonrecurring basis.
 
9.
Derivative Instruments and Hedging Activities
Cash Flow Hedges of Foreign Exchange Risk
The Company is exposed to fluctuations in various foreign currencies against its functional currency, the USD. Specifically, the Company is exposed to, and hedges, third-party expenses denominated in Indian Rupees (INR). These transactions expose the Company to exchange rate fluctuations between USD and INR and the Company uses foreign currency forward agreements to manage its exposure to fluctuations in the
USD-INR
exchange rate. This involves fixing the
USD-INR
exchange rate for delivery of a specified amount of INR on a specified date. The currency forward agreements are cash settled in USD for their fair value at or close to their settlement date.
 
17

For derivatives designated and that qualify as cash flow hedges of foreign exchange risk for accounting purposes, the gain or loss on the derivative is recorded in Accumulated other comprehensive income. The earnings recognition of excluded components is presented in the same income statement line item as the earnings effect of the hedged transaction. All contracts have maturities of less than 12 months.
As of September 30, 2021, the Company had the following outstanding foreign currency derivatives that were used to hedge its foreign exchange risks:
 
Foreign Currency Derivative
  
Number of Instruments
    
Notional Sold
    
Notional Purchased
 
Currency forward agreements
     3        4.2 million USD        331.0 million INR  
Non-designated
Derivatives
Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements and/or the Company has not elected to apply hedge accounting.
To reduce exposure to variability in expected future cash outflows on variable rate debt attributable to the changes in LIBOR, the Company has entered into interest rate swaps to economically offset a portion of this risk.
Additionally, the Company electively
de-designates
currency forward agreements previously designated as cash flow hedges prior to their maturity due to administrative constraints.
Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings.
As of September 30, 2021, the Company had the following outstanding derivative that was not designated as a hedge in qualifying hedging relationships:
 
Product
  
Number of
Instruments
    
Effective Date
    
Maturity Date
    
Notional
 
Interest Rate Swap
     1        June 30, 2021        June 30, 2022      $ 308.0 million USD  
All financial derivative instruments are carried at their fair value on the balance sheet. The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the unaudited condensed consolidated balance sheets as of December 31, 2020 and September 30, 2021.
 
    
Asset Derivatives
 
    
As of December 31, 2020
    
As of September 30, 2021
 
(in thousands)
  
Balance Sheet Location
  
Fair Value
    
Balance Sheet Location
  
Fair Value
 
Derivatives designated as hedging instruments:
                           
Foreign exchange contracts
   Other current assets    $ 648      Other current assets    $ 229  
         
 
 
         
 
 
 
Total foreign exchange contracts
        $ 648           $ 229  
         
 
 
         
 
 
 
 
    
Liability Derivatives
 
(in thousands)
  
As of December 31, 2020
    
As of September 30, 2021
 
Derivatives not designated as hedging instruments:
                           
Interest rate swaps
   Other current liabilities    $ 7,302      Other current liabilities    $ 6,500  
Interest rate swaps
   Other liabilities      4,222      Other liabilities      —    
         
 
 
         
 
 
 
Total interest rate swaps
        $ 11,524           $ 6,500  
         
 
 
         
 
 
 
 
18

The tables below present the effect of cash flow hedge accounting on
 
Accumulated Other Comprehensive Income for the three and nine months ended September 30, 2020 and 2021.
 
 
  
Three Months Ended
September 30,
 
  
 
  
Three Months Ended
September 30,
 
(in thousands)
  
2020
 
  
2021
 
  
 
  
2020
 
  
2021
 
 
  
 
 
  
 
 
  
 
  
 
 
  
 
 
Derivatives in Hedging Relationships
  
Amount of Gain or (Loss)
Recognized in OCI on
Derivative (Included
Component)
 
  
Location of Gain or (Loss)
Reclassified from
Accumulated OCI into
Income
  
Amount of Gain or (Loss)
Reclassified from
Accumulated OCI into Income
(Included Component)
 
                       Cost of revenues    $ 12      $ 35  
Foreign exchange contracts
   $ 423      $ 41      Selling general and administrative      14        24  
    
 
 
    
 
 
         
 
 
    
 
 
 
Total
   $ 423      $ 41           $ 26      $ 59  
    
 
 
    
 
 
         
 
 
    
 
 
 
 
 
  
Nine Months Ended
September 30,
 
 
 
  
Nine Months Ended
September 30,
 
(in thousands)
  
2020
 
  
2021
 
 
 
  
2020
 
  
2021
 
 
  
 
 
  
 
 
 
 
  
 
 
  
 
 
Derivatives in Hedging Relationships
  
Amount of Gain or (Loss)
Recognized in OCI on
Derivative (Included
Component)
 
 
Location of Gain or (Loss)
Reclassified from
Accumulated OCI into
Income
  
Amount of Gain or (Loss)
Reclassified from
Accumulated OCI into Income
(Included Component)
 
                      Cost of revenues    $ 12      $ 139  
Foreign exchange contracts
   $ 423      $ (143   Selling general and administrative      14        101  
    
 
 
    
 
 
        
 
 
    
 
 
 
Total
   $ 423      $ (143        $ 26      $ 240  
    
 
 
    
 
 
        
 
 
    
 
 
 
 
 
  
Three Months Ended
September 30,
 
  
 
  
Three Months Ended
September 30,
 
(in thousands)
  
2020
 
  
2021
 
  
 
  
2020
 
  
2021
 
 
  
 
 
  
 
 
  
 
  
 
 
  
 
 
Derivatives in Hedging Relationships
  
Amount of Gain or
(Loss) Recognized in
OCI on Derivative
(Excluded Component)
 
  
Location of Gain or (Loss)
Reclassified from
Accumulated OCI into
Income
  
Amount of Gain or (Loss)
Reclassified from
Accumulated OCI into Income
(Excluded Component)
 
                       Cost of revenues    $ 75      $ 30  
Foreign exchange contracts
   $ 11      $ 69      Selling general and administrative      102        22  
    
 
 
    
 
 
         
 
 
    
 
 
 
Total
   $ 11      $ 69           $ 177      $ 52  
    
 
 
    
 
 
         
 
 
    
 
 
 
 
19

 
 
  
Nine Months Ended
September 30,
 
  
 
  
Nine Months Ended
September 30,
 
(in thousands)
  
2020
 
  
2021
 
  
 
  
2020
 
  
2021
 
 
  
 
 
  
 
 
  
 
  
 
 
  
 
 
Derivatives in Hedging
Relationships
  
Amount of Gain or
(Loss) Recognized in
OCI on Derivative
(Excluded Component)
 
  
Location of Gain or (Loss)
Reclassified from
Accumulated OCI into
Income
  
Amount of Gain or (Loss)
Reclassified from
Accumulated OCI into Income
(Excluded Component)
 
                       Cost of revenues    $ 75      $ 120  
Foreign exchange contracts
   $ 11      $