Debt

12 Months Ended

Dec. 31, 2022

Debt Disclosure [Abstract]

Debt

8. Debt

Our debt consisted of the following (in thousands):

	December 31,
	2022			2021
X
Term Loan (variable rate) due September 2026	$	240,000		$	248,750
Debt discount and issuance cost, net of amortization		(1,335	)		(1,099	)
Total debt		238,665			247,651
Less: debt maturing within one year, net		6,495			4,753
Long-term debt, net	$	232,170		$	242,898

First and Second Lien Credit and Guaranty Agreement (Extinguished in 2021 and 2020, respectively)

In August 2017, we entered into a syndicated First Lien Credit and Guaranty Agreement (“First Lien”) with various financial institutions, initially providing a $235 million term loan (“First Lien Term Loan”) with a maturity date of August 28, 2024, and a $50 million revolving line-of-credit (“Revolver”) with a maturity date of August 28, 2022. Subsequently, we entered into several amendments to the First Lien and the principal amount of the First Lien was increased by $240 million, in aggregate, primarily to fund various business acquisitions and operational needs.

According to the repayment schedule, the Consolidated Excess Cash Flow (as defined in the First Lien) and the IPO repayment provisions as set forth in the First Lien, we made required repayments of the First Lien Term Loan of $59.6 million, in aggregate, in 2020 using the net proceeds from our IPO and excess cash on hand. Further we made voluntary prepayments of $80.8 million in 2020 and $78.3 million in 2021 through September 2021, without paying any premium or penalty. The remainder of First Lien Term Loan of $248.5 million was fully prepaid with the proceeds from the Term Loan (defined below) on September 3, 2021, and as a result, all obligations and covenants thereunder were terminated.

In August 2017, we also entered into a syndicated Second Lien Credit and Guaranty Agreement (“Second Lien”) with various financial institutions, initially providing a $65 million term loan (“Second Lien Term Loan”), with a maturity date of August 28, 2025. Subsequently, we entered into an amendment to the Second Lien reducing the principal amount to $50 million. In 2020, with excess cash on hand, we prepaid the entire outstanding balance of $50 million on the Second Lien Term Loan without paying any premium or penalty, and as a result, all obligations and covenants thereunder were terminated.

The First Lien Term Loan and Revolver carried interest at a rate equal to our election (as defined in the First Lien) plus a margin ranging from 2.75% to 3.25% for base rate loans and ranging from 3.75% to 4.25% for Eurodollar loans, based on our net leverage ratio. The Second Lien Term Loan carried interest at a base rate equal to that of the First Lien, plus a margin of 7.50% for base rate loans and 8.50% for Eurodollar loans. The weighted average effective interest rate inclusive of the debt discount and debt issuance costs for the First Lien and Second Lien, in aggregate, was approximately 5.4% and 6.4% for years ended December 31, 2021 and 2020, respectively.

In connection with the prepayments of the First and Second Lien Term Loan in 2020 and 2021, we have recorded losses on extinguishment of debt of $4.9 million and $4.1 million for the years ended December 31, 2021 and 2020, respectively.

Credit Agreement

On September 3, 2021, we entered into a Credit Agreement (“Credit Agreement”) which provides for a $100.0 million five-year revolving credit facility (“Revolving Facility”) and a $250.0 million five-year term loan facility (“Term Loan”), with each maturing in September 2026. The Credit Agreement also permits, subject to conditions stated therein, additional incremental facilities in a maximum aggregate principal amount not to exceed $250.0 million. We may prepay the Term Loan and the Revolving Facility at any time without premium or penalty.

The credit facilities under the Credit Agreement replaced our senior credit facilities under the First Lien Credit and Guaranty Agreement. The net proceeds from borrowings under the Credit Agreement of $248.5 million (net of $1.5 million of debt discount) were used to repay all amounts outstanding under the First Lien Term Loan on September 3, 2021.

The Term Loan and Revolving Facility under the Credit Agreement initially carried interest at the Company’s election at either (a) LIBOR plus a percentage spread (ranging from 1.25% to 2.0%) based on our total net leverage ratio, or (b) the base rate (described

in the Credit Agreement as the greatest of (i) the prime rate, (ii) the federal funds rate plus 0.50% and (iii) one-month LIBOR plus 1.0%) plus a percentage spread (ranging from 0.25% to 1.0%) based on our net leverage ratio.

The Credit Agreement contains covenants with which we must comply during the term of the agreement, which we believe are ordinary and standard for agreements of this nature, including the maintenance of a maximum Consolidated Total Net Leverage Ratio of 3.0 to 1.0 and a minimum Consolidated Interest Coverage Ratio of 3.0 to 1.0 (as defined in our credit facilities). The Credit Agreement also includes events of default customary for facilities of this nature and upon the occurrence of such events of default, among other things, all outstanding amounts under the Credit Agreement may be accelerated and/or the lenders’ commitments terminated. In addition, upon the occurrence of certain events of default, the interest rate on the Term loan and Revolving Facility can be increased by 2.0%.

Our obligations under the Credit Agreement are guaranteed by substantially all of our U.S. subsidiaries and secured by a security interest in substantially all assets of the Company and the guarantor subsidiaries, subject to certain exceptions detailed in the Credit Agreement and related ancillary documentation.

On June 30, 2022, we entered into a First Amendment of the Credit Agreement (“First Amendment”), which among other changes resulted in the Bloomberg Short-Term Bank Yield Index rate (“BSBY”) being utilized as a replacement rate for LIBOR. Consequently, following the First Amendment, the Term Loan and Revolving Facility will each bear interest at the Company’s election at either (a) BSBY plus a percentage spread (ranging from 1.25% to 2.25%) based on our total net leverage ratio, or (b) the base rate (as described in the Credit Agreement) as the greatest of (i) the prime rate, (ii) the federal funds rate plus 0.50% and (iii) one-month BSBY plus 1.0%) plus a percentage spread (ranging from 0.25% to 1.25%) based on our total net leverage ratio. In addition, pursuant to the First Amendment, the maximum permitted Consolidated Total Net Leverage Ratio (as defined in the Credit Agreement) was also amended to increase to 3.50 to 1.0 between the quarters ending September 30, 2022 through and including March 31, 2023, and such ratio will revert to 3.00 to 1.00 from the quarter ended June 30, 2023 and each quarter thereafter, provided that, upon the occurrence of a Qualified Acquisition (as defined in the Credit Agreement), such ratio can be increased to 3.50 to 1.0 temporarily provided all the requirements set forth in the Credit Agreement are met.

On September 29, 2022, we entered into an accounts receivable Factoring Agreement with a Factor. See Note 7 “Balance Sheet Components – Accounts Receivable, Net” for additional information on the Factoring Agreement. In connection with the Factoring Agreement, we also entered into (i) a Second Amendment (“Second Amendment”) to the Credit Agreement to permit the transactions contemplated by the Factoring Agreement and (ii) an Assignment of Factoring Proceeds and Intercreditor Agreement with the Factor and the administrative agent under the Credit Agreement to establish the respective rights of the Factor and the Credit Agreement Agent in and to the related factoring collateral.

On November 28, 2022, we entered into a Third Amendment (“Third Amendment”) to the Credit Agreement which provides for, among other things, (i) a decrease in the required minimum Consolidated Interest Coverage Ratio (as defined in the Credit Agreement) to 2.50 to 1.00 for the quarters ending on and after March 31, 2023 through and including December 31, 2023, (ii) an increase in the maximum permitted Consolidated Total Net Leverage Ratio (as defined in the Credit Agreement) to 3.75 to 1.00 for the quarters ending December 31, 2022 and March 31, 2023, stepping down to 3.50 to 1.00 for the quarter ending June 30, 2023, and 3.25 to 1.00 for the quarters ending September 30, 2023 and December 31, 2023, and (iii) a modified pricing grid providing for an increased margin (ranging from (x) 1.50% per annum to 3.25% per annum for loans bearing interest at the Bloomberg Short-Term Bank Yield (“BSBY”) rate, and (y) 0.50% per annum to 2.25% per annum for loans bearing interest at the base rate, in each case

depending on the Company’s Consolidated Total Net Leverage Ratio) for the period of December 31, 2022 through December 31, 2023.

The First, Second and Third Amendment were all accounted for as debt modifications.

As of December 31, 2022, we had no outstanding balance under the Revolving Facility.

As of December 31, 2022, the carrying value of our Term Loan was $238.7 million. The estimated fair value of our Term Loan as of December 31, 2022, which we have classified as a Level 2 financial instrument, was approximately $241.5 million.

The effective interest rate inclusive of the debt discount and debt issuance costs for the Term Loan was approximately 3.3% and 1.4% for the years ended December 31, 2022 and 2021, respectively.

The following table summarizes the interest expense, net recognized for all periods presented (in thousands):

	Year Ended December 31,
	2022			2021		2020
First and Second Lien Guaranty Agreement:
Contractual interest expense for term loan	$	—		$	9,818	$	27,387
Contractual interest expense for revolving facility		—			—		16
Amortization of debt discount and issuance cost		—			1,343		2,632
Loss on debt extinguishment		—			4,904		4,114
Credit Agreement:
Contractual interest expense for term loan		7,818			1,113		—
Contractual interest expense for revolving facility		1,141			53		—
Amortization of debt discount and issuance cost		398			115		—
Interest income		(374	)		—		—
Other		203			327		988
Total interest expense, net	$	9,186		$	17,673	$	35,137

The estimated future principal payments under our total long-term debt as of December 31, 2022 are as follows (in thousands):

	Amounts
2023	$	6,875
2024		12,500
2025		12,500
2026		208,125
2027		—
Total debt	$	240,000