UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2020
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 001-35108
SERVICESOURCE INTERNATIONAL, INC.
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☐
Delaware
(State or other jurisdiction of incorporation or organization)
81-0578975
(I.R.S. Employer Identification No.)
(Exact name of registrant as specified in its charter)
707 17th Street, 25th Floor
Denver, Colorado
(Address of principal executive offices)
80202
(Zip Code)
Registrant’s telephone number, including area code (720) 889-8500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.0001 Par Value
Trading Symbol
SREV
Name of each exchange on which registered
The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐ No ☒
Yes ☐ No ☒
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 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.
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 ☐
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 definition 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
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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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or
issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☒
Yes ☐ No ☒
The aggregate market value of voting and non-voting common stock held by non-affiliates of the registrant as of June 30, 2020, the last business day of the
Registrant’s most recently completed second fiscal quarter, was approximately $83.6 million. Shares of common stock held by each executive officer,
director and holder of 5% or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status does not reflect a determination that such persons are affiliates of the registrant for any other purpose.
As of February 18, 2021, there were approximately 97,263,099 shares of the registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive proxy statement for its 2021 annual meeting of stockholders are incorporated by reference in Part III of this annual
report on Form 10-K. Such proxy statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year
to which this report relates. Except with respect to information specifically incorporated by reference in this Form 10-K, the proxy statement is not deemed
to be filed as part of this Form 10-K.
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Item 16.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
TABLE OF CONTENTS
PART I
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
PART III
Exhibits and Financial Statement Schedules
Form 10-K Summary
Glossary of Terms
PART IV
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FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K (this “annual report") includes estimates, projections, statements relating to our business plans, objectives, and expected
operating results that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements may appear
throughout this annual report. These forward-looking statements are generally identified by the words “believe,” “project,” "target," "forecast", “expect,”
“anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely
result,” and variations of such words or similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject
to risks and uncertainties that may cause actual results to differ materially. Factors that could cause or contribute to such differences include, but are not
limited to, those identified elsewhere in this annual report, including the risks and uncertainties related to the impact and duration of the COVID-19
pandemic in “Risk Factors” (Part I, Item 1.A. of this Form 10-K) and “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” (Part II, Item 7 of this Form 10-K). Except as required by law, we undertake no obligation to update or revise publicly any forward-looking
statements, whether because of new information, future events, or otherwise, except as required by applicable law.
“ServiceSource,” “the Company,” “we,” “us,” or “our”, as used herein, refer to ServiceSource International, Inc. and its wholly owned subsidiaries, unless
the context indicates otherwise.
For a summary of commonly used industry terms and abbreviations used in this annual report, see the Glossary of Terms.
ITEM 1.
BUSINESS
About ServiceSource
PART I
ServiceSource is a leading provider of BPaaS solutions that enable the transformation of go-to-market organizations and functions for global technology
clients. We design, deploy, and operate a suite of innovative solutions and complex processes that support and augment our clients’ B2B customer
acquisition, engagement, expansion and retention activities. Our clients - ranging from Fortune 500 technology titans to high-growth disruptors and
innovators - rely on our holistic customer engagement methodology and process excellence, global scale and delivery footprint, and data analytics and
business insights to deliver trusted business outcomes that have a meaningful and material positive impact to their long-term revenue and profitability
objectives. Through our unique integration of people, process and technology - leveraged against our more than 20 years of experience and domain
expertise in the cloud, software, hardware, medical device and diagnostic equipment, and industrial IoT sectors - we effect and transact billions of dollars
of B2B commerce in more than 175 countries on our clients’ behalf annually.
Our services are delivered globally by approximately 2,800 professionals speaking 45 languages. Our net revenue was $194.6 million for the year ended
December 31, 2020.
Our Market Opportunity
Our clients operate in rapidly changing and dynamic environments where they face increasing pressure to gain market share, expand globally, accelerate
revenue growth, and streamline operating expenses. In an era of more intense competition, rapid technology disruption, and lower customer switching
costs, the most successful B2B companies are recognizing the imperative of a customer-centric mindset. Enabling and delivering a superior customer
experience is mission-critical for these companies, yet many lack the appropriate internal resources and capabilities required for longstanding success.
Increasingly, they are seeking strategic partners and thought leaders who possess the requisite expertise and proven competencies to enhance the loyalty
and lifetime value of their customers by accelerating their go-to-market transformation strategies. Against this market opportunity backdrop, we believe
ServiceSource is uniquely positioned and competitively differentiated to benefit from the following dynamics:
•
Consumerization of B2B commerce. In today’s hyper-connected digital economy, individuals have become accustomed to engaging with B2C
brands through channels and interactions that are efficient, effective and effortless. These individuals are bringing their consumer expectations into
the workplace, fundamentally reshaping how companies market, sell to and engage with their business customers. The majority of business buyers
expect their B2B customer experiences to mirror their B2C encounters and are willing to award a greater share of wallet and higher loyalty to
vendors who can meet these raised expectations. While factors such as price, quality and feature functionality remain important considerations,
leading B2B companies recognize that durable competitive advantage is increasingly based on facilitating interactions that are proactive,
predictive and personalized across all touchpoints of the customer journey. We believe more companies are turning to external specialists like
ServiceSource to structure,
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deploy and operate integrated solutions and processes that can holistically address and serve the unique and heightened demands of this emerging
consumerization trend.
• Deployment of customer-centric models that disrupt legacy go-to-market channels. Technology companies have relied for decades on a variety of
third-party intermediaries to reach their mid-market customers. For many companies, 50% - 75% or more of their revenue has historically been
attributed to indirect channels, including distributors, resellers, system integrators, and managed service providers, among others. These legacy
routes to market are rapidly losing relevance due to the consumerization of IT, the growth of as-a-service offerings, the proliferation of cloud
delivery and distribution models, and the rapid adoption of subscription and consumption-based billing plans. In light of these shifts and driven by
a growing desire for greater customer insight and intimacy, more companies are deprioritizing investments away from these indirect channels,
while assigning more focus to direct-to-consumer pathways. We believe these organizations are looking to strategic thought leaders such as
ServiceSource who can help them reimagine their go-to-market strategies, accelerate their channel transformation initiatives, and design and
manage new customer-centric operating models that will enable them to grow closer to their customers.
•
Emergence of customer experience as a competitive differentiator. Increased global competition, lower barriers to entry and shortened product
lifecycles are prompting technology companies to reassess their competitive advantage and reevaluate their core competencies. While areas such
as intellectual property, engineering, research and development, and product development still remain core, successful forward-thinking
organizations realize and appreciate the positive impact of a well-orchestrated customer experience on their revenue and profitability objectives.
While these companies are attempting to allocate greater resources to build internal customer-facing capacity in areas including demand
generation and conversion, account management, and customer success management, they are often encumbered by pre-existing organizational
dynamics, departmental silos, and corporate inertia. We believe more companies will increasingly seek to partner with differentiated BPaaS
providers like ServiceSource who can help them to more rapidly scale their customer experience initiatives with a value-driven and outcomes-
based business case. Our clients choose us to help them drive greater customer engagement, trust, and loyalty given our integrated solution suite,
demonstrable track record, proven process improvement methodology, global scale and infrastructure, and data expertise and insights.
Our Strategy and Solutions
Our strategy is to drive client success by bringing the world’s greatest brands closer to their customers through people-powered, digitally-enabled solutions
and data-driven insights. We are pioneers in the CJX market and believe our solution scope, process expertise and global operating scale position us as a
category leader. Our unified CJX solution suite spans the pre- and post-sale B2B customer journey and is deployed through a holistic model that enables
our clients to more efficiently and effectively identify, land, adopt, expand and renew their customers and end-users.
TM
TM
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The ServiceSource CJX solution suite has been built on three primary solution pillars, encompassing digital sales, customer success, and channel
management, all underpinned by enabling competencies centered around our highly trained people, proprietary processes, and best-in-class technologies.
Depending on our clients’ needs, we can provide our solutions and motions on a fully integrated basis or we can design and deploy them on a discrete, á la
carte basis to address our clients’ unique requirements.
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Digital sales. Through our digital sales solution, we help our clients accelerate their acquisition and expansion efforts across both net-new and installed-
base customer accounts. Our core motions of demand qualification, demand conversion, and account management are designed to drive higher quality
leads, improved pipeline hygiene, greater marketing and sales funnel velocity, better sales conversion rates, higher net expansion rates, and increased
consumption for our clients’ products and services.
• Demand qualification. We serve as a seamless extension to our clients’ advertising, marketing, and digital demand generation activities. Through
proactive customer interaction and leveraged with our data analytics expertise, our business development reps digitally engage with marketing-
generated leads to evaluate and score their budget, authority, need, and timing to progress them through the funnel into sales-qualified and sales-
accepted leads.
• Demand conversion. We serve as a high velocity augmentation to our clients’ inside sales teams, allowing for enhanced coverage and increased
conversion of their sales pipeline. Our sales development reps are extensively trained on our clients’ products, services, and features, and are
experts at value- and persona-based selling. Through omnichannel media - including voice, chat, email, video, and social - our teams nurture
leads, educate prospects, and conduct sales demos to convert qualified opportunities into confirmed orders and closed bookings for our clients.
•
Account management. We serve as a natural complement to our clients’ installed-based account management sales motions. Our highly-skilled
digital sales professionals develop, formulate, and implement account-based sales plans to identify and execute expansion selling opportunities,
driving high margin incremental revenue for our clients through higher cloud consumption levels, upsell and cross-sell rates, multi-year
conversions, and service and support attach rates.
Customer success. Through our customer success solution, we are an integrated component of our clients’ customer experience strategies and engagement
efforts. Our core motions of onboarding, adoption, and renewals management are uniquely tailored and customized to improve the satisfaction,
referenceability, loyalty, retention and lifetime value of our clients’ customers.
• Onboarding. Our onboarding experts engage and communicate with our clients’ new customers to ensure they are positioned for success from the
first day of their relationship. We confirm subscriptions were successfully activated, downloads were successfully installed, assets and
entitlements were successfully provisioned, and payments and credits were successfully applied. Where required, we further triage and support the
coordination of our clients’ technical support and professional services resources to drive higher initial customer satisfaction and issue resolution
outcomes.
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Adoption. Our adoption specialists are thoroughly trained and well-versed in the full range of features and functionality of our clients’ products,
services and solutions. Leveraging telemetry from a variety of data feeds complemented with proactive real-time customer interaction, we ensure
that our clients’ customers are appropriately educated, informed and empowered on how they can best achieve faster speed-to-value and return-on-
investment for their subscription or purchase.
Renewals management. Our renewals representatives are equipped with our industry-leading high-performance sales methodology and
complemented by best-in-class technology and processes to manage revenue that may be at risk of loss for our clients. Our systems and global
teams cleanse, validate, enhance and supplement our clients’ CRM and ERP data in order to proactively configure, price, quote and sell customer
contracts that are nearing expiration or cancellation. Through extensive integration with our clients’ internal systems, teams and processes, we
deliver performance outcomes that allow our clients to recognize lower customer churn and attrition, enhanced contract renewal rates, and higher
revenue retention metrics.
Channel management. Through our channel management solution, we support the full lifecycle management of our clients’ indirect channels and routes to
market. Our core motions of partner recruitment, partner onboarding and enablement, and partner success management are designed to increase partner
mindshare, productivity, and sales of our clients’ products and services across both one-tier and two-tier distribution channel models.
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Partner recruitment. Our partner recruitment specialists are dedicated to identifying, vetting, and recruiting new distributors, value-added
resellers, resellers, system integrators, managed service providers, agents and related third parties to join our clients’ channel partner programs.
Through intensive research and proactive outreach, we ensure that our clients have an opportunity to expand their partner organizations with firms
that are best positioned to more effectively market, sell and support our clients’ offerings in their respective regions and territories.
Partner onboarding and enablement. Our partner onboarding specialists are thoroughly trained in the program design, tiering levels and criteria,
and incentives available to partners through our clients’ channel programs. Through early engagement, intervention, and training, we promote
greater program awareness, understanding, and focus for new partners, equipping them to achieve better early outcomes with our clients.
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•
Partner success management. Our partner success managers support our clients’ partners in developing and formulating quarterly and annual
performance objectives, analyzing and forecasting sales and renewals pipelines, and identifying and resolving barriers to their success. Through
ongoing engagement and interaction with our clients’ indirect partners, we proactively manage the relationships to ensure higher levels of success
for our clients, the partners, and their mutual customers.
TM
Our CJX solution suite is provided to our clients primarily through a unique outcomes-based, pay-for-performance model that ensures optimal alignment
to their business growth priorities, return-on-investment mandates and customer experience objectives. Through this model, our clients pay us commissions
that are either flat-rate or variable based on the bookings and/or revenue we generate on their behalf. For engagements where other pricing options are more
appropriate, including our professional services, sales enablement and data management services, our clients pay us through either fixed-fee or full-time
employee-based pricing models. Oftentimes our client contracts incorporate multiple pricing models to most appropriately balance our assessment of the
data quality, operational complexity and risk-reward profile of the engagement. For the year ended December 31, 2020, 73% of our revenue was derived
from pay-for-performance pricing arrangements and 27% was derived from fixed-fee or full-time employee-based pricing arrangements.
Our relationship with our clients begins in the pre-sales process and continues through the lifecycle of our engagement:
•
•
Sales performance analysis. We typically begin engagements with our prospective clients by conducting a SPA. Through our SPA process, we
conduct in-depth executive interviews and data analysis to understand a client’s unique challenges and desired business outcomes, evaluate and
benchmark its performance against those outcomes, analyze opportunities for improvement using proprietary analytical models, and deliver
expertise and recommendations to drive an enhanced customer experience, improved operational KPIs, and targeted financial gains.
Business case, pricing and contract structuring. We use our reservoir of data, benchmarks, and best practices to estimate the critical components
of the business case, to calculate our ability to improve our clients’ performance based on our extensive track record of execution for similar
engagements, to scope and design an optimal delivery model, and to derive an appropriate value-based pricing structure and contractual
arrangement.
• Data integration, implementation and launch. Once we have entered into a contract with a client, we deploy our professional services to rapidly
integrate our tools and platforms with our clients’ systems, while our data and ops services teams ensure that high velocity data feeds are
appropriately configured, mapped, loaded, enabled, and enhanced. Our talent acquisition teams launch a highly selective recruiting and
onboarding process, while our learning and development teams build and deliver a robust training curriculum and certification program.
•
•
Performance and execution. Following the implementation and ramp of an engagement, we leverage our reporting platform, data reservoir, and
performance optimization tools to continuously monitor, measure, analyze, benchmark, and enhance the performance of our teams to ensure we
are positioned to deliver against the business case and exceed our clients’ expectations.
Client benchmarking and continuous improvement. Our extensive platform and the accumulation of more than 20 years of experience serve as the
foundation for benchmarking our clients’ performance against internal parity rates, industry peers, and previous performance periods. We
generally conduct monthly and quarterly business review meetings and host frequent executive steering reviews with our clients to assess our
results, identify potential process gaps, determine opportunities for continuous improvement, and make recommendations that we believe will
allow our clients and us to achieve higher levels of performance and efficiencies.
Markets We Serve
We target our solutions exclusively to B2B technology companies and focus on chosen market segments where we have deep domain expertise, proven
competencies and best practices, robust executive relationships, and the ability to leverage existing client references and advocacy.
•
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Cloud and SaaS. In this segment, we serve companies who provide their solutions via public, private, or hybrid cloud delivery models, including
SaaS, PaaS, and IaaS vendors. Within this market, customers and end-users typically purchase from our clients through a recurring subscription or
a consumption-based utility billing model. IDC, a market research firm, estimates the total global market for cloud software was approximately
$205 billion in 2020 with a forecasted 16% compound annual growth rate through 2024.
Software. Our clients in this segment include companies who primarily provide their software in an on premise environment, where our clients’
customers and end-users typically pay for a defined number of licenses or subscribers, as well as related software support, maintenance and
service contracts. We have developed extensive expertise in a variety of software sub-sectors, supporting vendors of application and system
software, collaboration software, CRM software, cyber-security software, open source operating system software, and virtualization software,
among others.
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IDC estimates the total global market for software license and maintenance was approximately $300 billion in 2020, while the software
subscription market was approximately $260 billion in 2020 with a forecasted 17% compound annual growth rate through 2024.
• Hardware. In this segment, we serve companies who provide IT hardware and related assets, including data center systems (servers, storage,
gateways, and arrays), networking and communications equipment (switches, routers, access points, and appliances), and computing equipment
and peripherals (workstations, PCs, thin-clients, and imaging devices), among others. Within this segment, our services are primarily directed at
selling, renewing, and extending hardware maintenance and support contracts on our clients’ behalf. IDC estimates the total global market for
hardware maintenance and support was approximately $64 billion in 2020 with a forecasted 2% compound annual growth rate through 2024.
• Medical device and diagnostic equipment. Our clients in this segment include companies who provide products, software and services to the
healthcare and medical field, including vendors of radiology and diagnostic imaging equipment, surgical and laboratory instruments, and
healthcare IT software, among others. Fortune Business Insights, a market research firm, estimates the total global medical device market was
approximately $432 billion in 2020 with a forecasted 5% compound annual growth rate through 2028.
•
Industrial IoT. In this segment, we serve companies who provide hardware, sensors, software and related services to monitor and automate smart
and connected devices for manufacturing environments, process control applications, and energy and utility customers, among others. Grand View
Research, a market research firm, estimates the total global market for industrial IoT applications was approximately $215 billion 2020 with a
forecasted 35% compound annual growth rate through 2025.
Our Clients
We seek to build long-term, durable relationships with leading companies and high-growth innovators within each of our target markets, where our
strategy, solutions, and capabilities provide a compelling client value proposition and opportunity for us to drive enduring client success and trusted
business outcomes. We typically enter into multi-year contracts with our clients with average terms ranging from two to four years. Our client contracts are
generally comprised of a master services agreement, which is a framework agreement that defines broad governing terms, supplemented by one or multiple
order forms or statements of work that outline detailed terms, conditions, pricing, description of services and definition of scope. While most of our
contracts may be terminated for convenience with relatively short notice, often subject to the payment of an early termination fee by the client, our top 10
client relationships range in duration from 8 to 14 years, with an average tenure of approximately 11 years.
During the year ended December 31, 2020, our top ten clients each generated more than $4.0 million in revenue and represented a combined 78% of our
total net revenue, and four clients each represented over 10% of our revenue during this period. A relatively small number of clients may continue to
account for a significant portion of our revenue for the foreseeable future. The loss of revenue from any of our significant clients for any reason may cause
a significant decrease in our revenue.
Human Capital
We believe our people are our greatest asset and central to the success of ServiceSource and our clients. Through our core values of trust, caring,
collaboration, and dedication, we direct our efforts and invest extensive resources to ensure we attract, hire, develop, incentivize, promote, and retain a
world-class workforce. We are committed to building a culture that inspires success for our people and fostering a workplace environment that promotes
trust, diversity, and inclusion while providing multiple avenues for continuous personal and professional development.
As of December 31, 2020, we had approximately 2,800 employees worldwide, of which nearly all were full-time, with 70% located outside of the U.S. Our
employees are not covered by collective bargaining agreements.
Employee health and well-being. We believe a loyal and productive workforce requires a holistic approach to caring for the whole self. We provide a
variety of programs and benefits to support the physical, mental, emotional, and spiritual health and well-being of our employees.
We are committed to the health and safety of our employees. To keep our employees safe during the COVID-19 pandemic, we created a dedicated crisis
team to proactively implement business continuity plans and quickly transitioned to a 100% work-from-home model. As a result of this successful work-
from-home implementation, we have shifted to a virtual-first operating model whereby our employees will continue to primarily work from their home
offices and our facilities will be used for collaboration, innovation, and connection. Additionally, this model includes virtual sourcing, hiring, and
onboarding for new employees as well as a process for driving performance and culture in a virtual environment.
Inclusion and diversity. We believe high-performing organizations are defined by policies and practices that encourage and celebrate an inclusive and
diverse workforce. We have adopted metrics that measure the racial, ethnic, and gender diversity of
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our organization and practices to ensure our organization is representative of the communities we serve. We are committed to equal pay for equal work, and
continually monitor and analyze our compensation programs for equality.
In 2020, we further advanced our gender equality initiative with women representing half of our total employee base and more than one-third of our
leadership ranks.
Benefits. We offer a complete set of benefits for our employees, including competitive base salaries, annual cash bonuses and an equity incentive program,
as well as comprehensive health benefits, retirement plans, and a generous time off policy. For our U.S.-based employees, we offer 12 weeks of paid
parental (maternal and paternal) leave, providing important support for our employees as they strive to care for, bond with and welcome new family
members and integrate family life with work life. In addition, every employee receives a day of birthday time off, to enable that employee to celebrate on a
day during the month of their birth.
Community engagement and involvement. We are active and involved members in the communities in which our employees live and work, and we promote
a culture of volunteering and giving back. Every employee globally receives eight hours of paid volunteer time off annually, which encourages our
employees to serve the communities in which we live and work. Through our paid volunteer time off program, our employees collectively volunteered
more than 5,300 hours supporting a variety of charitable causes and organizations in their communities during 2020.
Training, development, and performance. In July 2020, we launched CJX University, a world-class learning and development platform designed to help
employees grow and develop in their careers. Since launch, our employees have logged more than 18,000 training hours. Additionally, we hold bi-annual
unrated performance reviews, designed to encourage employees to have conversations with their managers relating to their areas of strength and growth
opportunities and allowing for a plan for future career progression and development.
TM
Competition and Our Competitive Strengths
TM
The market for our BPaaS services and CJX solution suite is dynamic and evolving. Historically, B2B companies have managed their customer
acquisition, engagement, expansion, and retention efforts internally and have relied upon a variety of third-party technologies and tools - including
enterprise resource planning software, customer relationship management software, customer success management software, business intelligence software,
channel management software, customer experience management software, and sales enablement software - from vendors such as Adobe, Gainsight,
Medallia, Oracle, SAP, salesforce.com, and XANT, to enable their in-house teams and workflows. Some companies have made further investments in this
area using firms such as Accenture, Deloitte Digital and McKinsey & Company for customer experience design and digital transformation consulting
services for their go-to-market organizations. These internally developed solutions represent the primary alternative to our integrated approach of
combining people, processes and technology to provide a purpose-built, end-to-end optimized solution.
We believe we are the only company of scale exclusively focused on serving the unique requirements of B2B technology companies with a solution suite
that addresses the entirety of the customer journey experience continuum. Within the broader BPaaS market, at times we may compete with larger, more
diversified and less-focused companies such as Cognizant, Convergys, Genpact, TTEC, and Webhelp, as well as smaller companies offering more narrow
point solutions such as MarketStar and N3 Results.
We believe our principal competitive strengths and differentiators include our:
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20+ year track record of innovation and market leadership;
B2B technology industry domain expertise;
ability to drive client success and value;
scope and completeness of our solution;
robust global delivery footprint and infrastructure;
extensive geographic and language coverage model;
outcomes-based, pay-for-performance pricing;
data-driven insights, best practices and benchmarks;
speed and agility;
experience and quality of our leadership team;
reputation and referenceable client base; and
size and financial stability of our operations.
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Although we currently have few direct competitors that offer integrated solutions at our scale, we expect competition and competitive pressure, from both
new and existing competitors, to increase in the future.
Our Intellectual Property
We believe our ability to innovate is a key driver of value for our clients and our business. The solutions we provide to our clients often include a variety of
proprietary tools, technologies, processes, methodologies, and expertise which comprise our intellectual property. In addition, our intellectual property
includes patents, trademarks, and copyrights, as well as various trade secrets, which we believe provide us with a competitive advantage in the marketplace.
We protect our intellectual property by leveraging U.S. and foreign patent, trademark, copyright, and trade secret laws, in addition to entering into non-
competition, confidentiality, non-disclosure, and related intellectual property protection agreements with our clients, employees, contractors and suppliers.
Partnerships and Alliances
We routinely enter into partnerships and alliances with companies that can enhance our solutions, differentiate our capabilities, advance our technologies
and tools, and complement our sales and marketing activities. These relationships include strategic go-to-market alliances, joint-selling agreements, “white-
labeled” technology integrations and business transformation and consulting partners.
Additional Information
Our predecessor company was founded in 1999 and we were formed as a Delaware limited liability company in 2002 and converted to a Delaware
corporation in 2011. Additional information about us is available on our website at http://www.servicesource.com. The information on our website is not
incorporated into this annual report by reference and is not a part of this Form 10-K. We make available free of charge on our website our annual reports on
Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after those reports are electronically filed with, or
furnished to, the SEC. In addition, the SEC maintains a website that contains reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC at http://www.sec.gov. From time to time, we may use our website as a channel of distribution of material
information about our company. Financial and other important information regarding our business is routinely posted on and accessible at
http://ir.servicesource.com.
ITEM 1A.
RISK FACTORS
Investing in our common stock involves risk. Our operations and financial results are subject to various risks and uncertainties, including those described
below, that could adversely affect our business, financial condition, results of operations, cash flows and the trading price of our common stock. You should
carefully consider the risks described below and the other information in this Annual Report on Form 10-K.
Risks Related to Our Business and Industry
Our business and growth depend substantially on clients renewing their agreements with us and expanding their use of our solution for additional
available markets. Any decline in our client renewals, termination of ongoing engagements or failure to expand their relationships with us could harm
our future operating results.
In order for us to improve our operating results and grow, it is important that our clients renew their agreements with us when the initial contract term
expires and that we expand our client relationships to add new market opportunities and the related revenue management opportunity. Our clients may elect
not to renew their contracts with us after the expiration of their initial term, which typically vary between one and two years, or may elect to otherwise
terminate our services, and we cannot assure you that our clients will renew service contracts with us at the same or higher level of service, if at all, or
provide us with the opportunity to manage additional revenue management opportunities. Although our renewal rates have been historically higher than
those achieved by our clients prior to their use of our solution, some clients have still elected not to renew their agreements with us. Our clients’ renewal
rates may decline or fluctuate as a result of a number of factors, many of which are beyond our control, including their satisfaction or dissatisfaction with
our solution and results, our pricing, mergers and acquisitions affecting our clients or their end customers, the effects of economic conditions or reductions
in our clients’ or their end customers’ spending levels. If our clients do not renew their agreements with us, renew on less favorable terms, terminate their
services with us or fail to contract with us for additional services, our revenue may decline and our operating results may be adversely affected.
Our revenue will decline if there is a decrease in the overall demand for our clients’ products and services.
A majority of our revenue is based on a pay-for-performance model, which means that we are paid a commission based on the service contracts we sell on
behalf of our clients. If a client’s products or services fail to appeal to its end customers, our revenue will decline for our work with that client. In addition,
if end customer demand decreases for other reasons, such as
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negative news regarding our clients or their products, unfavorable economic conditions, shifts in strategy by our clients away from promoting the service
contracts we sell in favor of selling their other products or services to their end customers, or if end customers experience financial constraints and
terminate or fail to renew the service contracts we sell, we may experience a decrease in our revenue as the demand for our clients’ service contracts
declines. Similarly, if our clients come under economic pressure, they may be more likely to terminate their contracts with us or seek to restructure those
contracts.
The ongoing COVID-19 pandemic may have material adverse effect on our business, financial position, results of operations and/or cash flows.
We face various risks related to health epidemics, pandemics and similar outbreaks, including the global outbreak of COVID-19. The continued spread of
COVID-19 has led to disruption and volatility in the global capital markets, which increases the cost of capital and adversely impacts access to capital. If
significant portions of our workforce are unable to work effectively, including because of illness, lack of available internet capacity, or other restrictions in
connection with the COVID-19 pandemic, our operations may be impacted.
If our performance falls short of our estimates, our client relationships will be at risk, our revenue will suffer and our ability to grow could be harmed.
A majority of our business depends on driving new or renewal revenue for our clients, and we then receive a commission on the new or renewal revenue
that we generate on our clients’ behalf. In some cases, our commission rates vary depending on our performance —for example, if we overperform
compared to our estimates then we may receive a higher commission. In addition, our clients rely on us to accurately forecast our performance, especially
because we drive revenue on their behalf. These forecasts are based upon the data our clients provide to us, and are subject to significant business,
economic and competitive uncertainties and are based on assumptions and estimates that may not prove to be accurate. In addition, these forecasted
expectations are based upon historical trends and data that may not be true in subsequent periods. If our performance for a particular client is lower than
anticipated, then our revenue for that client will also be lower than projected. If our performance falls short of expectations across a broad range of clients,
or if our performance falls below expectations for a particularly large client, then the impact on our revenue and our overall business will be significant. In
the event our performance is lower than expected for a given client, our margins will suffer because we will have already incurred a certain level of costs in
both personnel and infrastructure to support the engagement. This risk is compounded by the fact that many of our client relationships can be terminated by
the client if we fail to meet certain specified sales targets, including bookings rates, over a sustained period of time. If our performance falls to a level at
which our revenue and client contracts are at risk, then our financial performance will decline and we may have difficulty attracting and retaining new
clients.
We depend on a limited number of clients for a significant portion of our revenue, and the loss of business from one or more of our key clients could
adversely affect our results of operations.
Our top ten clients accounted for 78% of our revenue for the year ended December 31, 2020, and four clients each represented over 10% of our revenue
during this period. A relatively small number of clients may continue to account for a significant portion of our revenue for the foreseeable future. The loss
of revenue from any of our significant clients for any reason, including the failure to renew our contracts, termination of some or all of our services, a
change of relationship with any of our key clients, or the acquisition of one of our significant clients, may cause a significant decrease in our revenue.
If we cannot efficiently implement our offering for clients, we may be delayed in generating revenue, fail to generate revenue and/or incur significant
costs.
In general, our client engagements are complex and we must undertake lengthy and significant work to implement our offerings. We generally incur sales
and marketing expenses related to the commissions owed to our sales representatives and make upfront investments in technology and personnel to support
the engagements one to three months before we begin selling end customer contracts on behalf of our clients. Each client’s situation may be different, and
unanticipated difficulties and delays may arise as a result of our failure, or that of our client, to meet implementation responsibilities. If the client
implementation process is not executed successfully or if execution is delayed, we could incur significant costs without generating revenue, and our
relationships with some of our clients and operating results may be adversely impacted.
Because competition for our target employees is intense, we may be unable to attract and retain the highly skilled employees we need to support our
planned growth.
To continue to execute on our growth plan, we must attract and retain highly qualified sales representatives, engineers and other key employees in the
international markets in which we have operations. Competition for these personnel is intense, especially for highly educated, qualified sales
representatives with multiple language skills. We have from time to time in the past experienced, and we expect to continue to experience in the future,
difficulty in hiring and retaining highly skilled key employees with appropriate qualifications. We may incur significant costs to attract and retain highly
skilled key employees, and we may lose new employees to our competitors or other companies before we realize the benefit of our investment in
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recruiting and training them. If we fail to attract new sales representatives, engineers and other key employees, or fail to retain and motivate our most
successful employees, our business and future growth prospects could be harmed.
If our security measures are breached or fail, resulting in unauthorized access to client data, our solution may be perceived as insecure, the
attractiveness of our solution to current or potential clients may be reduced and we may incur significant liabilities.
Our solution involves the storage and transmission of the proprietary information and protected data that we receive from our clients. We rely on
proprietary and commercially available systems, software, tools and monitoring, as well as other processes, to provide security for processing, transmission
and storage of such information. Despite the implementation of these security measures, our systems may still be vulnerable. If our security measures are
breached or fail as a result of third-party action, employee negligence, error, malfeasance or otherwise, unauthorized access to client or end customer data
may occur. Techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against
a target, and we may be unable to anticipate these techniques or implement adequate protective measures. Our security measures may not be effective in
preventing these types of activities, and the security measures of our third-party data centers and service providers may not be adequate.
Our client contracts generally provide that we will indemnify our clients for data privacy breaches caused by our acts or omissions. If a data privacy breach
occurs, we could face contractual damages, damages and fees arising from our indemnification obligations, penalties for violation of applicable laws or
regulations, possible lawsuits by affected individuals and significant remediation costs and efforts to prevent future occurrences. Insurance may not be able
to cover these costs in full, in particular if the damages are large. In addition, whether there is an actual or a perceived breach of our security, the market
perception of the effectiveness of our security measures could be harmed significantly and we could lose current or potential clients.
We may be liable to our clients or third parties if we make errors in providing our solution or fail to properly safeguard our clients' confidential
information.
The solution we offer is complex, and we make errors from time to time. These may include human errors made in the course of managing the sales
process for our clients as we interact with their end customers, or errors arising from our technology solution as it interacts with our clients’ systems and
the disparate data contained on such systems. For example, our employees enter codes to classify their interactions with our clients’ end customers, and
incorrect code entry could result in our clients' end customer not receiving the service or solution they requested, which in turn could lead to customer
dissatisfaction or termination causing our client relationships to suffer and our revenue and our clients' revenue to decline. The costs incurred in correcting
any material errors may be substantial. Any claims based on errors could subject us to exposure for damages, significant legal defense costs, adverse
publicity and reputational harm, regardless of the merits or eventual outcome of such claims.
We conduct operations in a number of countries and are subject to risks of international operations.
Outside of the U.S., we conduct operations in Bulgaria, Ireland, Japan, Malaysia, the Philippines, Singapore and the United Kingdom. In 2020,
approximately 43% of our revenue was related to operations located outside of the U.S. In addition, 70% of our employees are located in offices outside of
the U.S. We expect to continue our international growth, with international revenue accounting for an increased portion of total revenue in the future. Our
international operations involve risks that differ from or are in addition to those faced by our U.S. operations. These risks include different employment
laws and rules and related social and cultural factors; different regulatory and compliance requirements, including in the areas of privacy and data
protection, anti-bribery and anti-corruption, trade sanctions, marketing and sales and other barriers to conducting business; cultural and language
differences; diverse or less stable political, operating and economic environments and market fluctuations; and civil disturbances or other catastrophic
events that affect business activity (including the ongoing coronavirus outbreak). If we are not able to efficiently adapt to or effectively manage our
business in markets outside of the U.S., our business prospects and operating results could be materially and adversely affected. Although we have business
continuity plans in place for our operations, an extended period of civil unrest that halts or significantly impedes operations could have a material adverse
effect on our business.
Laws or public perception may eliminate or restrict our ability to use revenue delivery centers not located in the U.S., which could have a material
adverse impact on our business and results of operations.
The issue of companies outsourcing services to organizations operating in other countries is a politically sensitive topic and has been under heightened
scrutiny in many countries, including the U.S. We provide our outsourced customer success and revenue growth solutions in several non-U.S. locations,
including the Philippines and Malaysia, and our growth strategy includes increasing reliance on these “offshore” revenue delivery centers. Many
organizations and public figures in the U.S. have publicly expressed concern about a perceived association between offshore outsourcing providers and the
loss of jobs in the U.S., and the topic of offshore outsourcing has recently received a great deal of negative attention from the U.S. executive
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branch. Because of negative public perception about offshore outsourcing, measures aimed at limiting or restricting offshore outsourcing by U.S.
companies are periodically considered in the U.S. Congress. Current or prospective clients may elect to perform such services themselves or may be
discouraged from transferring these services from onshore to offshore providers to avoid negative perceptions that may be associated with using an offshore
provider. Any slowdown or reversal of existing industry trends towards offshore outsourcing, including due to the enactment of any legislation restricting
offshore outsourcing by U.S. companies, would harm our ability to provide certain of our services to our clients at a competitive and cost-effective price
point and would have a material adverse effect on our business and results of operations.
Changes in the legal and regulatory environment that affect our operations, including laws and regulations relating to the handling of personal data,
data security and cross-border data flows, may impede the adoption of our services, disrupt our business or result in increased costs, legal claims, or
fines against us.
We are subject to a wide variety of laws and regulations in the U.S. and the other jurisdictions in which we operate, and changes in the level of government
regulation of our business have the potential to materially alter our business practices with resultant increases in costs and decreases in profitability.
Depending on the jurisdiction, those changes may come about through new legislation, the issuance of new regulations or changes in the interpretation of
existing laws and regulations by a court, regulatory body or governmental official. Sometimes those changes have both prospective and retroactive effect,
which is particularly true when a change is made through reinterpretation of laws or regulations that have been in effect for some time.
Our international operations and global client base relies increasingly on the movement of data across national boundaries. Legal requirements relating to
the collection, storage, handling and transfer of personal data continue to evolve, and additional regulation in those areas, some of it potentially difficult
and costly for us to accommodate, is frequently proposed and occasionally adopted. Laws in many countries and jurisdictions, particularly in the European
Union and Canada, govern the requirements related to how we store, transfer or otherwise process the private data provided to us by our clients. For
example, in the European Union, the GDPR imposes substantial requirements regarding the handling of personal data. The GDPR, as well as other data
privacy, cyber security and data localization laws and regulations, has changed in recent years and is likely to continue to evolve in the future. Although we
have implemented measures designed to comply with the laws and regulations applicable to our business, our ongoing efforts to comply with the GDPR
and other changes in laws and regulations (such as the California Consumer Privacy Act that became effective in January 2020) may entail substantial
expenses and divert resources from other initiatives. These changes have in the past increased, and may continue to increase, our cost of providing our
services, could limit us from offering solutions in certain jurisdictions, could adversely affect our sales cycles, and could impact our new technology
innovation. In addition, the centralized nature of our information systems at the data and operations centers that we use requires the routine flow of data
relating to our clients and their respective end customers across national borders, both with respect to the jurisdictions within which we have operations and
the jurisdictions in which we provide services to our clients. If this flow of data becomes subject to new or different restrictions, our ability to serve our
clients and their respective end customers could be seriously impaired for an extended period of time.
We also have entered into various model contracts and related contractual provisions to enable these data flows. For any jurisdictions in which these
measures are not recognized or otherwise not compliant with the laws of the countries in which we process data, or where more stringent data privacy laws
are enacted irrespective of international treaty arrangements or other existing compliance mechanisms, we could face increased compliance expenses and
face penalties for violating such laws or be excluded from those markets altogether, in which case our operations could be materially damaged.
Consolidation in the technology sector could harm our business in the event that our clients are acquired and their contracts are canceled.
Consolidation among technology companies in our target market has been robust in recent years, and this trend poses a risk for us. Acquisitions of our
clients could lead to cancellation of our contracts with those end customers by the acquiring companies and could reduce the number of our existing and
potential clients. If mergers and acquisitions take place within our customer base, some of the acquiring companies may terminate, renegotiate and/or elect
not to renew our contracts with the companies they acquire, which would reduce our revenue. In addition, acquisitions in our customer base may adversely
impact our revenue even if the contract is not terminated. The sales we make on behalf of our customers are processed through our customers’ billing and
quoting platforms. If our customers are acquired or merge with another company and as a result, their billing platforms or the procedures for processing
closed sales are changed or slowed down, we will be unable to close our sales and our closure rate will fall, and therefore our revenue and our ability to
keep our customers, could suffer.
We enter into long-term, commission-based contracts with our clients, and our failure to correctly price these contracts may negatively affect our
profitability.
We enter into long-term contracts with our clients that are priced based on multiple factors determined in large part by the performance analysis we conduct
for our clients. These factors include opportunity size, anticipated booking rates and expected commission rates at various levels of sales performance.
Some of these factors require forward-looking assumptions that may prove incorrect. If our assumptions are inaccurate, or if we otherwise fail to correctly
price our client contracts, particularly
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those with lengthy contract terms, then our revenue, profitability and overall business operations may suffer. Further, if we fail to anticipate any unexpected
increase in our cost of providing services, including the costs for employees, office space or technology, we could be exposed to risks associated with cost
overruns related to our required performance under our contracts, which could have a negative effect on our margins and earnings.
A substantial portion of our business consists of supporting our clients’ channel partners in the sale of service contracts. If those channel partners
become unreceptive to our solution, our business could be harmed.
Many of our clients, including some of our largest clients, sell service contracts through their channel partners and engage our solution to help those
channel partners become more effective at selling service contract renewals. In this context, the ultimate buyers of the service contracts are end customers
of those channel partners, who then receive the actual services from our clients. In the event our clients’ channel partners become unreceptive to our
involvement in the renewals process, those channel partners could discourage our current or future clients from engaging our solution to support channel
sales. This risk is compounded by the fact that large channel partners may have relationships with more than one of our clients or prospects, in which case
the negative reaction of one or more of those large channel partners could impact multiple client relationships. Accordingly, with respect to those clients
and prospective clients who sell service contracts through channel partners, any significant resistance to our solution by their channel partners could harm
our ability to attract or retain clients, which would damage our overall business operations.
We face long sales cycles to secure new client contracts, making it difficult to predict the timing of specific new client relationships.
We face a variable selling cycle to secure new client agreements, typically spanning a number of months and requiring our effort to obtain and analyze our
prospect’s business through the service performance analysis, for which we are not paid. We recently have also experienced a lengthening of our sales
cycles reflecting the hiring of a number of new sales personnel in the past eighteen months who are new to selling our solution as well as slower decision
making by a few end customers as well as other end customers considering renewals of large, multi-year contracts. This has adversely affected the
conversion rates of new client contracts. Moreover, even if we succeed in developing a relationship with a potential new client, the scope of the potential
subscription or service revenue management engagement frequently changes over the course of the business discussions and, for a variety of reasons, our
sales discussions may fail to result in new client acquisitions. Consequently, we have only a limited ability to predict the timing and size of specific new
client relationships.
The length of time it takes our newly hired sales and customer success representatives to become productive could adversely impact our success rate,
the execution of our overall business plan and our costs.
It can take twelve months or longer before our internal sales and customer success representatives are fully trained and productive in selling our solution to
prospective clients. This long ramp period presents a number of operational challenges as the cost of recruiting, hiring and carrying new sales and customer
success representatives cannot be offset by the revenue such new sales representatives produce until after they complete their long ramp periods. Given the
length of the ramp period, we often cannot determine if a sales and customer success representative will succeed until he or she has been employed for a
year or more. If we cannot reliably develop our sales and customer success representatives to a productive level, or if we lose productive representatives in
whom we have heavily invested, our future growth rates and revenue will suffer.
Our revenue and earnings are affected by foreign currency exchange rate fluctuations.
In 2020, approximately 43% of our revenue was generated outside of the U.S., as compared to 42% of our revenue in 2019. As a result of our continued
focus on international markets, we expect that revenue derived from international sources will continue to represent a significant portion of our total
revenue in the future.
A portion of the sales commissions earned from our international clients is paid in foreign currencies. As a result, fluctuations in the value of these foreign
currencies may make our solution more expensive or cause resulting fluctuations in cost for international clients, which could harm our business. We
currently do not undertake hedging activities to manage these currency fluctuations. Even if we were to implement hedging strategies to mitigate this risk,
these strategies might not eliminate our exposure to foreign exchange rate fluctuations and would involve costs and risks of their own, such as ongoing
management time and expense, external costs to implement the strategies and potential accounting implications. In addition, if the effective price of the
contracts we sell to end customers were to increase as a result of fluctuations in the exchange rate of the relevant currencies, demand for such contracts
could fall, which in turn would reduce our revenue.
The exit of the United Kingdom from the European Union could adversely affect our business.
In January 2020, the United Kingdom formally left the European Union, an action referred to as Brexit. Several political, legal, regulatory, and economic
factors which are currently unknown will influence Brexit’s impact on our business. We have a revenue delivery center in Liverpool, United Kingdom, and
Brexit has, and could continue to, create uncertainty in our employee base relating to immigration and other cross-border matters. Brexit could lead to
economic and legal uncertainty,
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including significant volatility in currency exchange rates, reduced customer demand for our services, and increasingly divergent laws and regulations as
the United Kingdom determines which European Union laws to replace or replicate. In addition, Brexit could cause a shift or increase in data privacy
regulations for data transfers between the United Kingdom and European Union. Any of these effects of Brexit, among others, could adversely affect our
operations in the United Kingdom and our financial results.
Claims by others that we infringe or violate their intellectual property could force us to incur significant costs and require us to change the way we
conduct our business.
Our services or solutions could infringe the intellectual property rights of others, impacting our ability to deploy our services or solutions with our clients.
From time to time, we receive letters from other parties alleging, or inquiring about, possible breaches of their intellectual property rights. These claims
could require us to cease activities, incur expensive licensing costs, or engage in costly litigation, each of which could adversely affect our business and
results of operations.
In addition, we may incorporate open source software into our technology solution. The terms of many open source licenses have not been interpreted by
U.S. or foreign courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our
commercialization of any of our solutions that may include open source software. As a result, we will be required to analyze and monitor our use of open
source software closely. As a result of the use of open source software, we could be required to seek licenses from third parties in order to develop such
future products, re-engineer our products, discontinue sales of our solutions or release our software code under the terms of an open source license to the
public. Given the nature of open source software, there is also a risk that third parties may assert copyright and other intellectual property infringement
claims against us based on any use of such open source software. These claims could result in significant expense to us, which could harm our business.
Interruption of operations at our data centers and revenue delivery centers could have a materially adverse effect on our business.
If we experience a temporary or permanent interruption in our operations at one or more of our data or revenue delivery centers, through natural disaster,
casualty, operating malfunction, cyberattack, sabotage or other causes, we may be unable to provide the services we are contractually obligated to deliver.
Failure to provide contracted services could result in contractual damages or clients’ termination or renegotiation of their contracts. Although we maintain
disaster recovery and business continuity plans and precautions designed to protect our company and our clients from events that could interrupt our
delivery of services, there is no guarantee that such plans and precautions will be effective or that any interruption will not be prolonged. Any prolonged
interruption in our ability to provide services to our clients for whom our plans and precautions fail to adequately protect us could have a material adverse
effect on our business, results of operation and financial condition.
We are dependent on the continued participation and level of service of our third-party platform provider. Any failure or disruption in this service
could materially and adversely affect our ability to manage our business effectively.
We rely on salesforce.com to provide the platform supporting many of our technologies and AWS to support a significant portion of our data storage. If
salesforce.com or AWS stops supporting our technologies or if they fail to provide a platform that consistently and adequately supports our solution,
including as a result of errors or failures in their systems or events beyond their control, or refuse to provide their platforms on terms acceptable to us or at
all and we are not able to find suitable alternatives, our business may be materially and adversely affected.
We may be subject to state, local and foreign taxes that could harm our business.
We operate revenue delivery centers in multiple locations. Some of the jurisdictions in which we operate, such as Ireland, give us the benefit of either
relatively low tax rates, tax holidays or government grants, in each case, that are dependent on how we operate or how many jobs we create and employees
we retain. We plan on utilizing such tax incentives in the future, as opportunities are made available to us. Any failure on our part to operate in conformity
with applicable requirements to remain qualified for any such tax incentives or grants may result in an increase in our taxes. In addition, jurisdictions may
choose to increase rates at any time due to economic or other factors. Any such rate increases may harm our results of operations.
We may lose sales or incur significant costs should various tax jurisdictions impose taxes on either a broader range of services or services that we have
performed in the past. We may be subject to audits of the taxing authorities in the jurisdictions where we do business that would require us to incur costs in
responding to such audits. Imposition of such taxes on our services could result in substantial unplanned costs, would effectively increase the cost of such
services to our clients and may adversely affect our ability to retain existing clients or to gain new clients in the areas in which such taxes are imposed.
We may incur material restructuring charges.
We continually evaluate ways to reduce our operating expenses and adapt to changing industry and market conditions through new restructuring
opportunities, including more effective utilization of our assets, workforce and operating facilities. We have
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recorded restructuring charges in the past and we may incur material restructuring charges in the future. The risk that we incur material restructuring
charges may be heightened during economic downturns or with expanded global operations.
We have incurred indebtedness in connection with our business and may incur additional indebtedness in the future.
In July 2018, we entered into a $40.0 million Revolver that allows us to borrow against our domestic receivables as defined in the credit agreement. As of
February 24, 2021, we had $15.0 million of borrowings under the Revolver through a one-month Eurodollar borrowing at an effective interest rate of
2.12% maturing at the end of February 2021. An additional $11.2 million was available for borrowing under the Revolver as of February 24, 2021. The
Eurodollar borrowings may be extended upon maturity, converted into a base rate borrowing upon maturity or require an incremental payment if the
Company's borrowing base decreases below the current amount outstanding during the term of the Eurodollar borrowing. We may incur additional
indebtedness in connection with financing acquisitions, strategic transactions or for other purposes.
If we are unable to secure additional borrowing options in the future, it may have an adverse effect on our business.
The Revolver matures in July 2021 and we are subject to the risks normally associated with debt obligations, including the risk that we will be unable to
refinance our indebtedness, or that the terms of such refinancing will not be as favorable as the terms of our indebtedness. If we are unable to generate
sufficient cash flow or otherwise obtain funds necessary to make required payments or otherwise refinance any debt that we incur, our business could
suffer.
Our financial condition and results of operations could suffer if there is an impairment of goodwill.
We are required to test goodwill annually or more frequently if certain circumstances change that would more-likely-than-not indicate the carrying value of
the reporting unit may not be recoverable. As of December 31, 2020, our goodwill was $6.3 million. When the carrying value of a reporting unit exceeds its
fair value, an impairment loss equal to the difference is recorded. This would result in incremental expenses for that period, which would reduce any
earnings or increase any loss for the period in which the impairment was determined to have occurred. Declines in our level of revenues or declines in our
operating margins, or sustained declines in our stock price, increase the risk that goodwill may become impaired in future periods. Our goodwill
impairment analysis is sensitive to changes in key assumptions used in our analysis, such as expected future cash flows and our stock price. If the
assumptions used in our analysis are not realized, it is possible that an impairment charge may need to be recorded in the future. We cannot accurately
predict the amount and timing of any impairment of goodwill.
If we were to experience an ownership change, we could be limited in our ability to use NOLs arising prior to the ownership change to offset future
taxable income. In addition, our ability to use NOLs to reduce future tax payments may be limited if our taxable income does not reach sufficient levels.
As of December 31, 2020, we had net operating losses of $316.7 million. If we were to experience an “ownership change,” as determined under Section
382 of the IRC, our ability to offset taxable income arising after the ownership change with net operating losses arising prior to the ownership change
would be limited, possibly substantially. In addition, our ability to use our net operating losses is dependent on our ability to generate taxable income, and
the net operating losses could expire before we generate sufficient taxable income to make use of our net operating losses.
General Risk Factors
Anti-takeover provisions contained in our certificate of incorporation and bylaws, as well as provisions of Delaware law, could impair a takeover
attempt.
Our certificate of incorporation, bylaws and Delaware law contain provisions that could have the effect of rendering more difficult or discouraging an
acquisition deemed undesirable by our board of directors. Our corporate governance documents include provisions:
• authorizing blank check preferred stock, which could be issued by our board of directors without stockholder approval, with voting, liquidation,
dividend and other rights superior to our common stock;
limiting the liability of, and providing indemnification to, our directors and officers;
limiting the ability of our stockholders to call and bring business before special meetings and to take action by written consent in lieu of a meeting;
requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates
for election to our board of directors;
•
•
•
• controlling the procedures for the conduct and scheduling of stockholder meetings;
• providing the board of directors with the express power to postpone previously scheduled annual meetings and to cancel previously scheduled
special meetings;
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•
limiting the determination of the number of directors on our board and the filling of vacancies or newly created seats on the board to our board of
directors then in office; and
• providing that directors may be removed by stockholders only for cause.
These provisions, alone or together, could delay hostile takeovers and changes in control or changes in our management. As a Delaware corporation, we are
also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation law, which limits the ability of stockholders owning
in excess of 15% of our outstanding common stock to merge or combine with us.
Any provision of our certificate of incorporation, bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the
opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing
to pay for our common stock.
If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their
recommendations regarding our stock, our stock price and trading volume could decline.
The trading market for our common stock could depend in part on the research and reports that securities or industry analysts publish about us or our
business, which in part depends on our market capitalization. If analysts downgrade our stock or publish inaccurate or unfavorable research about our
business, our stock price could also likely decline. If analysts cease coverage of us, the trading price and trading volume of our stock could be negatively
impacted. As of December 31, 2020, the Company is not aware of any active analyst coverage.
Because we currently do not intend to pay dividends, stockholders will benefit from an investment in our common stock only if it appreciates in value.
We currently intend to retain our future earnings, if any, for use in the operation of our business and do not expect to pay any cash dividends in the
foreseeable future on our common stock. As a result, the success of an investment in our common stock will depend upon any future appreciation in its
value. There is no guarantee that our common stock will appreciate in value or even maintain the price at which stockholders have purchased their shares.
Our business or the value of our common stock could be negatively affected as a result of actions by activist stockholders.
Our company values constructive input from investors and regularly engages in dialogues with stockholders regarding strategy and performance. Our board
of directors and management team are committed to acting in the best interests of all of our stockholders. There is no assurance that the actions taken by
our board of directors and management in seeking to maintain constructive engagement with stockholders will be successful.
Activist stockholders who disagree with the composition of our board of directors, our strategy, or the way our company is managed may seek to effect
change through various strategies that range from private engagement to publicity campaigns, proxy contests, efforts to force transactions not supported by
our board of directors, and litigation. Responding to some of these actions can be costly and time-consuming, may disrupt our operations and divert the
attention of our board of directors, management, and employees. Such activities could interfere with our ability to execute our strategic plan and to attract
and retain qualified executive leadership and could cause concern to our current or potential clients. The perceived uncertainty as to our future direction
resulting from activist strategies could also affect the market price and volatility of our common stock.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
PROPERTIES
The Company leases the office space that houses its corporate headquarters located in Denver, Colorado. The Company also leases additional office space
for its U.S. offices in California and Tennessee, and international offices in Bulgaria, Ireland, Japan, Malaysia, Philippines, Singapore and the United
Kingdom.
ITEM 3.
LEGAL PROCEEDINGS
The information required by this item is incorporated by reference from the information contained in “Note 11 — Commitments and Contingencies” in
Notes to the Consolidated Financial Statements in Part II, Item 8.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
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ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
PART II
Market Information
Our common stock is traded on The Nasdaq Stock Market LLC under the symbol “SREV.”
Holders
As of January 31, 2021, there were 53 holders of record of our common stock. A substantially greater number of holders of our common stock are “street
name” or beneficial holders, whose shares are held by banks, brokers and other financial institutions.
Dividends
We have never declared or paid cash dividends on our common stock. We currently intend to retain all available funds and any future earnings for use in
the operation of our business and do not anticipate paying any dividends on our common stock in the foreseeable future. Any future determination to
declare dividends will be made at the discretion of our board of directors and will depend on our financial condition, operating results, capital requirements,
general business conditions and other factors that our board of directors may deem relevant.
ITEM 6.
SELECTED FINANCIAL DATA
Not applicable.
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ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following MD&A should be read in conjunction with our annual Consolidated Financial Statements and notes thereto appearing elsewhere in this
annual report on Form 10-K. MD&A contains forward-looking statements. See “Forward-Looking Statements” and “Item 1A. Risk Factors” for a
discussion of the uncertainties, risks and assumptions associated with these statements. Actual results may differ materially from those contained in any
forward-looking statements.
Overview
ServiceSource is a leading provider of BPaaS solutions that enable the transformation of go-to-market organizations and functions for global technology
clients. We design, deploy, and operate a suite of innovative solutions and complex processes that support and augment our clients’ B2B customer
acquisition, engagement, expansion and retention activities. Our clients - ranging from Fortune 500 technology titans to high-growth disruptors and
innovators - rely on our holistic customer engagement methodology and process excellence, global scale and delivery footprint, and data analytics and
business insights to deliver trusted business outcomes that have a meaningful and material positive impact to their long-term revenue and profitability
objectives. Through our unique integration of people, process and technology - leveraged against our more than 20 years of experience and domain
expertise in the cloud, software, hardware, medical device and diagnostic equipment, and industrial IoT sectors - we effect and transact billions of dollars
of B2B commerce in more than 175 countries on our clients’ behalf annually.
Factors Affecting our Performance
We generate a significant portion of our revenue from a limited number of clients. The loss of revenue from any of our top clients for any reason, including
the failure to renew our contracts, termination of some or all of our services, or a change of relationship with any of our key clients or their acquisition, may
cause a significant decrease in our revenue.
Our business is geographically diversified. During 2020, 57% of our net revenue was earned in NALA, 28% in EMEA and 15% in APJ, compared to
58% in NALA, 26% in EMEA and 16% in APJ during 2019. All of NALA's revenue represents revenue generated within the U.S. Net revenue for a
particular geography generally reflects commissions earned from sales of service contracts managed from our revenue delivery center in that geography.
Predominantly all of the service contracts sold and managed by our revenue delivery centers relate to end customers located in the same geography.
Sales Cycle. We sell our integrated solution through our sales organization. At the beginning of the sales process, our quota-carrying sales representatives
contact prospective clients and educate them about our offerings. Educating prospective clients about the benefits of our solutions can take time, as many of
these prospects have not historically relied upon integrated solutions like ours for service revenue management, nor have they typically put out a formal
request for proposal or otherwise made a decision to focus on this area. As part of our sales process, our solutions design team performs a service
performance analysis of our prospect’s service revenue. This includes an analysis of best practices and benchmarks the prospect’s service revenue against
industry peers. Through this process, which typically takes several weeks, we are able to assess the characteristics and size of the prospect’s service
revenue, identify potential areas of performance improvement, and formulate our proposal for managing the prospect’s service revenue. The length of our
sales cycle for a new client, inclusive of the service performance analysis process and measured from our first formal discussion with the client until
execution of a new client contract, is typically six months and has decreased in recent periods.
Implementation Cycle. After entering into an engagement with a new client, and to a lesser extent after adding an engagement with an existing client, we
incur sales and marketing expenses related to the commissions owed to our sales personnel. These commissions are based on realized revenue that the
contract delivers over time and on the estimated total annual contract value. Commission amounts based on realized revenue are expensed in the period the
related revenue is recognized by the Company. Upfront commissions based on estimated total annual contract value are capitalizable as contract acquisition
costs and expensed ratably over the expected life of the applicable contract or five years if the contract is between the Company and one of its long-
standing clients. We also make upfront investments in technology and personnel to support the engagement. These upfront commissions and investments
are typically incurred one to three months before we begin generating sales and recognizing revenue. Accordingly, in a given quarter, an increase in new
clients, and, to a lesser extent, an increase in engagements with existing clients, or a significant increase in the contract value associated with such new
clients and engagements, will negatively impact our gross margin and operating margins until we begin to achieve anticipated sales levels associated with
the new engagements, which is typically two to three quarters after we begin selling contracts on behalf of our clients.
Although we expect new client engagements to contribute to our operating profitability over time, in the initial periods of a client relationship, our near-
term profitability can be negatively impacted by slower-than anticipated growth in revenues for these engagements as well as the impact of the upfront
costs we incur, the lower initial level of associated service sales team productivity and lack of mature data and technology integration with the client. As a
result, an increase in the mix of new
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clients as a percentage of total clients may initially have a negative impact on our operating results. Similarly, a decline in the ratio of new clients to total
clients may positively impact our near-term operating results.
Contract Terms. A significant portion of our revenue comes from our pay-for-performance model. Under our pay-for-performance model, we earn
commissions based on the value of service contracts we sell on behalf of our clients. In some cases, we earn additional performance-based commissions for
exceeding pre-determined service performance targets.
Our new client contracts typically have an initial term between one and two years. Our contracts generally require our clients to deliver a minimum value of
qualifying service revenue contracts for us to renew on their behalf during a specified period. To the extent that our clients do not meet their minimum
contractual commitments over a specified period, they may be subject to fees for the shortfall. Our client contracts are cancelable with relatively short
notice and can be subject to the payment of an early termination fee by the client. The amount of this fee is based on the length of the remaining term and
value of the contract.
Merger and Acquisition Activity. Our clients, particularly those in the technology sector, participate in an active environment for mergers and acquisitions.
Large technology companies have maintained active acquisition programs to increase the breadth and depth of their product and service offerings and small
and mid-sized companies have combined to better compete with large technology companies. A number of our clients have merged, purchased other
companies or been acquired by other companies. We expect merger and acquisition activity to continue to occur in the future.
The impact of these transactions on our business can vary. Acquisitions of other companies by our clients can provide us with the opportunity to pursue
additional business to the extent the acquired company is not already one of our clients. Similarly, when a client is acquired, we may be able to use our
relationship with the acquired company to build a relationship with the acquirer. In some cases, we have been able to maintain our relationship with an
acquired client even where the acquiring company handles its other service contract renewals through internal resources. In other cases, however, acquirers
have elected to terminate or not renew our contract with the acquired company.
Seasonality. We experience a seasonal variance in our revenue which is typically higher in the fourth quarter when many of our clients’ products come up
for renewal, and for the third quarter of the year which is typically lower as a result of lower or flat renewal volume corresponding to the timing of our
customers’ product sales particularly in the international regions. The impact of this seasonal fluctuation can be amplified if the economy as a whole is
experiencing disruption or uncertainty, leading to deferral of some renewal decisions.
Foreign currency. Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, particularly
changes in the Euro, British Pound, Singapore Dollar, Philippine Peso, Bulgarian Lev and Malaysian Ringgit. To date, we have not entered into any foreign
currency hedging contracts, but may consider entering into such contracts in the future. We believe our operating activities act as a natural hedge for a
substantial portion of our foreign currency exposure because we typically collect revenue and incur costs in the currency in the location in which we
provide our solution from our revenue delivery centers. As our international operations grow, we will continue to reassess our approach to managing our
risk relating to fluctuations in currency rates. See Item.1A. "Risk Factors" for a description of the risks associated with fluctuations of the foreign currency
exchange rate in our foreign operations.
Inflation. We do not believe that inflation has a material effect on our business, financial condition or results of operations as of December 31,
2020 and December 31, 2019. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such
higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations.
Impact of the COVID-19 Pandemic. With the global outbreak of COVID-19 and the declaration of a pandemic by the World Health Organization on March
11, 2020, we created a dedicated crisis team to proactively implement our business continuity plans. By March 19, 2020, more than 95% of our employees
had moved from an in-office to a work-from-home environment and as of April 1, 2020, we transitioned to a 100% virtual operating model. As a result of
this successful work-from-home implementation, we have shifted to a virtual-first operating model whereby our employees will continue to primarily work
from their home offices and our facilities will be used for collaboration, innovation, and connection. Additionally, this model includes virtual sourcing,
hiring, and onboarding for new employees as well as a process for driving performance and culture in a virtual environment. As a result of the
implementation of these business continuity measures, we have not experienced material disruptions in our operations.
We believe we have sufficient liquidity on hand to continue business operations during this volatile period. As of December 31, 2020, we had total
available liquidity of $45.2 million consisting of cash on hand and availability under our Revolver. See "Liquidity and Capital Resources" for additional
information.
There was no material adverse impact on the results of operations for the year ended December 31, 2020 resulting from COVID-19. We have incurred and
expect to continue to incur costs directly related to the COVID-19 pandemic such as costs for enhanced cleaning of our facilities, investing capital to allow
our employees to function in our virtual, work-from-home
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operating model and increased paid time off costs resulting from employees taking less paid time off. However, we are benefiting and will continue to
benefit from decreases in certain costs related to our facilities and reduced travel and entertainment costs with our virtual-first operating model. We do not
currently anticipate that these items will have a material adverse impact on our overall business and financial results.
During 2020, ServiceSource received various grants from the Singapore government, including the Job Support Scheme, which assists enterprises in
retaining their local employees during the COVID-19 pandemic. ServiceSource received approximately $1.3 million from the grant during the year ended
December 31, 2020 and is expected to receive an additional $0.2 million through July 2021.There are no conditions to repay the grants.
The situation surrounding COVID-19 remains fluid and the potential for a negative impact on our financial condition and results of operations increases the
longer the virus impacts the economic activity in the U.S. and globally. See Part I, Item 1A - “Risk Factors” for additional information.
Basis of Presentation
Net Revenue
Substantially all of our net revenue is attributable to commissions we earn from the sale of renewals of maintenance, support and subscription agreements
on behalf of our clients. We generally invoice our clients for our selling services on a monthly basis for sales commissions, and on a quarterly basis for
certain performance sales commissions. We do not set the price, terms or scope of services in the service contracts with end customers and do not have any
obligations related to the underlying service contracts between our clients and their end customers. We also generate revenues from selling professional
services for which we are the principal. Professional services involve providing data integration at scale with our systems and processes, combined with
client data enhancement, enablement and optimization. We typically invoice our clients for professional services on a monthly basis.
Cost of Revenue and Gross Profit
Our cost of revenue includes employee compensation, technology costs, including those related to the delivery of our cloud-based technologies, and
allocated overhead expenses. Employee compensation includes salary, bonus, commissions, benefits, and stock-based compensation for our dedicated
service sales teams. Allocated overhead expenses include depreciation, amortization of internal-use software associated with our selling services revenue
technology platform and cloud applications, and costs for facilities and information technology. Allocated overhead expenses for facilities consist of rent,
maintenance, and compensation of personnel in our facilities departments. Our allocated overhead expenses for information technology include costs
associated with third-party data centers where we maintain our data servers, compensation of our information technology personnel and the cost of support
and maintenance contracts associated with computer hardware and software. To the extent our client base or business with our existing client base expands,
we may need to hire additional service sales personnel and invest in infrastructure to support such growth. Our cost of revenue may fluctuate significantly
and increase or decrease on an absolute basis and as a percentage of revenue in the near term, including for the reasons discussed under, “Factors Affecting
Our Performance-Implementation Cycle.”
Operating Expenses
Sales and Marketing
Sales and marketing expenses primarily consist of employee compensation expense and sales commissions paid to our sales and marketing employees,
amortization of contract acquisition costs, marketing programs and events and allocated overhead expenses which consist of depreciation, amortization of
internally developed software, and facility and technology costs. We sell our solutions through our global sales organization, which is organized across
three geographic regions: NALA, EMEA and APJ. Our commission plans generally provide multiple payments of commissions to our sales representatives
based in part on the execution of a client contract and then on a percentage of revenue recorded during the first one to three years of the contract term.
Commissions paid as a percentage of recorded revenue is contingent on the sales representatives' continued employment. We generally capitalize the
amounts payable for obtaining a contract and amortize ratably to sales and marketing expense over the contract term for new clients or five years for long-
standing client relationships. Revenue based commissions are generally expensed to sales and marketing expense each quarter as revenue is recorded.
Research and Development
Research and development expenses primarily consist of employee compensation expense, third-party consultant costs and allocated overhead expenses
which consist of depreciation, amortization of internally developed software, and facility and technology costs. We focus our research and development
efforts on developing new products and applications related to our technology platform. We capitalize certain expenditures related to the development and
enhancement of internal-use software related to our technology platform.
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General and Administrative
General and administrative expenses primarily consist of employee compensation expense for our executive, human resources, finance and legal functions
and expenses for professional fees for accounting, tax and legal services, as well as allocated overhead expenses, which consist of depreciation,
amortization of internally developed software, facility and technology costs.
Restructuring and Other Related Costs
Restructuring and other related costs primarily consist of employee severance payments and related benefits and legal fees and charges related to lease
termination costs. During 2019 and 2020, the Company announced restructuring efforts resulting in a reduction of headcount and office lease costs. As of
December 31, 2020, the Company does not expect to incur additional restructuring charges related to the 2019 restructuring effort and expects to incur
additional costs through 2021 related to the 2020 restructuring effort.
Interest and Other Expense, Net
Interest and other expense, net consists of interest expense associated with our Revolver, imputed interest from finance lease payments, interest income
earned on our cash and cash equivalents, amortization of debt issuance costs and foreign exchange gains and losses.
Provision for Income Tax Expense
We account for income taxes using an asset and liability method, which requires the recognition of taxes payable or refundable for the current year and
deferred tax assets and liabilities for the expected future tax consequences of temporary differences that currently exist between the tax basis and the
financial reporting basis of our taxable subsidiaries’ assets and liabilities using the enacted tax rates in effect for the year in which the differences are
expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in operations in the period that includes the
enactment date. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are
not expected to be realized.
We evaluate our ability to realize the tax benefits associated with deferred tax assets on a jurisdictional basis. This evaluation utilizes the framework
contained in ASC 740 wherein management analyzes all positive and negative evidence available at the balance sheet date to determine whether all or
some portion of our deferred tax assets will not be realized. Under this guidance, a valuation allowance must be established for deferred tax assets when it
is more-likely-than-not (a probability level of more than 50 percent) that they will not be realized. In assessing the realization of our deferred tax assets, we
consider all available evidence, both positive and negative, and place significant emphasis on guidance contained in ASC 740, which states that “a
cumulative loss in recent years is a significant piece of negative evidence that is difficult to overcome.”
We account for unrecognized tax benefits using a more-likely-than-not threshold for financial statement recognition and measurement of tax positions
taken or expected to be taken in a tax return. We establish reserves for tax-related uncertainties based on estimates of whether, and the extent to which,
additional taxes will be due. We record an income tax liability, if any, for the difference between the benefit recognized and measured and the tax position
taken or expected to be taken on our tax returns. To the extent that the assessment of such tax positions change, the change in estimate is recorded in the
period in which the determination is made. The reserves are adjusted in light of changing facts and circumstances, such as the outcome of a tax audit. The
provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate.
Key Financial Results – Full Year Ended December 31, 2020
• GAAP revenue was $194.6 million, compared with $216.1 million reported for the year ended December 31, 2019.
• GAAP net loss was $18.5 million or $0.19 per diluted share, compared with GAAP net loss of $18.7 million or $0.20 per diluted share reported
for the year ended December 31, 2019.
• Adjusted EBITDA, a non-GAAP financial measure, was $4.3 million compared with $4.2 million reported for the year ended December 31, 2019.
See “Non-GAAP Financial Measurements” below for a reconciliation of Adjusted EBITDA from net loss.
•
Ended the year with $36.3 million of cash and cash equivalents and restricted cash and $15.0 million of borrowings under the Company’s $40.0
million Revolver.
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Results of Operations
For the Year Ended December 31, 2020 Compared to the Year Ended December 31, 2019
Net Revenue, Cost of Revenue and Gross Profit
Net revenue
Cost of revenue
Gross profit
For the Year Ended December 31,
2020
% of Net Revenue
2019
% of Net Revenue
Amount
(in thousands)
$ Change
(in thousands)
% Change
100 % $
70 %
30 % $
216,135
153,155
62,980
100 % $
71 %
29 % $
(21,534)
(16,114)
(5,420)
(10)%
(11)%
(9)%
Amount
(in thousands)
$
$
194,601
137,041
57,560
Net revenue decreased by $21.5 million, or 10%, for the year ended December 31, 2020 compared to the same period in 2019, primarily due to client churn
and lower bookings.
Cost of revenue decreased $16.1 million, or 11%, for the year ended December 31, 2020 compared to the same period in 2019, primarily due to the
following:
•
•
•
•
$10.9 million decrease in employee related costs associated with a reduction in headcount, the receipt of the Singapore government grant, and
lower travel and entertainment expenditures, partially offset by increased paid time off costs resulting from employees taking less paid time off
during the global pandemic;
$3.6 million decrease in facility related costs primarily related to sublease income, reduced headcount and transitioning to a virtual-first operating
model; and
$2.7 million decrease in information technology costs due to an increase in capitalizable software development activity and lower headcount;
partially offset by
$1.3 million increase in depreciation and amortization expense.
Operating Expenses
Operating expenses:
Sales and marketing
Research and development
General and administrative
Restructuring and other related costs
Total operating expenses
Sales and Marketing
For the Year Ended December 31,
2020
% of Net Revenue
Amount
(in thousands)
Amount
(in thousands)
2019
% of Net Revenue
$ Change
(in thousands)
% Change
$
$
24,999
5,602
41,970
1,542
74,113
13 % $
3 %
22 %
1 %
38 % $
30,009
4,848
43,208
1,929
79,994
14 % $
2 %
20 %
1 %
37 % $
(5,010)
754
(1,238)
(387)
(5,881)
(17)%
16 %
(3)%
(20)%
(7)%
Sales and marketing expense decreased $5.0 million, or 17%, for the year ended December 31, 2020 compared to the same period in 2019, primarily due to
a $3.9 million decrease in employee related costs associated with a reduction in headcount, lower bookings, and lower travel and entertainment
expenditures, a $0.4 million decrease in information technology cost, a $0.3 million decrease in marketing cost, and a $0.3 million decrease in facility costs
related to sublease income and transitioning to a virtual-first operating model.
Research and Development
Research and development expense increased $0.8 million, or 16%, for the year ended December 31, 2020 compared to the same period in 2019, primarily
due to a $1.1 million reduction in third party capitalizable software development costs, partially offset by a $0.5 million decrease in information technology
and facility costs related to sublease income and transitioning to a virtual-first operating model.
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General and Administrative
General and administrative expense decreased $1.2 million, or 3%, for the year ended December 31, 2020 compared to the same period in 2019, primarily
due to the following:
•
•
•
•
•
$1.2 million decrease in employee related costs associated with a reduction in headcount and lower travel and entertainment expenditures and
recruiting costs, partially offset by merit increases and increased paid time off costs resulting from employees taking less paid time off during the
global pandemic; and
$0.8 million decrease in depreciation and amortization expense; and
$0.7 million decrease in professional fees; partially offset by
$1.2 million increase in information technology support and facility costs due to lower headcount in cost of revenue; and
$0.2 million increase due to the settlement of the legal contingency in 2019.
Restructuring and Other Related Costs
Restructuring and other related costs decreased $0.4 million, or 20%, for the year ended December 31, 2020 compared to the same period in 2019 due to
decreased costs incurred during the year ended December 31, 2020 related to the restructuring efforts resulting in a reduction of headcount and office lease
costs compared to the year ended December 31, 2019.
Interest and Other Expenses, Net
Interest expense
Other expense, net
For the Year Ended December 31,
2020
% of Net Revenue
2019
% of Net Revenue
Amount
(in thousands)
$ Change
(in thousands)
% Change
— % $
— % $
(388)
(838)
— % $
— % $
(220)
167
(57)%
20 %
Amount
(in thousands)
$
$
(608)
(671)
Interest expense increased $0.2 million, or 57%, for the year ended December 31, 2020 compared to the same period in 2019 primarily due to borrowings
on the Revolver during 2020.
Other expense, net decreased $0.2 million, or 20%, for the year ended December 31, 2020 compared to the same period in 2019 primarily due to a foreign
currency fluctuations.
Income Tax Provision
For the Year Ended December 31,
2020
% of Net Revenue
Amount
(in thousands)
Amount
(in thousands)
2019
% of Net Revenue
$ Change
(in thousands)
% Change
Provision for income tax expense
$
(709)
— % $
(443)
— % $
(266)
(60)%
Provision for income tax expense resulted primarily from profitable jurisdictions where no valuation allowance has been provided. Income tax expense
increased $0.3 million, or 60%, for the year ended December 31, 2020 compared to 2019, due to an increase in profitable operations in certain foreign
jurisdictions.
Liquidity and Capital Resources
Our primary operating cash requirements include the payment of compensation and related employee costs and costs for our facilities and information
technology infrastructure. Historically, we have financed our operations from cash provided by our operating activities. We believe our existing cash and
cash equivalents will be sufficient to meet our working capital and capital expenditure needs over the next twelve months.
We have considered the effects of the COVID-19 pandemic, including customer purchasing and renewal decisions in our assessment of the sufficiency of
our liquidity and capital resources. We will continue to monitor our financial position as pandemic-related challenges develop over time.
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As of December 31, 2020, we had cash and cash equivalents of $34.0 million, which primarily consist of demand deposits and money market mutual funds.
Included in cash and cash equivalents was $6.7 million held by our foreign subsidiaries used to satisfy their operating requirements. We consider the
undistributed earnings of ServiceSource Europe Ltd. and ServiceSource International Singapore Pte. Ltd. permanently reinvested in foreign operations and
have not provided for U.S. income taxes on such earnings. As of December 31, 2020, the Company had no unremitted earnings from our foreign
subsidiaries.
In July 2018, the Company entered into a $40.0 million Revolver that allows it and the other Borrowers named therein to borrow against its domestic
receivables as defined in the Credit Agreement. The Revolver matures July 2021 and bears interest at a variable rate per annum based on the greater of the
prime rate, the Federal Funds rate plus 0.50% or the one-month LIBOR rate plus 1.00%, plus, in each case, a margin of 1.00% for base rate borrowings or
2.00% for Eurodollar borrowings.
As of December 31, 2020, the Company had $15.0 million of borrowings under the Revolver through a one-month Eurodollar borrowing at an effective
interest rate of 2.15% maturing January 2021. An additional $11.2 million was available for borrowing under the Revolver as of December 31, 2020. The
Eurodollar borrowings may be extended upon maturity, converted into a base rate borrowing upon maturity or require an incremental payment if the
Company's borrowing base decreases below the current amount outstanding during the term of the Eurodollar borrowing.
Subsequent to December 31, 2020, the one-month $15.0 million Eurodollar borrowing was extended at an effective interest rate of approximately 2.12%
maturing at the end of February 2021.
The obligations under the Credit Agreement are secured by substantially all the assets of the Borrowers and certain of their subsidiaries, including pledges
of equity in certain of the Company’s subsidiaries. The Revolver has financial covenants which the Company was in compliance with as of December 31,
2020 and 2019.
Letters of Credit and Restricted Cash
In connection with two of our leased facilities, the Company is required to maintain two letters of credit totaling $2.3 million. The letters of credit are
secured by $2.3 million of cash in money market accounts, which are classified as restricted cash in "Other assets" in the Consolidated Balance Sheets.
Cash Flows
The following table presents a summary of our cash flows:
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents and restricted cash
Net change in cash and cash equivalents and restricted cash
Depreciation and amortization expense were comprised of the following:
Internally developed software amortization
Property and equipment depreciation
Total depreciation and amortization
Operating Activities
For the Year Ended December 31,
2020
2019
(in thousands)
401 $
(7,855)
14,301
96
6,943 $
12,445
(10,106)
(859)
124
1,604
For the Year Ended December 31,
2020
2019
(in thousands)
7,701 $
6,224
13,925 $
5,802
7,647
13,449
$
$
$
$
Net cash provided by operating activities decreased $12.0 million during the year ended December 31, 2020 compared to the same period in 2019,
primarily as a result of decreased revenue and higher supplier payments during the current period compared to the prior period related to operating costs
accrued for previously.
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Investing Activities
Net cash used in investing activities decreased $2.3 million during the year ended December 31, 2020 compared to the same period in 2019, due to
decreased cash outflows from purchases of property and equipment during the year ended December 31, 2020.
Financing Activities
Net cash provided by financing activities increased $15.2 million during the year ended December 31, 2020 compared to the same period in 2019, primarily
as a result of $15.0 million in net cash inflows from borrowings on the Revolver during the year ended December 31, 2020.
Off-Balance Sheet Arrangements
As of December 31, 2020 and 2019, we did not have any relationships with other entities or financial partnerships such as entities often referred to as
structured finance or special-purpose entities, which have been established for facilitating off-balance sheet arrangements or other contractually narrow or
limited purposes.
Critical Accounting Policies and Estimates
General
The preparation of financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including
making estimates and assumptions. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different or
different assumptions were made, it is possible that different accounting policies would have been applied, resulting in different financial results or a
different presentation of our financial statements. Our discussion and analysis of financial condition and results of operations is based on our Consolidated
Financial Statements, which have been prepared in accordance with GAAP. Estimates, judgments and assumptions are based on historical experiences that
we believe to be reasonable under the circumstances. From time to time, we re-evaluate those estimates and assumptions.
The Company’s significant accounting policies are described in Notes to the Consolidated Financial Statements, "Note 2 — Summary of Significant
Accounting Policies.” These policies were followed in preparing the Consolidated Financial Statements as of and for the year ended December 31, 2020
and are consistent with the year ended December 31, 2019.
The Company has identified the following as critical accounting policies. These accounting policies have the most significant impact on our financial
condition and results of operations and require management’s most difficult, subjective and/or complex estimates.
Revenue Recognition
The Company derives its revenues primarily from selling and professional services. Revenue is recognized in accordance with ASC 606 when performance
obligations identified in a contract are satisfied, which is achieved through the transfer of control of the services to our client.
Selling Services
Selling services primarily consist of variable fees earned from the following categories of selling motions: (1) digital sales, (2) customer success, and (3)
channel management.
Professional Services
Professional services primarily consist of fixed fees for providing data integration at scale with our systems and processes, combined with client data
enhancement, enablement and optimization. Professional services revenues from fixed consideration are recognized based on proportional performance
over the performance period which is typically concluded within 90 days of contract execution.
Multiple Arrangements
The Company enters into contracts with multiple performance obligations that incorporate fixed consideration, pay-for-performance commissions and
variable bonus commissions. Judgment is required to estimate the amount of variable consideration to include when estimating the total contract
consideration and how to allocate the consideration if one of the distinct performance obligations is not sold at SSP.
Performance Obligations
Revenue is measured based on the consideration specified in a contract. Individual services within a single contract are accounted separately if they are
distinct. The total contract consideration, or transaction price, is allocated between the separate services identified in the contract based on their SSP. SSP is
determined based on a cost plus margin analysis for selling
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services and a standard hourly rate card for professional services. For professional services that are contractually priced differently from SSP, the Company
estimates SSP using a standard hourly rate card and allocates a portion of the total contract consideration to reflect professional services revenue at SSP.
The Company’s performance obligations are satisfied over time and revenue is recognized based on monthly or quarterly time increments and the variable
volume of closed bookings during the period at the contractual commission rates for selling services, or proportional performance during the period at SSP
for professional services. Because the client simultaneously receives and consumes the benefit of the Company’s selling services as provided, the time
increment output method depicts the measure of progress in transferring control of the services to the client.
While multiple selling motions in a contract are performed at various times and patterns throughout the month or quarter and the number of closed
bookings vary in any given period, each time increment of a service activity is substantially the same and has the same pattern of transfer to the client, and
therefore, represents a series of distinct performance obligations that form a single performance obligation. As a result, the Company allocates all variable
consideration in a contract to the selling services performance obligation in accordance with the variable consideration allocation exception provisions in
ASC 606 (less amounts for which it is probable a significant reversal of revenue will occur when the uncertainties related to the variability are resolved)
and applies a single measure of progress to record revenue in the period based on when the output of the variable number of closed bookings occurs or
when the variable performance metric is achieved.
Our revenue contracts often include promises to transfer services involving multiple selling motions to a client. Determining whether those services are
considered distinct performance obligations and qualify as a series of distinct performance obligations that represent a single performance obligation
requires significant judgment. Also, due to the continuous nature of providing services to our clients, judgment is required in determining when control of
the services is transferred to the client.
A significant portion of our contracts is based on a pay-for-performance model that provides the Company with commissions and revenue based on a
volume of closed bookings each time period and variable consideration if certain performance targets are achieved during a given period of time (such as
exceeding quarterly closure rate thresholds or achieving absolute dollar volume sales targets). Significant judgment is required to determine if this type of
variable consideration should be constrained, and to what extent, until the risk of a significant revenue reversal is not probable.
Stock-Based Compensation
Stock-based compensation expense for RSUs and PSUs is determined using the fair value of our common stock on the date of grant and is recognized on a
straight-line basis over the vesting period. PSU compensation expense is only recorded if it is probable the performance conditions will be met.
Impairment of Goodwill
We evaluate goodwill for possible impairment at least annually or if indicators of impairment arise, such as significant changes in key factors including the
industry and competitive environment, stock price, actual revenue performance year over year, EBITDA and cash flow generation that would more-likely-
than-not indicate the carrying amount of such assets may not be recoverable. Significant judgments are required to estimate the fair value of the reporting
unit which include estimating future cash flows. Changes in these estimates and assumptions could materially affect the determination of fair value for the
reporting unit which could trigger impairment.
Income Taxes
We account for income taxes using an asset and liability method, which requires the recognition of taxes payable or refundable for the current year and
deferred tax assets and liabilities for the expected future tax consequences of temporary differences that currently exist between the tax basis and the
financial reporting basis of our taxable subsidiaries’ assets and liabilities using the enacted tax rates in effect for the year in which the differences are
expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in operations in the period that includes the
enactment date. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are
not expected to be realized.
We regularly assess the need for a valuation allowance against our deferred tax assets. In making that assessment, we consider both positive and negative
evidence related to the likelihood of realization of the deferred tax assets on a jurisdictional basis to determine, based on the weight of available evidence,
whether it is more-likely-than-not that some or all of the deferred tax assets will not be realized. Examples of positive and negative evidence include future
growth, forecasted earnings, future taxable income, the mix of earnings in the jurisdictions in which we operate, historical earnings, taxable income in prior
years, if carryback is permitted under the law and prudent and feasible tax planning strategies. In the event we were to determine that we would not be able
to realize all or part of our net deferred tax assets in the future, an adjustment to the deferred tax assets valuation allowance would be charged to earnings in
the period in which we make such a determination, or goodwill would be adjusted at our final determination of the valuation allowance related to an
acquisition within the measurement period. If we
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later determine that it is more-likely-than-not that the net deferred tax assets would be realized, we would reverse the applicable portion of the previously
provided valuation allowance as an adjustment to earnings at such time.
We account for unrecognized tax benefits using a more-likely-than-not threshold for financial statement recognition and measurement of tax positions
taken or expected to be taken in a tax return. We establish reserves for tax-related uncertainties based on estimates of whether, and the extent to which,
additional taxes will be due. We record an income tax liability, if any, for the difference between the benefit recognized and measured and the tax position
taken or expected to be taken on our tax returns. We recognize interest accrued and penalties related to unrecognized tax benefits in the income tax
provision. To the extent that the assessment of such tax positions change, the change in estimate is recorded in the period in which the determination is
made. The reserves are adjusted in light of changing facts and circumstances, such as the outcome of a tax audit. The provision for income taxes includes
the impact of reserve provisions and changes to reserves that are considered appropriate.
Recent Accounting Pronouncements
See Notes to the Consolidated Financial Statements “Note 2 — Summary of Significant Accounting Policies” in Item 8. Financial Statements and
Supplementary Data for a full description of recent accounting pronouncements including the expected dates of adoption and the anticipated impact to our
Consolidated Financial Statements.
Non-GAAP Financial Measurements
ServiceSource believes net income (loss), as defined by GAAP, is the most appropriate financial measure of our operating performance; however,
ServiceSource considers Adjusted EBITDA to be useful supplemental, non-GAAP financial measure of our operating performance. We believe Adjusted
EBITDA can assist investors in understanding and assessing our operating performance on a consistent basis, as it removes the impact of the Company's
capital structure and other non-cash or non-recurring items from operating results and provides an additional tool to compare ServiceSource's financial
results with other companies in the industry, many of which present similar non-GAAP financial measures.
EBITDA consists of net income (loss) plus provision for income tax expense (benefit), interest and other expense (income), net and depreciation and
amortization. Adjusted EBITDA consists of EBITDA plus stock-based compensation, restructuring and other related costs, amortization of contract
acquisition costs related to the initial adoption of ASC 606 and costs attributable to establishing a litigation reserve.
This non-GAAP measure should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP.
The following table presents the reconciliation of "Net loss" to Adjusted EBITDA:
Net loss
Provision for income tax expense
Interest and other expense, net
Depreciation and amortization
EBITDA
Stock-based compensation
Restructuring and other related costs
Amortization of contract acquisition asset costs -
ASC 606 initial adoption
Litigation reserve
Adjusted EBITDA
For the Year Ended December 31,
2019
2020
(in thousands)
$
$
(18,541) $
709
1,279
13,925
(2,628)
4,865
1,542
605
(74)
4,310 $
(18,683)
443
1,226
13,449
(3,565)
5,162
1,929
976
(256)
4,246
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to smaller reporting companies as defined by Rule 12b-2 of the Exchange Act.
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ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Loss
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Reports of Independent Registered Public Accounting Firm
26
27
28
29
30
31
32
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Assets
Current assets:
Cash and cash equivalents
Accounts receivable, net
Prepaid expenses and other
Total current assets
Property and equipment, net
ROU assets
Contract acquisition costs
Goodwill
Other assets
Total assets
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
Accrued expenses
Accrued compensation and benefits
Revolver
Operating lease liabilities
Other current liabilities
Total current liabilities
Operating lease liabilities, net of current portion
Other long-term liabilities
Total liabilities
Commitments and contingencies (Note 11)
Stockholders’ equity:
ServiceSource International, Inc.
Consolidated Balance Sheets
(in thousands, except per share and par value amounts)
December 31,
2020
2019
$
$
$
$
34,006 $
38,890
9,275
82,171
29,948
29,798
872
6,334
3,490
152,613 $
1,204 $
3,217
18,342
15,000
10,797
1,209
49,769
25,975
1,593
77,337
27,089
41,754
7,296
76,139
36,149
36,396
1,602
6,334
4,844
161,464
4,392
3,366
16,700
—
9,652
2,218
36,328
33,716
2,983
73,027
—
—
10
(441)
379,696
(304,607)
618
75,276
152,613 $
9
(441)
374,525
(286,066)
410
88,437
161,464
Preferred stock, $0.0001 par value; 20,000 shares authorized and none issued and outstanding
Common stock; $0.0001 par value; 1,000,000 shares authorized; 97,248 shares issued and 97,127
shares outstanding as of December 31, 2020; 94,972 shares issued and 94,851 shares outstanding as of
December 31, 2019
Treasury stock
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive income
Total stockholders’ equity
Total liabilities and stockholders’ equity
The accompanying notes are an integral part of these Consolidated Financial Statements.
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Net revenue
Cost of revenue
Gross profit
Operating expenses:
Sales and marketing
Research and development
General and administrative
Restructuring and other related costs
Total operating expenses
Loss from operations
Interest and other expense, net
Loss before provision for income taxes
Provision for income tax expense
Net loss
Net loss per common share:
Basic and diluted
Weighted-average common shares outstanding:
Basic and diluted
ServiceSource International, Inc.
Consolidated Statements of Operations
(in thousands, except per share amounts)
$
$
$
For the Year Ended December 31,
2019
2020
194,601 $
137,041
57,560
24,999
5,602
41,970
1,542
74,113
(16,553)
(1,279)
(17,832)
(709)
(18,541) $
(0.19) $
95,787
216,135
153,155
62,980
30,009
4,848
43,208
1,929
79,994
(17,014)
(1,226)
(18,240)
(443)
(18,683)
(0.20)
93,882
The accompanying notes are an integral part of these Consolidated Financial Statements.
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Net loss
Other comprehensive income
Foreign currency translation adjustments
Other comprehensive income
Comprehensive loss
ServiceSource International, Inc.
Consolidated Statements of Comprehensive Loss
(in thousands)
For the Year Ended December 31,
2019
2020
$
$
(18,541) $
208
208
(18,333) $
(18,683)
8
8
(18,675)
The accompanying notes are an integral part of these Consolidated Financial Statements.
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ServiceSource International, Inc.
Consolidated Statements of Stockholders' Equity
(in thousands)
Balance at December 31, 2018
Net loss
Other comprehensive income
Stock-based compensation
Issuance of common stock, RSUs
Proceeds from the exercise of stock options and ESPP
Net cash paid for payroll taxes on RSU releases
Balance at December 31, 2019
Net loss
Other comprehensive income
Stock-based compensation
Issuance of common stock, RSUs
Proceeds from the exercise of stock options and ESPP
Net cash paid for payroll taxes on RSU releases
Balance at December 31, 2020
Common Stock
Treasury Shares/Stock
Shares
Amount
Shares
Amount
Additional
Paid-in
Capital
Accumulated
Deficit
Accumulated Other
Comprehensive
Income
92,895
—
—
—
1,814
263
—
94,972
—
—
—
1,845
431
—
97,248
$
$
9
—
—
—
—
—
—
9
—
—
—
1
—
—
10
(121)
—
—
—
—
—
—
(121)
—
—
—
—
—
—
(121)
$
$
(441)
—
—
—
—
—
—
(441)
—
—
—
—
—
—
(441)
$
$
369,246
—
—
5,238
—
223
(182)
374,525
—
—
4,919
(1)
414
(161)
379,696
$
$
(267,383)
(18,683)
—
—
—
—
—
(286,066)
(18,541)
—
—
—
—
—
(304,607)
$
$
402
—
8
—
—
—
—
410
—
208
—
—
—
—
618
$
$
Total
101,833
(18,683)
8
5,238
—
223
(182)
88,437
(18,541)
208
4,919
—
414
(161)
75,276
The accompanying notes are an integral part of these Consolidated Financial Statements.
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ServiceSource International, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization
Amortization of contract acquisition costs
Amortization of ROU assets
Stock-based compensation
Restructuring and other related costs
Other
Net changes in operating assets and liabilities:
Accounts receivable, net
Prepaid expenses and other assets
Contract acquisition costs
Accounts payable
Accrued compensation and benefits
Operating lease liabilities
Accrued expenses
Other liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of property and equipment
Net cash used in investing activities
Cash flows from financing activities:
Repayment on finance lease obligations
Proceeds from Revolver
Repayment of Revolver
Proceeds from issuance of common stock
Payments related to minimum tax withholdings on RSU releases
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents and restricted cash
Net change in cash and cash equivalents and restricted cash
Cash and cash equivalents and restricted cash, beginning of period
Cash and cash equivalents and restricted cash, end of period
Supplemental disclosures of cash flow information:
Cash paid for interest
Income taxes paid, net
Supplemental disclosures of non-cash activities:
Purchases of property and equipment accrued in accounts payable and accrued expenses
ROU assets obtained in exchange for new lease liabilities
Increase in operating lease liabilities related to the adoption of ASC 842
Increase in ROU assets related to the adoption of ASC 842
Decrease in prepaids and other assets related to the adoption of ASC 842
Decrease in other liabilities related to the adoption of ASC 842
For the Year Ended December 31,
2020
2019
$
(18,541) $
(18,683)
13,925
1,003
9,841
4,865
1,460
71
3,232
(82)
(266)
(3,213)
(97)
(10,195)
(107)
(1,495)
401
(7,855)
(7,855)
(952)
27,000
(12,000)
414
(161)
14,301
96
6,943
29,383
36,326 $
517 $
448 $
8 $
2,271 $
— $
— $
— $
— $
13,449
1,504
9,715
5,162
1,866
(168)
12,449
(1,558)
(442)
2,441
(646)
(8,678)
(102)
(3,864)
12,445
(10,106)
(10,106)
(900)
—
—
223
(182)
(859)
124
1,604
27,779
29,383
264
166
8
20,038
32,104
29,526
(749)
(3,327)
$
$
$
$
$
$
$
$
$
The accompanying notes are an integral part of these Consolidated Financial Statements.
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Note 1 — The Company
ServiceSource International, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ServiceSource is a leading provider of BPaaS solutions that enable the transformation of go-to-market organizations and functions for global technology
clients. We design, deploy, and operate a suite of innovative solutions and complex processes that support and augment our clients’ B2B customer
acquisition, engagement, expansion and retention activities. Our clients - ranging from Fortune 500 technology titans to high-growth disruptors and
innovators - rely on our holistic customer engagement methodology and process excellence, global scale and delivery footprint, and data analytics and
business insights to deliver trusted business outcomes that have a meaningful and material positive impact to their long-term revenue and profitability
objectives. Through our unique integration of people, process and technology - leveraged against our more than 20 years of experience and domain
expertise in the cloud, software, hardware, medical device and diagnostic equipment, and industrial IoT sectors - we effect and transact billions of dollars
of B2B commerce in more than 175 countries on our clients’ behalf annually.
“ServiceSource,” “the Company,” “we,” “us,” or “our”, as used herein, refer to ServiceSource International, Inc. and its wholly owned subsidiaries, unless
the context indicates otherwise.
For a summary of commonly used industry terms and abbreviations used in this annual report on Form 10-K, see the Glossary of Terms.
Note 2 — Summary of Significant Accounting Policies
Basis of Presentation
The accompanying Consolidated Financial Statements include the accounts of ServiceSource International, Inc. and its wholly owned subsidiaries and have
been prepared in accordance with GAAP and with the instructions to Form 10-K. All intercompany balances and transactions have been eliminated in
consolidation.
The CEO manages and allocates resources on a company-wide basis as a single segment that is focused on service offerings which integrate data, processes
and cloud technologies.
Use of Estimates
The preparation of the Consolidated Financial Statements in accordance with GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the
reported amount of net revenue and expenses during the reporting period.
The Company bases its estimates and judgments on historical experience and on various assumptions that it believes are reasonable under the
circumstances. The Company has considered the effects of the COVID-19 pandemic in determining its estimates. However, future events are difficult to
predict and subject to change, especially with the risks and uncertainties related to the impact of the COVID-19 pandemic, which could cause estimates and
judgments to require adjustment. Actual results and outcomes may differ from our estimates.
Reclassifications
Certain items on the Consolidated Statements of Cash Flows for the year ended December 31, 2019 have been reclassified to conform to the current year
presentation. These reclassifications did not affect the Consolidated Balance Sheet, Consolidated Statements of Operations, Consolidated Statements of
Comprehensive Loss or Consolidated Statements of Stockholders' Equity.
Significant Risks and Uncertainties
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and accounts
receivable. The Company is also exposed to market risks, including the effects of changes in foreign currency exchange rates and interest rates.
Cash is maintained in demand deposit accounts at U.S., European and Asian financial institutions that management believes are credit worthy. Deposits in
these institutions may exceed the amount of insurance provided on these deposits.
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Fair Value of Financial Instruments
The Company accounts for certain assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date. The fair value guidance establishes a hierarchy that
prioritizes the inputs to valuation techniques used to measure fair value. An asset or liability’s level is based upon the lowest level of input that is
significant to the fair value measurement. The guidance requires that assets and liabilities carried at fair value be classified and disclosed in one of the
following three categories:
Level 1: Quoted prices in active markets for identical assets or liabilities;
Level 2: Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable;
Level 3: Inputs that are generally unobservable and typically reflect management's estimates or assumptions that market participants would use in pricing
the asset or liability.
The carrying amount of financial instruments including cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued expenses
and other current liabilities approximate their fair value due to their short-term maturities.
Cash Equivalents and Restricted Cash
Cash equivalents consist of highly liquid investments with original maturities of three months or less at the time of purchase and are classified as a Level 1
investment.
Restricted cash consists of cash in money market accounts that are used to secure letters of credit in connection with two of our leased facilities. Restricted
cash is recorded within "Other assets" in the Consolidated Balance Sheets and is classified as a Level 1 investment. The Company had restricted cash of
$2.3 million as of December 31, 2020 and 2019.
Foreign Currency Translation and Remeasurement
Assets and liabilities of non-U.S. subsidiaries that operate in a local currency environment, where that local currency is the functional currency, are
translated to U.S. dollars at exchange rates at the balance sheet date. Net revenue and expenses are translated at monthly average exchange rates. The
Company accumulates net translation adjustments in equity as a component of accumulated other comprehensive income. For non-U.S. subsidiaries whose
functional currency is the U.S. dollar, transactions that are denominated in foreign currencies are remeasured in U.S. dollars, and any resulting gains and
losses are reported in "Interest and other expense, net" in the Consolidated Statements of Operations. Foreign currency transaction losses were
approximately $0.9 million and $0.7 million for the years ended December 31, 2020 and 2019, respectively.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are derived from services performed for clients located primarily in the U.S., Europe and Asia. The Company attempts to mitigate the
credit risk in its trade receivables through its ongoing credit evaluation process and historical collection experience. The Company performs a periodic
review for specific aging evaluation allowance for doubtful accounts based upon the expected collectability of its accounts receivable, which takes into
consideration an analysis of historical bad debts, customers' timeliness on payment and other available information.
Accounts receivable are stated at their carrying values net of an allowance for doubtful accounts, if applicable. The Company evaluates the ongoing
collectability of its accounts receivable based on a number of factors such as the credit quality of its clients, the age of accounts receivable balances,
collections experience, current economic conditions and other factors that may affect a client’s ability to pay. In circumstances where the Company is aware
of a specific client’s inability to meet its financial obligations to the Company, a specific allowance for doubtful accounts is estimated and recorded, which
reduces the recognized receivable to the estimated amount that management believes will ultimately be collected. Account balances are charged off against
the allowance when it is probable that the receivable will not be recovered. The allowance for doubtful accounts as of December 31, 2020 and 2019, and
recoveries and reductions to revenue for the years ended December 31, 2020 and 2019, were insignificant.
Property and Equipment
The Company records property and equipment at cost, less accumulated depreciation and amortization. Depreciation is recorded using the straight-line
method over the estimated useful lives for each asset class.
When assets are disposed, the cost and related accumulated depreciation and amortization are written-off and any gain or loss on sale or disposal is reported
in "General and administrative" expense in the Consolidated Statements of Operations.
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Lease Asset Retirement Obligations
The fair value of a liability for an ARO is recognized in the period in which it is incurred. The Company’s AROs are associated with leasehold
improvements at our international office locations, which, at the end of a lease, are contractually obligated to be removed. AROs were approximately $1.5
million and $1.4 million as of December 31, 2020 and 2019, respectively. Accretion expense was insignificant for the years ended December 31, 2020 and
2019.
Capitalized Internal-Use Software
Expenditures related to software developed or obtained for internal use are capitalized and amortized over a period of two to seven years on a straight-line
basis. The Company capitalizes direct external costs associated with developing or obtaining internal-use software. In addition, the Company also
capitalizes certain payroll and payroll-related costs for employees or professional fees for consultants who are directly associated with the development of
such applications. Costs associated with preliminary project stage activities, training, maintenance, and all other post-implementation stage activities are
expensed as incurred and are recorded in "Research and development" expenses in the Consolidated Statements of Operations. Capitalized costs related to
internal-use software under development are treated as construction-in-progress until the program, feature or functionality is ready for its intended use, at
which time amortization commences.
Goodwill Impairment
Goodwill represents the excess of the purchase price over the estimated fair market value of net identifiable assets of acquired businesses. The Company
evaluates goodwill for possible impairment at least annually or whenever events or changes in circumstances indicate the carrying amount of such assets
may not be recoverable. This evaluation includes a preliminary assessment of qualitative factors to determine whether it is necessary to compare the fair
value of the reporting unit with its carrying value. If there are indicators of impairment, the fair value of the reporting unit is compared to its carrying
value. If the carrying value of the reporting unit exceeds its fair value, an impairment loss equal to the difference is recorded. The carrying value of
goodwill for the year ended December 31, 2020 and 2019 was $6.3 million. No impairment was recorded for the years ended December 31, 2020 and 2019.
Impairment of Long-Lived Assets
The Company evaluates the recoverability of its long-lived assets whenever events or changes in circumstances indicate the carrying amount of the long-
lived asset may not be recoverable. Recoverability of these assets is measured by comparison of their carrying amounts to future undiscounted cash flows
the assets are expected to generate. If the long-lived asset is impaired, an impairment is recognized for the amount by which the carrying value of the asset
exceeds its fair value. No impairment was recorded for the years ended December 31, 2020 and 2019.
Comprehensive Loss
We report comprehensive loss in our Consolidated Statements of Comprehensive Loss. Amounts reported in “Accumulated other comprehensive income”
consist of foreign currency translation adjustments from subsidiaries with a functional currency other than the U.S. dollar.
Revenue Recognition
The Company provides a comprehensive suite of selling and professional services to its clients.
Selling services consists of sales earned from the following categories of selling motions:
• Digital sales activities include demand qualification, demand conversion, and account management;
•
•
Customer success activities include onboarding, adoption, and renewals management; and
Channel management efforts include partner recruitment, partner onboarding and enablement, and partner success management.
Professional services involve providing data integration at scale with our systems and processes, combined with client data enhancement, enablement and
optimization.
The Company derives all of its revenue from contracts with clients. Revenue is measured based on the consideration specified in a contract. The
Company’s contracts generally contain one to two distinct performance obligations that are sold on a variable and/or fixed consideration basis. These two
distinct performance obligations are identified as selling services and professional services. Selling services are generally invoiced on a monthly or
quarterly basis with standard 30-day payment terms over the length of the contract, typically one to three years. Professional services are generally invoiced
upfront upon obtaining a client contract and are typically fulfilled within 90 days.
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The Company recognizes revenue when it satisfies the performance obligations identified in the contract, which is achieved through the transfer of control
of the services to the client. The timing of satisfying performance obligations and the receipt of client consideration can be different and will give rise to
contract assets and contract liabilities. Contract assets relate to the Company’s conditional rights to consideration for services provided but not yet billable
at the reporting date. Accounts receivable balances reflected in the Consolidated Balance Sheet represent the Company’s unconditional rights to
consideration for services provided. Contract asset amounts are transferred to accounts receivables when the rights become unconditional, typically in the
same period control of services is transferred to the client and the amount is contractually billable. Contract liabilities primarily relate to the advance
consideration received from clients for fixed consideration contracts where transfer of control of the services has not yet occurred. Contract liability
balances generally convert to revenue upon either the satisfaction of professional services obligations or when services under fixed consideration contracts
are transferred to the client, typically within six months of being recorded. These contract balances are reflected in "Prepaid expenses and other", "Other
assets" and "Other current liabilities" in the Consolidated Balance Sheets.
The Company accounts for individual services within a single contract separately if they are distinct. A service is distinct if it is separately identifiable from
other services in the contract and if a client can benefit from the service on its own or with other resources that are readily available to the client.
Determining whether these services are considered distinct performance obligations and qualify as a series of distinct performance obligations that
represent a single performance obligation requires significant judgment. The total contract consideration, or transaction price, is allocated between the
separate services identified in the contract based on their SSP. SSP is determined based on a cost-plus margin analysis for selling services and a standard
hourly rate card for professional services. For professional services that are contractually priced differently from SSP, the Company estimates the SSP using
a standard hourly rate card and allocates a portion of the total contract consideration to reflect professional services revenue at SSP.
The Company’s performance obligations are satisfied over time and revenue is recognized based on monthly or quarterly time increments and the variable
volume of closed bookings during the period at the contractual commission rates for selling services, or proportional performance during the period at SSP
for professional services. Due to the continuous nature of providing services to our clients, judgment is required in determining when control of the services
is transferred to the client. Because the client simultaneously receives and consumes the benefit of the Company’s selling and professional services as
provided, the time increment output method depicts the measure of progress in transferring control of the services to the client. A significant portion of the
Company’s contracts is based on a pay-for-performance model in which commission revenue is based on a volume of closed bookings each time period. At
each reporting period, the Company makes an estimate of this revenue for amounts that have yet to be invoiced, which was $16.3 million and $16.6 million
as of December 31, 2020 and 2019, respectively. These accrued revenue balances are reflected in "Accounts Receivable” in the Consolidated Balance
Sheets.
While multiple selling motions in a contract are performed at various times and patterns throughout the month or quarter and the number of closed
bookings vary in any given period, each time increment of a service activity is substantially the same and has the same pattern of transfer to the client, and
therefore, represents a series of distinct performance obligations that form a single performance obligation. As a result, the Company allocates all variable
consideration in a contract to the selling services performance obligation in accordance with the variable consideration allocation exception provisions in
ASC 606, (less amounts for which it is probable a significant reversal of revenue will occur when the uncertainties related to the variability are resolved)
and applies a single measure of progress to record revenue in the period based on when the output of the variable number of closed bookings occurs or
when the variable performance metric is achieved. Judgment is required to estimate the amount of variable consideration to include when estimating the
total contract consideration and how to allocate the consideration if one of the distinct performance obligations is not sold at SSP. In addition, judgment is
required to determine if the variable consideration should be constrained, and to what extent, until the risk of a significant revenue reversal is not probable.
The Company applies the optional disclosure exemptions related to variable consideration and the requirement to disclose the remaining transaction price
allocated to a wholly unsatisfied promise to transfer a distinct service that forms part of a single performance obligation.
Significant estimates and judgments for revenue recognition include: (1) identifying and determining distinct performance obligations in contracts with
clients, (2) determining the timing of the satisfaction of performance obligations, (3) estimating the timing and amount of variable consideration in a
contract, (4) determining SSP for each performance obligations and the methodology to allocate the total contract consideration to the distinct performance
obligations, and (5) determining and measuring variable revenue that has yet to be invoiced as of period end.
Our revenue contracts often include promises to transfer services involving multiple selling motions to a client. Determining whether those services are
considered distinct and qualify as a series of distinct services that represent a single performance obligation requires significant judgment. Also, due to the
continuous nature of providing services to our clients, judgment is required in determining when control of the services is transferred to the client.
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Table of Contents
We also enter into contracts with multiple performance obligations that incorporate fixed consideration, pay-for-performance commissions and variable
bonus commissions. Judgment is required to estimate the amount of variable consideration to include when estimating the total contract consideration and
how to allocate the consideration if one of the distinct performance obligations is not sold at SSP.
Contract Acquisition Costs
To obtain contracts with clients, the Company pays its sales team commissions partly based on the estimated value of the contract. Because these sales
commissions are incurred and paid upon contract execution and would not have been incurred or payable otherwise, they are considered incremental costs
to acquire the contract; and if recoverable, are capitalized as contract acquisition costs in the period the contract is executed. Capitalized sales commissions
are amortized to “Sales and marketing" expense in the Consolidated Statements of Operations based on the transfer of services over the contract term,
generally one to three years for a new client or five years for long-standing client relationships. The contract acquisition costs asset is evaluated for
recoverability and impairment each reporting period. For initial amortization periods one year or less, the Company recognizes any incremental costs of
obtaining contracts as expense when the cost is incurred. These costs are included in "Sales and marketing" expense in the Consolidated Statements of
Operations.
Stock-Based Compensation
The Company issues stock-based awards to employees and directors and offered an ESPP until its expiration in February 2021.
Stock options are recorded at fair value on the date of grant date using the Black-Scholes option-pricing model and generally vest ratably over a three to
four-year period. Vested options may be exercised up to ten years from the grant date, as defined in the 2020 Plan. Vested but unexercised options expire 90
days after termination of employment with the Company. Stock-based compensation expense is amortized on a straight-line basis over the service period
during which the right to exercise such options fully vests.
RSUs are recorded at fair value on the date of grant and amortized on a straight-line basis over the service period during which the stock vests. RSUs
generally vest ratably over three to four years with vesting contingent upon employment of the Company.
PSUs are stock-based awards in which the number of shares ultimately received by the employee ranges from 0% to 150% of the participant's target award
depending on the Company’s achievement of specified Adjusted EBITDA and net bookings targets. PSU expense is based on a fixed grant date fair value
and adjusted based on the estimated achievement of the performance metrics and recognized on a straight-line basis over the vesting period.
The Company estimates the fair value of purchase rights under the ESPP using the Black-Scholes option-pricing model and the straight-line attribution
approach.
The fair value of stock options and purchase rights under the ESPP was determined by the Company using the methods and assumptions discussed below.
Each of these inputs is subjective and generally requires significant judgment to determine.
Expected Term - The expected term represents the period that the Company’s share-based awards are expected to be outstanding. The Company calculates
the expected term based on the average of the weighted-average vesting term and contractual term.
Expected Volatility - The expected volatility is based on the historical stock volatility of the Company's own common shares.
Risk-Free Interest Rate - The risk-free interest rate is based on the implied yield on U.S. Treasury zero-coupon issues for each option grant date with
maturities approximately equal to the option’s contractual term.
Expected Dividend Yield - The Company has not paid dividends on its common shares nor does it expect to pay dividends in the foreseeable future.
See "Note 7 — Stock-Based Compensation" for additional information.
Income Taxes
The Company accounts for income taxes using an asset and liability method, which requires the recognition of taxes payable or refundable for the current
year and deferred tax assets and liabilities for the expected future tax consequences of temporary differences that currently exist between the tax basis and
the financial reporting basis of our taxable subsidiaries’ assets and liabilities using the enacted tax rates in effect for the year in which the differences are
expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in operations in the period that includes the
enactment date. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are
not expected to be realized.
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Table of Contents
The Company files U.S. federal and state and foreign income tax returns in jurisdictions with varying statutes of limitations. In the normal course of
business the Company is subject to examination by taxing authorities throughout the world. These audits include questioning the timing and amount of
deductions, the allocation of income among various tax jurisdictions and compliance with federal, state, local and foreign tax laws. The Company accounts
for unrecognized tax benefits using a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected
to be taken in a tax return. The Company establishes reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional
taxes will be due. The Company records an income tax liability, if any, for the difference between the benefit recognized and measured and the tax position
taken or expected to be taken on our tax returns. The Company recognizes interest accrued and penalties related to unrecognized tax benefits in the income
tax provision.
Net Loss Per Common Share
Basic net income (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted-average number of shares of
common stock outstanding during the period. Diluted net income per share is computed by dividing income available to common shareholders by the
weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock
that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include outstanding stock options,
shares to be purchased under the Company’s ESPP, non-vested RSUs and PSUs. The dilutive effect of potentially dilutive securities is reflected in diluted
earnings per share by application of the treasury stock method. Under the treasury stock method, an increase in the fair market value of the Company’s
common stock can result in a greater dilutive effect from potentially dilutive securities.
Potential shares of common stock that are not included in the determination of diluted net income per share because they are anti-dilutive for the periods
presented consist of stock options, non-vested RSUs and PSUs, and shares to be purchased under our ESPP.
The Company excluded from diluted earnings per share the weighted-average common share equivalents related to 3.3 million and 7.3 million shares for
the years ended December 31, 2020 and 2019, respectively, because their effect would have been anti-dilutive.
Government Assistance
During 2020, ServiceSource received various grants from the Singapore government, including the Job Support Scheme, which assists enterprises in
retaining their local employees during the COVID-19 pandemic. ServiceSource received approximately $1.3 million from these grants during the year
ended December 31, 2020 and is expected to receive an additional $0.2 million through July 2021. There are no conditions to repay the grants. Government
grants are recognized in the Company's Consolidated Statements of Operations during the same period that the expenses related to the grant are incurred if
there is reasonable assurance the grant will be received, and the Company has complied with any conditions attached to the grant.
New Accounting Standards Issued but Not yet Adopted
Income Taxes
In December 2019, the FASB issued an ASU that simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740
related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax
liabilities for outside basis differences. This ASU is effective for annual periods and interim periods for those annual periods beginning after December 15,
2020, with early adoption permitted. Based on our current analysis, the Company does not expect the adoption to have a material impact on the
Consolidated Financial Statements. The Company will adopt this standard effective January 1, 2021.
Financial Instruments - Credit Losses
In June 2016, the FASB issued an ASU that amends the measurement of credit losses on financial instruments and requires measurement and recognition of
expected versus incurred credit losses for financial assets held. This ASU is effective for annual periods and interim periods for those annual periods
beginning after December 15, 2022, with early adoption permitted. This standard will apply to the Company's accounts receivable and contract assets.
Based on our current analysis, the Company does not expect the adoption to have a material impact on the Consolidated Financial Statements as credit
losses from trade receivables have historically been insignificant. The Company will adopt this standard effective January 1, 2023.
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Table of Contents
Note 3 — Consolidated Financial Statement Details
Property and equipment, net were comprised of the following:
Computers and equipment
Software
Furniture and fixtures
(1)
Leasehold improvements
Finance leases
Property and equipment
Less: accumulated depreciation and amortization
Property and equipment, net
Depreciable Life
2020
2019
December 31,
2 - 5 years
2 - 7 years
7 years
Lesser of estimated useful life or
life of lease
$
$
(in thousands)
17,904 $
60,771
10,727
17,823
2,880
110,105
(80,157)
29,948 $
(1)
Includes capitalized internally developed software as follows (in thousands):
Balance as of January 1, 2019
Capitalized costs
Amortization expense
Balance as of December 31, 2019
Capitalized costs
Amortization expense
Balance as of December 31, 2020
$
$
18,707
63,557
10,041
18,395
3,480
114,180
(78,031)
36,149
18,879
6,340
(5,802)
19,417
5,076
(7,701)
16,792
Depreciation and amortization expense related to property and equipment, which includes amortization expense for internally developed software and
finance leases, was $13.9 million and $13.4 million during the years ended December 31, 2020 and 2019, respectively.
The following table presents long-lived assets by geographic location:
NALA
APJ
EMEA
Property and equipment, net
Note 4 — Debt
Revolving Line of Credit
December 31,
2020
2019
(in thousands)
24,420 $
4,456
1,072
29,948 $
28,283
6,580
1,286
36,149
$
$
In July 2018, the Company entered into a $40.0 million Revolver that allows it and the other Borrower named therein to borrow against their domestic
receivables as defined in the Credit Agreement. The Revolver matures July 2021 and bears interest at a variable rate per annum based on the greater of the
prime rate, the Federal Funds rate plus 0.50% or the one-month LIBOR rate plus 1.00%, plus, in each case, a margin of 1.00% for base rate borrowings or
2.00% for Eurodollar borrowings.
As of December 31, 2020, the Company had $15.0 million of borrowings under the Revolver through a one-month Eurodollar borrowing at an effective
interest rate of 2.15% maturing January 2021. An additional $11.2 million was available for borrowing under the Revolver as of December 31, 2020. The
Eurodollar borrowings may be extended upon maturity, converted into a base rate borrowing upon maturity or require an incremental payment if the
borrowing base decreases below the current amount outstanding during the term of the Eurodollar borrowing.
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Subsequent to December 31, 2020, the one-month $15.0 million Eurodollar borrowing was extended at an effective interest rate of approximately 2.12%
maturing at the end of February 2021.
The obligations under the Credit Agreement are secured by substantially all the assets of the Borrower and certain of their subsidiaries, including pledges of
equity in certain of the Company’s subsidiaries. The Revolver has financial covenants which the Company was in compliance with as of December 31,
2020 and 2019.
Interest Expense
Interest expense related to the amortization of debt issuance costs and interest expense associated with the Company's debt obligation was $0.5 million and
$0.2 million for the years ended December 31, 2020 and 2019, respectively.
Note 5 — Leases
The Company has operating leases for office space and finance leases for certain equipment under non-cancelable agreements with various expiration dates
through May 2030. Certain office leases include the option to extend the term between one to seven years and certain office leases include the option to
terminate the lease upon written notice within one year after lease commencement. Leases with an initial term of 12 months or less are not recorded on the
balance sheet.
During 2020, the Company entered into a 22-month sublease agreement with a third-party for one floor of its Manila office space through October 2021,
extended its lease for two of its five floors in the Kuala Lumpur office space through December 2023, and extended its lease for one of its three floors in
the Sofia office space through February 2026.
Subsequent to December 31, 2020, the Company entered into a sublease agreement through the end of the original lease term with a third party for two
floors of its Manila office space, with total sublease income of approximately $1.4 million.
The Company recognizes rent expense and sublease income on a straight-line basis over the lease period and accrues for rent expense and sublease income
incurred but not paid.
Supplemental income statement information related to leases was as follows:
Operating lease cost
Finance lease cost:
Amortization of leased assets
Interest on lease liabilities
Total finance lease cost
Sublease income
Net lease cost
For the Year Ended December 31,
2019
2020
(in thousands)
12,264
$
744
88
832
(3,599)
9,497
$
12,000
709
163
872
(2,166)
10,706
$
$
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Table of Contents
Supplemental balance sheet information related to leases was as follows:
Operating leases:
ROU assets
Operating lease liabilities
Operating lease liabilities, net of current portion
Total operating lease liabilities
Finance leases:
Property and equipment
Accumulated depreciation
Property and equipment, net
Other current liabilities
Other long-term liabilities
Total finance lease liabilities
Lease term and discount rate information was as follows:
Weighted-average remaining lease term (in years):
Operating lease
Finance lease
Weighted-average discount rate:
Operating lease
Finance lease
Maturities of lease liabilities were as follows as of December 31, 2020:
$
$
$
$
$
$
$
2021
2022
2023
2024
2025
Thereafter
Total lease payments
Less: interest
Total
Operating Leases
Operating Subleases
Finance Leases
Total
(in thousands)
(3,560) $
(2,538)
(623)
—
—
—
(6,721)
—
(6,721) $
633 $
64
—
—
—
—
697
(26)
671 $
$
$
12,846 $
9,291
4,306
3,004
3,045
11,510
44,002
(7,230)
36,772 $
40
December 31,
2020
2019
(in thousands)
29,798 $
36,396
10,797 $
25,975
36,772 $
2,880 $
(1,963)
917 $
608 $
63
671 $
For the Year Ended December 31,
2019
2020
5.7
1.0
6.2 %
6.5 %
9,652
33,716
43,368
3,480
(1,823)
1,657
952
671
1,623
5.9
1.8
6.4 %
8.0 %
9,919
6,817
3,683
3,004
3,045
11,510
37,978
(7,256)
30,722
Table of Contents
Note 6 — Revenue Recognition
The following tables present the disaggregation of revenue from contracts with our clients:
Revenue by Performance Obligation
Selling services
Professional services
Total revenue
Revenue by Geography
For the Year Ended December 31,
2019
2020
(in thousands)
190,906 $
3,695
194,601 $
213,897
2,238
216,135
$
$
Revenue for each geography generally reflects commissions earned from sales of service contracts managed from revenue delivery centers in that
geography and subscription sales and professional services to deploy the Company's solutions. Predominantly all the service contracts sold and managed by
the revenue delivery centers relate to end customers located in the same geography. All NALA revenue represents revenue generated within the U.S.
NALA
EMEA
APJ
Total revenue
Revenue by Contract Pricing
Variable consideration
Fixed consideration
Total revenue
For the Year Ended December 31,
2019
2020
(in thousands)
111,085 $
54,975
28,541
194,601 $
125,660
55,801
34,674
216,135
For the Year Ended December 31,
2019
2020
(in thousands)
142,355 $
52,246
194,601 $
146,192
69,943
216,135
$
$
$
$
Four of our clients represented 15%, 15%, 11% and 11% of our revenue, respectively, for the year ended December 31, 2020.
Contract Assets and Liabilities
As of December 31, 2020, contract assets and liabilities were $0.5 million and $0.4 million, respectively. As of December 31, 2019, contract assets were
insignificant and contract liabilities were $0.8 million.
Transaction Price Allocated to Remaining Performance Obligations
As of December 31, 2020, assuming none of the Company’s current contracts with fixed consideration are renewed, the Company estimates receiving
approximately $35.9 million in future selling services fixed consideration and approximately $0.4 million in professional services fixed consideration.
Contract Acquisition Costs
As of December 31, 2020 and 2019, capitalized contract acquisition costs were $0.9 million and $1.6 million, respectively. The Company recorded
amortization expense related to capitalized contract acquisition costs of $0.8 million and $1.3 million for the year ended December 31, 2020 and 2019,
respectively.
Impairment recognized on contract costs was insignificant for the years ended December 31, 2020 and 2019.
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Table of Contents
Note 7 — Stock-Based Compensation
2020 Equity Incentive Plan
The 2020 Plan was approved by the Company’s stockholders on May 14, 2020 and expires March 4, 2025. The 2020 Plan provides for the Company's
common stock to be issued pursuant to permitted awards, which include, but are not limited to, options, stock appreciation rights, restricted stock units,
performance stock units and other cash and stock-based awards. As of December 31, 2020, 3.5 million shares were available for grant under the 2020 Plan.
On May 14, 2020, following the approval of the 2020 Plan, the Company’s board of directors terminated the 2011 Plan with the effect that no additional
awards may be issued under the 2011 Plan and all outstanding awards under the 2011 Plan shall continue and be unaffected by the termination of the 2011
Plan.
2020 PSU Awards
During May 2020 and prior to expiration of the 2011 Plan, the Company granted PSUs to certain executives under the 2011 Plan. The aggregate target
number of shares outstanding as of December 31, 2020 subject to these awards is 0.7 million, with an aggregate grant date fair value of $0.9 million. The
number of shares ultimately received related to these awards ranges from 0% to 150% of the executive's target award depending on the Company's
achievement of specified Adjusted EBITDA and net bookings targets over a two-year performance period and will vest on the third anniversary of the grant
date.
Stock-Based Compensation Expense
The following table presents stock-based compensation expense as allocated within the Company’s Consolidated Statements of Operations:
Cost of revenue
Sales and marketing
Research and development
General and administrative
Total stock-based compensation
For the Year Ended December 31,
2019
2020
(in thousands)
389 $
1,416
57
3,003
4,865 $
538
1,772
41
2,811
5,162
$
$
The above table does not include capitalized stock-based compensation related to internal-use software that was insignificant for the years ended December
31, 2020 and 2019.
Fair Value of Equity Compensation
The Black-Scholes option-pricing model assumptions for stock options were as follows:
Expected term (in years)
Expected volatility
Risk-free interest rate
Expected dividend yield
Weighted-average grant date fair value
For the Year Ended December 31,
2019
2020
5.0
56%
0.75%
— %
$
0.63
$
5.0
55% - 59%
1.39% - 2.57%
— %
0.47
The Black-Scholes option-pricing model assumptions for purchase rights under the ESPP were as follows:
Expected term (in years)
Expected volatility
Risk-free interest rate
Expected dividend yield
42
For the Year Ended December 31,
2019
2020
0.5 - 1.0
53% - 60%
0.12% - 1.52%
— %
0.5 - 1.0
39% - 97%
1.67% - 2.47%
— %
Table of Contents
Stock Awards
A summary of the Company's stock option activity and related information was as follows:
Outstanding as of December 31, 2019
Granted
Exercised
Expired and/or forfeited
Outstanding as of December 31, 2020
Exercisable as of December 31, 2020
Fair value of options vested
Intrinsic value of options exercised
Shares
(in thousands)
4,146 $
20 $
(212) $
(924) $
3,030 $
2,437 $
Weighted-Average
Exercise Price
Weighted-Average
Remaining Contractual
Life (Years)
Intrinsic Value
(in thousands)
1,580
2.16
1.32
1.20
2.60
2.09
2.31
$
$
5.15 $
5.25 $
1,372
983
For the Year Ended December 31,
2019
2020
(in thousands)
733 $
46 $
865
—
As of December 31, 2020, there was $0.3 million of unrecognized compensation expense related to stock options, which is expected to be recognized over
a weighted-average period of 1.8 years.
A summary of the Company's RSU and PSU activity and related information was as follows:
Non-vested as of December 31, 2019
Granted
(1)
Vested
Forfeited
Non-vested as of December 31, 2020
Units
(in thousands)
Weighted-Average Grant
Date Fair Value
5,305 $
5,617 $
(1,944) $
(1,963) $
7,015 $
1.88
1.43
1.95
1.70
1.55
(1)
1,845 shares of common stock were issued for RSUs and PSUs vested and the remaining 99 shares were withheld for taxes.
Fair value of RSUs and PSUs vested
For the Year Ended December 31,
2019
2020
$
(in thousands)
2,940 $
2,076
As of December 31, 2020, there was $7.5 million of unrecognized compensation expense related to RSUs and PSUs, which is expected to be recognized
over a weighted-average period of 2.0 years.
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Note 8 — Restructuring and Other Related Costs
The Company has undergone restructuring efforts to better align its cost structure with its business and market conditions. These restructuring efforts
include severance and other employee costs, lease and other contract termination costs and asset impairments. Severance and other employee costs include
severance payments, related employee benefits, stock-based compensation related to the accelerated vesting of certain equity awards and employee-related
legal fees. Lease and other contract termination costs include charges related to lease consolidation and abandonment of spaces no longer utilized and the
cancellation of certain contracts with outside vendors. Asset impairments include charges related to leasehold improvements and furniture in spaces vacated
or no longer in use. The restructuring plans and future cash outlays are recorded in "Accrued expenses" and "Other long-term liabilities" in the
Consolidated Balance Sheets as of December 31, 2020 and 2019.
During 2020, the Company announced a restructuring effort to align with its virtual-first operating model and reduce the operating cost structure resulting
in a reduction of headcount and office lease costs. The Company recognized charges related to this restructuring effort of $0.8 million for the year ended
December 31, 2020 and expects to incur approximately $1.0 million in additional costs through 2021.
The following table presents a reconciliation of the beginning and ending fair value liability balance related to the 2020 restructuring effort:
Balance as of January 1, 2020
Restructuring and other related costs
Cash paid
Balance as of December 31, 2020
Severance and Other
Employee Costs
Lease Termination Costs
Total
(in thousands)
$
$
— $
780
(442)
338 $
— $
59
—
59 $
—
839
(442)
397
During 2019, the Company announced a restructuring effort resulting in a reduction of headcount and office lease costs. The Company recognized charges
related to this restructuring effort of $0.7 million and $1.9 million for the year ended December 31, 2020 and 2019, respectively. The Company does not
expect to incur additional restructuring charges related to the 2019 restructuring.
The following table presents a reconciliation of the beginning and ending fair value liability balance related to the 2019 restructuring effort:
Balance as of January 1, 2019
Restructuring and other related costs
Cash paid
Balance as of December 31, 2019
Restructuring and other related costs
Cash paid
Change in estimates and non-cash charges
Balance as of December 31, 2020
Severance and Other
Employee Costs
Lease Termination Costs
Total
(in thousands)
— $
1,806
(1,624)
182
703
(866)
(19)
— $
— $
123
(123)
—
—
—
—
— $
—
1,929
(1,747)
182
703
(866)
(19)
—
$
$
44
Table of Contents
In May 2017, the Company announced a restructuring effort resulting in a headcount reduction and the reduction of office space in four locations. The
Company does not expect to incur additional restructuring charges related to the May 2017 restructuring.
The following table presents a reconciliation of the beginning and ending fair value liability balance related to the May 2017 restructuring effort:
Severance and Other
Employee Costs
Lease and Other
Contract Termination
Costs
Asset Impairments
Total
Balance as of January 1, 2017
$
— $
Restructuring and other related costs
Cash paid
Change in estimates and non-cash charges
Acceleration of stock-based compensation expense in additional paid-
in capital
Balance as of December 31, 2017
Restructuring and other related costs
Cash paid
Change in estimates and non-cash charges
Balance as of December 31, 2018
Cash paid
Change in estimates and non-cash charges
Balance as of December 31, 2019
Cash paid
Change in estimates and non-cash charges
Balance as of December 31, 2020
Note 9 — Income Taxes
3,483
(3,060)
—
(352)
71
120
(188)
(3)
—
—
—
—
—
—
— $
$
(in thousands)
— $
2,939
(1,185)
—
—
1,754
89
(1,133)
252
962
(183)
(63)
716
(182)
(63)
471 $
— $
886
—
(886)
—
—
—
—
—
—
—
—
—
—
—
— $
—
7,308
(4,245)
(886)
(352)
1,825
209
(1,321)
249
962
(183)
(63)
716
(182)
(63)
471
Loss from continuing operations before provision for income taxes for the Company’s domestic and international operations was as follows:
U.S.
International
Loss before provision for income taxes
45
For the Year Ended December 31,
2019
2020
(in thousands)
(18,278) $
446
(17,832) $
(9,877)
(8,363)
(18,240)
$
$
Table of Contents
The income tax provision consisted of the following:
Current:
Federal
Foreign
State and local
Total current income tax provision
Deferred:
Federal
Foreign
State and local
Total deferred income tax provision
Income tax provision
For the Year Ended December 31,
2019
2020
(in thousands)
121 $
559
43
723
(13)
7
(8)
(14)
709 $
181
189
58
428
65
(6)
(44)
15
443
$
$
The following table provides a reconciliation of income taxes provided at the federal statutory rate of 21% for the years ended December 31, 2020 and
2019 to the income tax provision:
U.S. income tax at federal statutory rate
State income taxes, net of federal benefit
Share-based compensation
Foreign tax rate differential
Permanent differences
Tax credits
Valuation allowance
Other, net
Income tax provision
For the Year Ended December 31,
2019
2020
(in thousands)
(3,745) $
(1,575)
277
(1,749)
3,355
—
3,756
390
709 $
(3,830)
238
2,241
374
403
(136)
1,128
25
443
$
$
In November 2015, the Philippine Economic Zone Authority granted a four-year tax holiday to the Company's Philippine affiliate, commencing with its
fiscal year beginning January 1, 2016. The earnings per share benefit in 2020 and 2019 was not material.The Company has applied for the tax holiday
extension, however, as of December 31, 2020 the extension has not been granted. Therefore, the Company included tax on modified gross receipts in the
current income tax calculation.
In December 2013, Malaysia granted a ten-year tax holiday to the Company’s Malaysia affiliate, commencing with its fiscal year beginning January 1,
2014. This resulted in a tax benefit in fiscal 2013 of approximately $0.2 million from the elimination of the Malaysia subsidiary’s deferred tax liabilities.
The earnings per share benefit in 2019 and 2020 was not material.
46
Table of Contents
The following table provides the effect of temporary differences that created deferred income taxes as of December 31, 2020 and 2019. Deferred tax assets
and liabilities represent the future effects on income taxes resulting from temporary differences and carryforwards at the end of the respective periods:
Deferred tax assets:
Accrued liabilities
Share-based compensation
Net operating loss carryforwards
Tax credits
Amortization of tax intangibles
Interest
Total deferred tax assets
Deferred tax liabilities:
Property and equipment
ROU assets
Amortization of tax intangibles
Other, net
Total deferred tax liabilities
Net deferred tax assets
Less: valuation allowance
Net deferred tax liabilities
December 31,
2020
2019
(in thousands)
$
5,710 $
864
84,450
7,310
—
187
98,521
(3,423)
(3,704)
(232)
(533)
(7,892)
90,629
(90,899)
$
(270) $
6,576
879
81,533
7,410
525
123
97,046
(5,037)
(4,631)
—
(583)
(10,251)
86,795
(87,078)
(283)
As of December 31, 2020 and 2019, management assessed the realizability of deferred tax assets and evaluated the need for a valuation allowance for
deferred tax assets on a jurisdictional basis. This evaluation utilizes the framework contained in ASC 740 wherein management analyzes all positive and
negative evidence available at the balance sheet date to determine whether all or some portion of the Company's deferred tax assets will not be realized.
Under this guidance, a valuation allowance must be established for deferred tax assets when it is more-likely-than-not that the asset will not be realized. In
assessing the realization of the Company's deferred tax assets, management considers all available evidence, both positive and negative.
In concluding on the evaluation, management placed significant emphasis on guidance in ASC 740, which states that “a cumulative loss in recent years is a
significant piece of negative evidence that is difficult to overcome.” Based upon available evidence, it was concluded on a more-likely-than-not basis that
all deferred tax assets were not realizable as of December 31, 2020. Accordingly, a valuation allowance of $90.9 million has been recorded to offset this
deferred tax asset. The valuation allowance decreased $3.8 million and $1.3 million for the years ended December 31, 2020 and 2019, respectively.
The Company also maintains a deferred tax liability related to indefinite lived intangible assets in jurisdictions which the Company does not have indefinite
lived deferred tax assets, as reversal of the taxable temporary difference cannot serve as a source of income for realization of the non-indefinite deferred tax
assets, because the deferred tax liability will not reverse until the asset is sold or written down due to impairment.
ASC 842
The Company adopted ASC 842 on January 1, 2019. Under ASC 842, the Company is required to recognize the assets and liabilities that arise from most
operating leases on the balance sheet. Upon adoption, no change in retained earnings was recorded related to income taxes as the Company maintains a full
valuation allowance. As of the implementation date, an adjustment of $4.6 million was recorded as a deferred tax liability and an adjustment of $4.6
million was recorded as a deferred tax asset.
Operating Loss and Tax Credit Carryforwards
As of December 31, 2020, the Company had $2.7 million of U.S. federal research and development credits which expire beginning in 2031 and $3.7
million of California research and development credits which do not expire. The Company also has $0.5 million of California Enterprise Zone Credits
which expire beginning in 2023 if not utilized and $1.3 million of other state tax credits which expire beginning in 2024 if not utilized.
47
Table of Contents
As of December 31, 2020, the Company had net operating loss carryforwards of approximately $316.7 million for federal income tax purposes of which
$52.0 million can be carried forward indefinitely and the remaining $264.8 million will expire at various dates beginning in 2024. The Company has
$248.6 million in state net operating losses. These losses are available to reduce taxable income and expire at various dates beginning in 2021. The
Company also has foreign net operating loss carryforwards of approximately $15.4 million of which $14.6 million is indefinitely available to reduce
taxable income and will expire in 2025.
Utilization of the Company’s net operating loss and tax credit carryforwards may be subject to a substantial annual limitation due to the ownership change
limitations provided by the IRC and similar state provisions. Such an annual limitation could result in the expiration or elimination of the net operating loss
and tax credit carryforwards before utilization. Management believes that the limitation will not limit utilization of the carryforwards prior to their
expiration.
The Company acquired U.S. federal net operating loss carryforwards of Scout Analytics, Inc. upon the acquisition of that entity in January 2014, subject to
the ownership change limitations. Acquired U.S. federal net operating losses from Scout total approximately $30.2 million net of amounts unavailable due
to ownership change limitations, which is included in the total U.S. federal net operating loss above.
The Company's 2016 through 2020 tax years generally remain subject to examination by federal, state and foreign tax authorities. As the Company has
incurred losses in most jurisdictions, the taxing authorities can generally challenge 2006 through 2015 losses to determine either the amount of the
carryforward deduction reported in the open year or the amount of an net operating loss deduction that is absorbed in a closed year and supports the
determination of the available net operating loss deduction for the open year under examination.
Uncertain Tax Positions
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
Balance as of January 1, 2019
Additions based on tax positions related to the current year
Balance as of December 31, 2019
Additions based on tax positions related to the current year
Reductions for tax positions of prior years
Balance as of December 31, 2020
$
$
944
20
964
12
(11)
965
As of December 31, 2020, the Company had a liability for unrecognized tax benefits of $1.0 million, none of which, if recognized, would affect the
Company’s effective tax rate. The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months.
The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. During the years ended December 31,
2020 and 2019, interest and penalties recognized were insignificant.
Note 10 — Employee Benefit Plan
The Company maintains a 401(k) defined contribution plan that covers eligible employees. Employer matching contributions, which may be discontinued
at the Company’s discretion, were approximately $1.3 million and $1.5 million during the years ended December 31, 2020 and 2019, respectively.
Note 11 — Commitments and Contingencies
Letter of Credit
In connection with two of our leased facilities, the Company is required to maintain two letters of credit totaling $2.3 million. The letters of credit are
secured by $2.3 million of cash in money market accounts, which are classified as restricted cash in "Other assets" in our Consolidated Balance Sheets.
48
Table of Contents
Non-cancelable Service Contract Commitments
Future minimum payments under non-cancelable service contract commitments were as follows:
2021
2022
2023
2024
Thereafter
Total
49
December 31, 2020
(in thousands)
10,385
9,699
7,993
821
—
28,898
$
$
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of ServiceSource International, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of ServiceSource International, Inc. (the Company) as of December 31, 2020 and 2019, the
related consolidated statements of operations, comprehensive loss, stockholders' equity and cash flows for each of the two years in the period ended
December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations
and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's
internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 24, 2021 expressed an unqualified
opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial
statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or
required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2)
involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion
on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion
on the critical audit matter or on the accounts or disclosures to which it relates.
50
Table of Contents
Description of the
Matter
Measurement of revenue accruals
As more fully described in Note 2 to the consolidated financial statements, a significant portion of the Company’s contracts is based
on a pay-for-performance model in which commission revenue is based on a volume of closed bookings each time period. Significant
judgment is required to estimate such accrued commission revenue at year end for amounts that the Company has not yet invoiced. At
December 31, 2020, the Company recorded $16.3 million of accrued commission revenue.
Auditing accrued commission revenue was subjective and involved significant audit effort due to the amount of the commission
revenue accrual and the subjectivity applied in our audit procedures, including the testing of closed bookings which is an underlying
assumption of the accrual.
How We Addressed
the Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of internal controls relating to accrued
commission revenue, including management’s review of the completeness and accuracy of data used in the accrual. For example, we
tested the Company’s controls over management’s review of the underlying data used in the commission revenue accrual and controls
over management’s review of the amounts subsequently invoiced compared to the amounts accrued.
To test the Company’s calculation of the commission revenue accrual, our audit procedures included, among others, testing the
completeness and accuracy of underlying data used in the calculation, and comparing the commission revenue accrual to actual
invoices for closed bookings approved subsequent to year end. We also performed analytical procedures by developing expectations
of the amount of the commission revenue accrual for which actual invoices have not been approved as of the financial statement
issuance date based on historical activity.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2016.
Denver, Colorado
February 24, 2021
51
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of ServiceSource International, Inc.
Opinion on Internal Control over Financial Reporting
We have audited ServiceSource International, Inc.’s internal control over financial reporting as of December 31, 2020, based on criteria established in
Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the
COSO criteria). In our opinion, ServiceSource International, Inc. (the Company) maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2020, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated
balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive loss, stockholders'
equity and cash flows for each of the two years in the period ended December 31, 2020, and the related notes and our report dated February 24, 2021
expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our
responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control
over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Denver, Colorado
February 24, 2021
52
Table of Contents
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A.
CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures
Under the supervision and with the participation of our management, including our CEO and CFO, we conducted an evaluation of the effectiveness of the
design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the
period covered by this annual report on Form 10-K.
In designing and evaluating our disclosure controls and procedures, management recognizes that any disclosure controls and procedures, no matter how
well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls
and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of
possible controls and procedures relative to their costs.
Based on management’s evaluation, our CEO and CFO concluded that as of December 31, 2020 our disclosure controls and procedures are designed to,
and are effective to, provide at a reasonable assurance level that the information we are required to disclose in reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is
accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosures.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act
Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our CEO and CFO, we conducted an
evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2020 based on the guidelines established in Internal
Control-Integrated Framework (2013) issued by the COSO. Our internal control over financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally
accepted accounting principles.
Based on the results of our evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2020.
The effectiveness of our internal control over financial reporting as of December 31, 2020 has been audited by Ernst & Young LLP, an independent
registered public accounting firm, as stated in its report which is included herein.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the quarter ended December 31, 2020 that has materially affected,
or is reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our CEO and CFO, do not expect that our disclosure controls or our internal control over financial reporting will prevent all
errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives
of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls
must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that
judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be
circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any
system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or
the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements
due to error or fraud may occur and not be detected.
ITEM 9B.
OTHER INFORMATION
None.
53
Table of Contents
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information regarding our directors is incorporated by reference from the information contained under the caption “Election of Directors” in our 2021
Proxy Statement. Information regarding our current executive officers is incorporated by reference from information contained under the caption
“Executive Officers” in our 2021 Proxy Statement. Information regarding Section 16 reporting compliance is incorporated by reference from information
contained under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” in our 2021 Proxy Statement. Information regarding the Audit
Committee of our Board of Directors and information regarding an Audit Committee financial expert is incorporated by reference from information
contained under the caption “Board Committees” in our 2021 Proxy Statement. Information regarding our code of ethics is incorporated by reference from
information contained under the caption “Code of Business Conduct and Ethics” in our 2021 Proxy Statement. Information regarding our implementation
of procedures for stockholder nominations to our Board of Directors is incorporated by reference from information contained under the caption “Delinquent
Section 16(a) Reports" in our 2021 Proxy Statement.
We intend to disclose any amendment to our code of ethics, or waiver from, certain provisions of our code of ethics as applicable for our directors and
executive officers, including our principal executive officer, principal financial and accounting officer, chief accounting officer, and controller, or persons
performing similar functions, by posting such information on our website at http://www.servicesource.com.
ITEM 11.
EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference from the information contained under the captions “Compensation Discussion and
Analysis” and “Executive Compensation” in our 2021 Proxy Statement.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
Other than information regarding securities authorized for issuance under equity compensation plans, which is set forth in the Notes to the Consolidated
Financial Statements above, the information required by this item is incorporated by reference from the information contained under the caption “Security
Ownership” in our 2021 Proxy Statement.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this item is incorporated by reference from the information contained under the captions “Related Person Transactions" and
"Delinquent Section 16(a) Reports” and “Director Independence” in our 2021 Proxy Statement.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this item is incorporated by reference from the information contained under the caption “Principal Accountant Fees and
Services” in our 2021 Proxy Statement.
54
Table of Contents
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) (1) Financial Statements
PART IV
Consolidated Financial Statements filed as part of this annual report are listed under Part II, Item 8 of this Form 10-K.
(2) Financial Statement Schedules
No schedules are required because either the required information is not present or is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the Consolidated Financial Statements or the notes thereto.
(3) Exhibits
The exhibits listed on the accompanying Exhibit Index immediately preceding the signature page are filed as part of, or are incorporated by
reference into, this annual report on Form 10-K.
ITEM 16.
FORM 10-K SUMMARY
None.
55
The following abbreviations or acronyms used in this Form 10-K are defined below:
GLOSSARY OF TERMS
TM
Abbreviations or acronyms
2011 Plan
2020 Plan
2021 Proxy Statement
APJ
ARO
ASC 606
ASC 740
ASC 842
ASU
AWS
B2B
B2C
Borrowers
BPaaS
CEO
CFO
CJX
COVID-19
CRM
COSO
EMEA
ERP
ESPP
Exchange Act
FASB
GAAP
GDPR
IaaS
IDC
IoT
IRC
IRS
KPI
MD&A
NALA
PaaS
PSU
Revolver
ROU
RSU
SaaS
SEC
SPA
SSP
U.S.
Definition
2011 Equity Incentive Plan
2020 Equity Incentive Plan
Proxy statement for our 2021 annual meeting of stockholders
Asia Pacific-Japan
Asset retirement obligation
Accounting Standards Codification Topic 606, Revenue from Contracts with Customers
Accounting Standards Codification Topic 740, Income Taxes
Accounting Standards Codification Topic 842, Leases
Accounting Standards Update
Amazon Web Services
Business-to-business
Business-to-consumer
ServiceSource International, Inc. and ServiceSource Delaware, Inc.
Business Process-as-a-Service
Chief Executive Officer
Chief Financial Officer
Customer journey experience trademark
Coronavirus disease 2019
Customer relationship management
Committee of Sponsoring Organizations of the Treadway Commission
Europe, Middle East and Africa
Enterprise resource planning
2011 Employee Stock Purchase Plan
Securities Exchange Act of 1934, as amended
Financial Accounting Standards Board
United States Generally Accepted Accounting Principles
General Data Protection Regulation
Infrastructure-as-a-service
International Data Corporation
Internet of things
Internal Revenue Code of 1986, as amended
Internal Revenue Service
Key performance indicator
Management’s Discussion and Analysis of Financial Condition and Results of Operations
North America and Latin America
Platform-as-a-service
Performance-based restricted stock unit
Senior secured revolving line of credit
Right-of-use
Restricted stock unit
Software-as-a-service
Securities and Exchange Commission
Sales performance analysis
Stand-alone selling price
United States
56
Table of Contents
INDEX TO EXHIBITS
Certificate of Incorporation of the Company filed May 22, 2018
Exhibit Description
Form
10-Q
File No.
001-35108
Exhibit
3.1
Filing Date
08/06/2018
Filed
Herewith
Incorporated by Reference
Amended and Restated Bylaws of the Company dated March 28, 2016
8-K
001-35108
Registration and Information Rights Agreement dated as of December
8, 2006, between the Registrant and GA SS Holding LLC, SSLLC
Holdings, Inc., Housatonic Micro Fund SBIC, LP and Housatonic
Equity Investors SBIC, LP
S-1/A
333-171271
Specimen common stock certificate of the Registrant
S-1/A
333-171271
Description of Capital Stock
10-K
001-35108
3.2
4.1
4.3
4.3
03/31/2016
02/25/2011
03/11/2011
02/19/2020
Exhibit
Number
3.1
3.2
4.1
4.2
4.3
10.1
Form of Director and Executive Officer Indemnification Agreement
S-1
333-171271
10.1
12/20/2010
10.2†
10.3
Employment and Confidential Information Agreement dated as of
January 22, 2019, between the Company and Gary B. Moore
8-K
001-35108
10.1
01/28/2019
Revolving Loan Credit Agreement, dated as of July 30, 2018, among
ServiceSource International, Inc. and ServiceSource Delaware, Inc., as
Borrowers, and Compass Bank, as Lender
8-K
001-35108
10.1
08/02/2018
10.4†
Non-employee Director Deferred Compensation Plan
10-Q
001-35108
10.1
05/07/2020
10.5†
2011 Equity Incentive Plan and forms of agreements thereunder
S-8
333-173116
4.4
03/28/2011
10.6†
2011 Equity Incentive Plan form of Restricted Stock Award Agreement
8-K
001-35108
10.1
02/10/2012
10.7†
10.8†
2011 Equity Incentive Plan form of Share Option Award Agreement
(adopted October 2019)
10-Q
001-35108
10.1
10/29/2019
2011 Equity Incentive Plan form of Restricted Stock Award Agreement
(adopted October 2019)
10-Q
001-35108
10.2
10/29/2019
10.9†
2011 Employee Stock Purchase Plan and form of agreement thereunder
S-8
333-173116
4.5
03/28/2011
10.10†
2020 Equity Incentive Plan
S-8
333-239211
10.1
06/16/2020
10.11†
2020 Equity Incentive Plan form of Performance Stock Unit Award
Agreement
10-Q
001-35108
10.2
07/29/2020
10.12†
2020 Equity Incentive Plan form of Restricted Stock Award Agreement
10.13†
2020 Equity Incentive Plan form of Share Option Award Agreement
10.14†
CFO Transition Agreement
X
X
X
57
Table of Contents
10.15†
Employment and Confidential Information Agreement dated as of
November 16, 2017, between the Company and Chad W. Lyne
21.1
List of subsidiaries
23.1
Consent of Ernst & Young LLP
24.1
31.1
31.2
32.1*
32.2*
Power of Attorney (included on the Signatures page of this Annual
Report on Form 10-K).
Certification of Principal Executive Officer required by Rule 13a-14(a)
or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Principal Financial Officer required by Rule 13a-14(a)
or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
Inline XBRL Instance Document
101.INS
101.SCH Inline XBRL Taxonomy Extension Schema
101.CAL
101.DEF
101.LAB
101.PRE
104
Inline XBRL Taxonomy Extension Calculation Linkbase
Inline XBRL Taxonomy Extension Definition Linkbase
Inline XBRL Taxonomy Extension Label Linkbase
Inline XBRL Taxonomy Extension Presentation Linkbase
Cover Page Interactive Data File, formatted in Inline XBRL (included in Exhibit 101)
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
†
*
Indicates a management contract or compensatory plan.
These exhibits are furnished with this Annual Report on Form 10-K and are not deemed filed with the Securities and Exchange
Commission and are not incorporated by reference in any filing of the Registrant under the Securities Act of 1933 or the Exchange Act of
1934, whether made before or after the date hereof and irrespective of any general incorporation language in such filings.
58
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated:
February 24, 2021
By:
/s/ GARY B. MOORE
SERVICESOURCE INTERNATIONAL, INC.
SIGNATURES
Gary B. Moore
Chief Executive Officer and Director (Principal Executive Officer)
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Patricia Elias, and each of them,
his or her true and lawful attorney-in-fact and agent, with full power of substitution, each with power to act alone, to sign and execute on behalf of the
undersigned any and all amendments to this Annual Report on Form 10-K, and to perform any acts necessary in order to file the same, with all exhibits
thereto and other documents in connection therewith with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full
power and authority to do and perform each and every act and thing requested and necessary to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or their or his or her substitutes, shall
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
ServiceSource International, Inc. and in the capacities and on the dates indicated.
Date
February 24, 2021
/s/ GARY B. MOORE
Signature
Title
Chief Executive Officer and Director (Principal Executive Officer)
Gary B. Moore
February 24, 2021
/s/ CHAD W. LYNE
Chief Financial Officer (Principal Financial and Accounting Officer)
Chad W. Lyne
February 24, 2021
/s/ ANDREW M. BAKER
Andrew M. Baker
February 24, 2021
/s/ JOHN R. FERRON
John R. Ferron
February 24, 2021
/s/ JOHN R. HARRIS
John R. Harris
February 24, 2021
/s/ JOHN A. MEYER
John A. Meyer
February 24, 2021
/s/ JANE OKUN BOMBA
Jane Okun Bomba
February 24, 2021
/s/ ROBIN L. SMITH
Dr. Robin L. Smith
February 24, 2021
/s/ RICHARD G. WALKER
Richard G. Walker
Director
Director
Director
Director
Director
Director
Director
59
Exhibit 10.1
Note: Do not sign and return this document to the Company. By clicking on the [“ACCEPT” box], you acknowledge that you
have read the information below and agree to be bound by the terms of the Plan and Agreement, including the Appendix. To
avoid cancellation of the Restricted Stock Units, you must provide such acceptance within ninety (90) days of the Grant
Date, as set forth in Section 11 of the Restricted Stock Unit Award Terms and Conditions.
ServiceSource International, Inc.
2020 Equity Incentive Plan
Restricted Stock Unit Award Agreement
Dear %%FIRST_NAME_MIDDLE_NAME_LAST_NAME%-%
We are pleased to inform you that ServiceSource International, Inc. (the “Company”) has made an award of restricted stock units
to you (the “Restricted Stock Units”) as indicated in this Restricted Stock Unit Award Agreement (this “Agreement”). The award
of Restricted Stock Units is made pursuant to the Company’s 2020 Equity Incentive Plan (the “Plan”) and is subject to and
governed by the Plan generally. All capitalized terms not defined herein shall have the meanings given to such terms in the Plan.
Grant Date
%%OPTION_DATE,’MM/DD/YYYY’%-%
Vesting Commencement Date
%%VEST_BASE_DATE%-%
Number of Restricted Stock Units %%TOTAL_SHARES_GRANTED,’999,999,999’%-%
Vesting Schedule
Except as set forth below, your Restricted Stock Units shall vest in accordance with the
vesting schedule set forth below, subject to your continued employment or service with the
Company or its Subsidiaries through each applicable date.
Vesting Schedule
One third (1/3) of the Restricted Stock Units will vest on each of the first three (3)
anniversaries of the Vesting Commencement Date.
Any unvested Restricted Stock Units shall be automatically forfeited immediately upon the
termination of your employment or service with the Company or its Subsidiaries for any or
no reason. The Administrator shall determine in its discretion whether and when your
employment or service has ended (including as a result of any leave of absence).
Payment
The Company shall issue to you one share of Common Stock for each Restricted Stock
Unit that vests hereunder, with the delivery of such Common Stock to occur within
seventy-four (74) days following the date on which such Restricted Stock Units vest.
Other Terms and Conditions
Are set forth in the accompanying Restricted Stock Unit Award Terms and Conditions and
the Plan.
Online Acceptance of Restricted Stock Unit Award Agreement
By your online acceptance, you and the Company agree that the Restricted Stock Units granted hereby are granted under and
governed by the terms and conditions of the Plan and of this Restricted Stock Unit Award Agreement (including the
accompanying Restricted Stock Unit Award Terms and Conditions) (the “Award Documents”). You hereby represent and
acknowledge that you been provided the opportunity to review the Plan and the Award Documents in their entirety, and you
hereby agree to accept as binding, conclusive, and final all decisions or interpretations of the Administrator upon any questions
relating to the Plan and the Award Documents.
2
Restricted Stock Unit Award Terms and Conditions
The following terms and conditions apply to the Restricted Stock Units granted to you by the Company, as specified in the
accompanying Restricted Stock Unit Award Agreement (the “Award Agreement”).
1. Award of Restricted Stock Units. The Company has issued to you the number of Restricted Stock Units set forth
above in the Award Agreement, effective on the Grant Date, and subject to the terms and conditions set forth in the Award
Agreement and the Restricted Stock Unit Award Terms and Conditions, including any special terms and conditions for your
country of residence contained in the Appendix to these Restricted Stock Unit Award Terms and Conditions (together, the “Award
Documents”), and the Plan (which is incorporated herein by reference).
2. Restricted Stock Units Non-Transferable. Restricted Stock Units (and related rights) may not be sold, assigned,
alienated, transferred by gift or otherwise, pledged, hypothecated, or otherwise disposed of, by operation of law or otherwise.
Any attempt to assign, alienate, transfer, pledge, sell or otherwise dispose of the Restricted Stock Units or its related rights shall
be ineffective and, if any such attempt is made, the Restricted Stock Units will be forfeited and all of your rights under the Plan
and the Award Documents shall immediately terminate without any payment or consideration by the Company.
3. Vesting. Unless otherwise provided in the Plan, your Restricted Stock Units shall vest in accordance with the Vesting
Schedule set forth in the Award Agreement.
4. Payment. Payment in respect of vested Restricted Stock Units shall be made at the time(s) and in the form(s) set forth
in the Award Agreement. Any distribution or delivery to be made to you under the Award Documents will, if you are then
deceased, be made to the administrator or executor of your estate. Any such administrator or executor must furnish the Company
with (a) written notice of his or her status as transferee, and (b) evidence satisfactory to the Company to establish the validity of
the transfer and compliance with any laws or regulations pertaining to said transfer.
5. Termination of Service; Forfeiture. Upon the termination of your Continuous Service for any reason, any Restricted
Stock Units that have not vested in accordance with Section 3 and the Award Agreement shall immediately be forfeited. Upon
forfeiture, you shall have no further rights with respect to such Restricted Stock Units. If you reside outside of the United States,
in the event of termination of your employment or service (regardless of the reason for such termination and whether or not in
breach of employment laws in the country where you reside or are employed or provide services or the terms of your
employment agreement, if any, and whether or not later found to be invalid), your right to vest in the Restricted Stock Units
under the Plan, if any, will terminate effective as of the date that you are no longer actively providing services and will not be
extended by any notice period mandated under employment laws in the country where you reside or are employed or provide
services (e.g., active employment would not include any contractual notice period or any period of “garden leave” or similar
period mandated in the country in which you reside or are employed or provide services or the terms of your employment
agreement, if any); the Administrator shall have the exclusive discretion to determine when you are no longer actively providing
services for purposes of the Restricted Stock Units (including whether or not you may still be considered as actively providing
services while on an approved leave of absence).
3
6. Tax Treatment; Section 409A. You may incur tax liability as a result of the receipt of Restricted Stock Units and
payments thereunder. You should consult your own tax adviser for tax advice. You acknowledge that the Administrator, in the
exercise of its sole discretion and without your consent, may amend or modify the Award Documents in any manner, and delay
the payment of any amounts thereunder, to the minimum extent necessary to satisfy the requirements of Section 409A. The
Company will provide you with notice of any such amendment or modification. This Section 6 does not, and shall not be
construed so as to, create any obligation on the part of the Company to adopt any such amendments or to take any other actions
or to indemnify you for any failure to do so.
7. Tax Withholding. You shall make appropriate arrangements with the Company to provide for payment of all federal, state,
local or foreign taxes of any kind required by law to be withheld in respect of your Restricted Stock Units. Such arrangements
may include, but are not limited to, the payment of cash directly to the Company, withholding by the Company from other cash
payments of any kind otherwise due you, withholding from proceeds of the sale of Shares acquired upon exercise either through a
voluntary sale or through a mandatory sale arranged by the Company (on your behalf pursuant to this authorization without
further consent), or share withholding as described below. Subject to the prior approval of the Administrator, which may be
withheld by the Administrator in its sole discretion, you may be permitted to satisfy the statutory withholding obligations, in
whole or in part, (i) by having the Company withhold shares otherwise issuable to you or (ii) by delivering to the Company
shares of Common Stock already owned by you. The shares delivered or withheld shall have an aggregate Fair Market Value not
in excess of the minimum statutory total tax withholding obligations. In addition, to the extent provided by the Plan, you may
elect to have the Company perform additional voluntary tax withholding through the withholding or delivery of shares up to the
maximum statutory tax rates in your applicable jurisdictions. The Fair Market Value of the shares used for tax withholding
purposes shall be determined by the Company as of the date on which taxation occurs. Shares used for tax withholding purposes
must be vested and cannot be subject to any repurchase, forfeiture, or other similar requirements. Any election to withhold or
deliver shares shall be irrevocable, made in writing, signed by you, and shall be subject to any restrictions or limitations that the
Administrator, in its sole discretion, deems appropriate. Further, if you become subject to tax in more than one jurisdiction
between the Grant Date and the date of any relevant taxable or tax withholding event, as applicable, you acknowledge that the
Company and/or its Subsidiaries (or former employer, as applicable) may be required to withhold or account for federal, state,
local or foreign taxes of any kind in more than one jurisdiction.
8. Acknowledgements. If you reside outside the U.S., the following additional provisions shall apply:
a.
the Restricted Stock Units and the Shares subject to the Restricted Stock Units are extraordinary items that do not
constitute compensation of any kind for services of any kind rendered to the Company or you, and are outside the scope of your
employment or service contract, if any;
b.
pension rights; and
the Restricted Stock Units and the Shares subject to the Restricted Stock Units are not intended to replace any
c.
no claim or entitlement to compensation or damages shall arise from forfeiture of the Restricted Stock Units
resulting from termination of your employment or services by the Company or its Subsidiaries (whether or not in breach of
employment laws in the country where you resides and whether or not later found to be invalid) and in consideration of the
Restricted Stock Units to which
4
you are otherwise not entitled, you irrevocably agree never to institute any claim against the Company or its Subsidiaries, waive
your ability, if any, to bring any such claim, and releases the Company and its Subsidiaries from any such claim; if,
notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan,
you shall be deemed irrevocably to have agreed not to pursue such claim and agrees to execute any and all documents necessary
to request dismissal or withdrawal of such claims.
9. Personal Information. The Company and its Subsidiaries may collect, store, disclose, use, or otherwise process
certain personal information about you for the purpose of managing and administering the Plan, such as your name, home address
and telephone number, date of birth, social security number or other employee identification number, salary, nationality, job title,
any shares or directorships held in the Company, details of all Restricted Stock Units and other equity awards or any other
entitlement to shares awarded, canceled, purchased, vested, unvested or outstanding in your favor (“Data”). The Company and/or
its Subsidiaries may disclose Data among themselves as necessary for the purpose of implementation, administration and
management of your participation in the Plan and the Company and/or any of its Subsidiaries may each further disclose Data to
any third parties assisting the Company in the implementation, administration and management of the Plan, including E*Trade
and the Plan recordkeeper. These recipients may be located throughout the world, including the United States. You understand
and agree that these parties may receive, possess, use, retain, transfer, and otherwise process the Data, in electronic or other form,
for the purposes of implementing, administering and managing your participation in the Plan, including any requisite transfer or
disclosure of such Data as may be required for the administration of the Plan and/or the subsequent holding of shares on your
behalf to a broker or other third party with whom you may elect to deposit any shares acquired pursuant to the Plan.
Notwithstanding anything to the contrary in this Section 9, you acknowledge and agree that the Company and its Subsidiaries
may also collect, store, use, disclose, and otherwise process your Data where such processing is necessary to comply with a legal
obligation, for the Company or its Subsidiaries’ legitimate business purposes, or with your consent if applicable law requires
consent. You may, at any time, request to access, correct, delete or restrict processing of your Data by contacting the Company in
writing. Applicable law may allow or require the Company to refuse to provide you with access to, correct, or restrict processing
of some or all of the Data that the Company or its Subsidiaries hold about you, or the Company or its Subsidiaries may have
destroyed, erased, or made such Data anonymous in accordance with applicable record retention obligations and practices. If the
Company cannot provide you with access to, delete or restrict processing of your Data, the Company will inform you of the
reasons why, subject to any legal or regulatory restrictions. For more information on the processing of your Data, contact your
human capital representative.
10. Other Employee Benefits. Except as specifically provided otherwise in any relevant employee benefit plan,
program, or arrangement, the Restricted Stock Units evidenced hereby are not part of normal or expected compensation for
purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension
or retirement benefits or similar payments.
11. Electronic Delivery. BY YOUR ELECTRONIC ACCEPTANCE OF THIS AWARD, YOU HEREBY CONSENT
TO ELECTRONIC DELIVERY OF THE PLAN, AND ANY DISCLOSURE OR OTHER DOCUMENTS RELATED TO THE
PLAN, INCLUDING FUTURE AWARD DOCUMENTS (COLLECTIVELY, THE “PLAN DOCUMENTS”). THE COMPANY
5
MAY DELIVER THE PLAN DOCUMENTS ELECTRONICALLY TO YOU BY E-MAIL, BY POSTING SUCH
DOCUMENTS ON ITS INTRANET WEBSITE OR BY ANOTHER MODE OF ELECTRONIC DELIVERY AS
DETERMINED BY THE COMPANY IN ITS SOLE DISCRETION. YOU ACKNOWLEDGE THAT YOU ARE ABLE TO
ACCESS, VIEW AND RETAIN AN E-MAIL ANNOUNCEMENT INFORMING YOU THAT THE PLAN DOCUMENTS
ARE AVAILABLE IN HTML, PDF OR SUCH OTHER FORMAT AS THE COMPANY DETERMINES IN ITS SOLE
DISCRETION. If you do not accept the Award documents within ninety (90) days of the Grant Date, the Award documents will
be null and void following the ninetieth (90th) day after the Grant date and you will have no right or claim to the Award.
12. Notices. Any notice required or permitted to be given hereunder shall be in writing and shall be given by hand
delivery, by e-mail, by facsimile, or by first class registered or certified mail, postage prepaid, addressed, if to the Company, to its
Corporate Secretary, and if to you, to your address now on file with the Company, or to such other address as either may
designate in writing. Any notice shall be deemed to be duly given as of the date delivered in the case of personal delivery, e-mail,
or facsimile, or as of the second day after enclosed in a properly sealed envelope and deposited, postage prepaid, in a United
States post office, in the case of mailed notice.
13. Amendment. The Award Documents may be amended by the Administrator at any time without your consent if such
amendment is not materially adverse to your rights hereunder or is otherwise permitted herein. In all other cases, the Award
Documents may not be amended or otherwise modified unless evidenced in writing and signed by the Company and by you.
14. Relationship to Plan. Nothing in the Award Documents shall alter the terms of the Plan. If there is a conflict between the
terms of the Plan and the terms of the Award Documents, the terms of the Plan shall prevail.
15. Construction; Severability. The section headings contained herein are for reference purposes only and shall not in any
way affect the meaning or interpretation of these Restricted Stock Unit Award Terms and Conditions. The invalidity or
unenforceability of any provision of the Award Documents shall not affect the validity or enforceability of any other provision
thereof, and each other provision thereof shall be severable and enforceable to the extent permitted by law.
16. Waiver. Any provision contained in the Award Documents may be waived, either generally or in any particular instance,
by the Administrator appointed under the Plan, but only to the extent permitted under the Plan.
17. Binding Effect. The Award Documents shall be binding upon and inure to the benefit of the Company and to you and
your respective heirs, executors, administrators, legal representatives, successors and assigns.
18. Rights to Employment. Nothing contained in the Award Documents shall be construed as giving you any right to be
retained in the employ or service of the Company or any of its Subsidiaries and the Award Documents are limited solely to
governing the parties’ rights and obligations with respect to the Restricted Stock Units.
6
19. Governing Law. The Award Documents shall be governed by and construed in accordance with the laws of the State of
Delaware, without regard to the choice of law principles thereof.
20. Company Policies to Apply; Potential Clawback. The sale of any shares of Common Stock received as payment under
the Restricted Stock Units is subject to the Company’s policies regulating securities trading by employees, all relevant federal
and state securities laws and the listing requirements of any stock exchange on which the shares of the Company’s Common
Stock are then traded. In addition, participation in the Plan and receipt of remuneration as a result of the Restricted Stock Units is
subject in all respects to any laws, regulations, or Company compensation policies related to clawback that may be in effect from
time to time.
21. Section 409A Compliance. The Restricted Stock Units granted hereunder are intended to comply with or be exempt from
the requirements of Section 409A, and the Award Documents shall be interpreted and administered in a manner consistent with
such intent. You shall be solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on you in
connection with the Restricted Stock Units granted hereunder (including any taxes and penalties under Section 409A), and
neither the Company nor any of its Affiliates shall have any obligation to indemnify or otherwise hold you harmless from any or
all of such taxes or penalties.
22. Language. If you have received any of the Award Documents or any other document related to the Restricted Stock Units
and/or the Plan translated into a language other than English, and if the meaning of the translated version is different than the
English version, the English version will control.
23. Appendix. Notwithstanding any provisions in the Award Agreement and these Restricted Stock Unit Award Terms and
Conditions, the Restricted Stock Units shall be subject to any special terms and conditions set forth in the Appendix for your
country of residence. Moreover, if you relocate to one of the countries included in the Appendix, the special terms and conditions
for such country shall apply to you, to the extent the Company determines that the application of such terms and conditions is
necessary or advisable in order to comply with the relevant laws concerning the issuance or sale of Shares or to facilitate the
administration of the Plan. The Appendix constitutes part of the Award Documents.
7
Appendix to the Restricted Stock Unit Award Terms and Conditions
This Appendix to the Restricted Stock Unit Award Terms and Conditions includes additional terms and conditions that govern
participation in the ServiceSource International, Inc. 2020 Equity Incentive Plan (the “Plan”) if you reside in one of the countries
listed herein. This Appendix forms part of the Restricted Stock Unit Award Agreement (including the accompanying Restricted
Stock Unit Award Terms and Conditions) (the “Award Documents”). Capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Award Documents and the Plan.
This Appendix also includes information regarding exchange controls and certain other issues of which you should be aware with
respect to your participation in the Plan. The information is based on the securities, exchange control and other laws in effect in
the respective countries as of 2020. Such laws are often complex and change frequently. As a result, the Company strongly
recommends that you not rely on the information noted herein as the only source of information relating to the consequences of
your participation in the Plan because the information may be out of date at the time you vest in the Restricted Stock Units and
acquire Shares or when you subsequently sells Shares acquired under the Plan.
In addition, the information contained herein is general in nature and may not apply to your situation, and the Company is not in
a position to assure you of any particular result. Accordingly, you are advised to seek appropriate professional advice as to how
the relevant laws in your country may apply to your situation.
Finally, if you are a citizen or resident of a country other than the one in which you is currently working, transfer employment to
another country after the Restricted Stock Units are granted, or are considered a resident of another country for local law
purposes, the information contained herein may not be applicable to you. In addition, the Company shall, in its sole discretion,
determine to what extent the terms and conditions included herein will apply to you.
CANADA
Terms and Conditions
For Participants who are directors, the following terms and conditions apply to the Award Documents and the Plan:
Termination of Continuous Status as a Director. The following provision replaces the last sentence of Section 5 of the
Restricted Stock Unit Award Terms and Conditions:
Your continuous status as a director shall be considered terminated for vesting purposes as of the earlier of (a) the date on which
your continuous status as a director is terminated; (b) the date that you receive notice of termination of your continuous status as
a director from the Company; or (c) the date that you are no longer actively serving as a director of the Company, regardless of
any notice period or period of pay in lieu of such notice required under applicable employment law; the Board shall have the
exclusive discretion to determine when your continuous status as a
8
director is terminated for purposes of the Restricted Stock Units (including whether you may still be considered to be actively
serving as a director while on a leave of absence).
Notifications
Securities Law Information. You are permitted to sell Shares acquired under the Plan, provided that the resale of the Shares
takes place outside of Canada through the facilities of a stock exchange on which the shares are listed. The Shares are currently
listed on the NASDAQ Global Select Market.
Foreign Assets Reporting Information. You are required to report any foreign property (including Restricted Stock Units and
Shares) on form T1135 (Foreign Income Verification Statement) if the total value of the foreign property exceeds C$100,000 at
any time in the year. The form must be filed by April 30 of the following year. You Are advised to consult with your personal
legal advisor to ensure compliance with applicable reporting obligations.
IRELAND
Notifications
Director Notification Obligation. You acknowledge that if you are a director, shadow director or secretary of the Company’s
Irish Subsidiary, with interest representing 1% or more of the Company’s voting share capital, you must notify the Irish
Subsidiary in writing within five business days of receiving or disposing of an interest in the Company (e.g., the Restricted Stock
Units, Shares, etc.), or within five business days of becoming aware of the event giving rise to the notification requirement or
within five business days of becoming a director or secretary if such an interest exists at the time. This notification requirement
also applies with respect to the interests of your spouse or children under the age of 18 (whose interests will be attributed to you
if you are a director, shadow director or secretary).
JAPAN
Notifications
Foreign Assets Reporting Obligation. You are required to report details of any assets held outside of Japan to the tax authorities
on an annual basis as of December 31 (including Shares acquired under the Plan), to the extent such assets have a total net fair
market value exceeding ¥100 million. Such report will be due by March 15 each year. You should consult with your personal tax
advisor to determine if the reporting obligation applies to your personal situation.
MALAYSIA
Notifications
Insider Trading Notification. You understand that Malaysian insider-trading rules exist, which may impact your acquisition or
disposal of Shares under the Plan. Under the Malaysian
9
insider-trading rules, you are prohibited from acquiring or disposing of Shares or rights to acquire Shares (e.g., the Restricted
Stock Units) when in possession of information which is not generally available, and which you know or should know will have a
material effect on the price of Shares once such information is generally available.
Director Notification. If you are a director of a Subsidiary in Malaysia, you are subject to certain notification requirements
under the Malaysian Companies Act. Among these requirements is an obligation to notify the Malaysian Subsidiary in writing
when you receive an interest in the Company (e.g., the Restricted Stock Units, Shares). In addition, you must notify the
Malaysian Subsidiary when you sell shares of the Company (including when you sell Shares acquired under the Plan). These
notifications must be made within 14 days of acquiring or disposing of any interest in the Company.
SINGAPORE
Notifications
Director Notification Obligation. You acknowledge that if you are a director, associate director or shadow director of a
Singapore Subsidiary, you are subject to certain notification requirements under the Singapore Companies Act. Among these
requirements is an obligation to notify the Singapore Subsidiary in writing when you receive an interest (e.g., the Restricted
Stock Units or Shares) in the Company or any Subsidiary within two business days of (i) its acquisition or disposal, (ii) any
change in previously disclosed interest (e.g., when the Shares are sold), or (iii) becoming a director.
Securities Law Information. You understand that the Restricted Stock Units are being granted pursuant to the “Qualifying
Person” exemption under section 273(1)(f) of the Singapore Securities and Futures Act (Chapter 289, 2006 Ed.) (“SFA”). You
further understand that neither the Plan nor any of the Award Documents have been lodged or registered as a prospectus with the
Monetary Authority of Singapore. You understand and acknowledge that the Restricted Stock Units are subject to section 257 of
the SFA and you will not be able to make any subsequent sale of Shares in Singapore, or any offer of such subsequent sale of the
Shares acquired upon vesting of the Restricted Stock Units, unless such sale or offer in Singapore is made pursuant to the
exemptions under Part XIII Division (1) Subdivision (4) (other than section 280) of the SFA.
Insider Trading Information. You should be aware of the Singaporean insider trading rules, which may impact the acquisition
or disposal of Shares or rights to Shares under the Plan. Under the Singaporean insider trading rules, you are prohibited from
acquiring or selling Shares or rights to Shares (e.g., Restricted Stock Units) when in possession of information which is not
generally available and which you know or should know will have a material effect on the price of Shares once such information
is generally available.
10
UNITED KINGDOM
Terms and Conditions
For Services Providers who are Employees, the following additional terms and conditions apply to the Agreement. These terms
and conditions, as well as the provisions related to withholding contained in the Agreement, do not apply if Participant is a
Consultant who is self-employed.
Tax Reporting and Payment Liability. The following provision supplements Sections 6 and 7 of the Restricted Stock Unit
Award Terms and Conditions:
You agree that if the Company does not withhold or otherwise collect the full amount of income tax that you owe due to the
vesting of the Restricted Stock Units or release, assignment or cancellation of the Restricted Stock Units (the “Chargeable
Event”) from you within ninety (90) days after the Chargeable Event or such other period as required by U.K. law (the “Due
Date”), then the amount that should have been withheld or collected shall constitute a loan owed by you to the Company,
effective on the Due Date. You agree that the loan will bear interest at the then-current Official Rate of Her Majesty’s Revenue &
Customs (“HMRC”) and it will be immediately due and repayable by you and the Company and/or its Subsidiaries may recover it
at any time thereafter by any of the means referred to in Section 7 of the Restricted Stock Unit Award Terms and Conditions.
Notwithstanding the foregoing, if you are an executive officer or director (as within the meaning of Section 13(k) of the
Exchange Act), the terms of the provision above will not apply. In the event that you are an executive officer or director and
income tax is not collected from or paid by you by the Due Date, the amount of any uncollected income tax may constitute a
benefit to you on which additional income tax and National Insurance Contributions (“NICs”) may be payable. You understand
that you will be responsible for reporting and paying any income tax due on this additional benefit directly to HMRC under the
self-assessment regime and for reimbursing the Company for the value of the employee NICs due on this additional benefit. You
acknowledge that you will be responsible for reporting and paying any income tax due on this additional benefit directly to
HMRC under the self-assessment regime and for reimbursing the Company or its Subsidiaries (as applicable) for the value of any
employee NICs due on this additional benefit which the Company or its Subsidiaries may recover from you by any of the means
referred to in Section 7 of the Restricted Stock Unit Award Terms and Conditions or Section 9.1 of the Plan.
Joint Election. As a condition of participation in the Plan, you agree to accept any liability for secondary Class 1 NICs which
may be payable by the Company and/or any of its Subsidiaries in connection with the Restricted Stock Units and any event
giving rise to federal, state, local or foreign taxes of any kind (the “Employer’s NICs”). Without limitation to the foregoing, you
agree to enter into a joint election with the Company (the “Joint Election”), the form of such Joint Election being formally
approved by HMRC, and to execute any other consents or elections required to accomplish the transfer of the Employer’s NICs
to you. You further agree to execute such other joint elections as may be required between you and any
11
successor to the Company and/or any of its Subsidiaries. You further agree that the Company and/or its Subsidiaries may collect
the Employer’s NICs from you by any of the means set forth in Section 7 of the Restricted Stock Unit Award Terms and
Conditions or Section 9.1 of the Plan.
(Joint Election Form below)
12
SERVICESOURCE INTERNATIONAL, INC.
2020 EQUITY INCENTIVE PLAN
Important Note on the Joint Election to Transfer
Employer National Insurance Contributions
As a condition of participation in the ServiceSource International, Inc. 2020 Equity Incentive Plan (the “Plan”) and the
Restricted Stock Units that have been granted to you by ServiceSource International, Inc. (the “Company”), you are required to
enter into a joint election to transfer to you any liability for employer national insurance contributions (the “Employer NICs”)
that may arise in connection with the grant of the Restricted Stock Units or in connection with future restricted stock units
granted to you by the Company under the Plan (the “Joint Election”).
If you do not agree to enter into the Joint Election, the grant of the Restricted Stock Units will be worthless and
you will not be able to vest in the Restricted Stock Units or receive any benefit in connection with the Restricted Stock
Units.
By entering into the Joint Election:
•
•
you agree that any liability for Employer’s NICs that may arise in connection with or pursuant to the vesting of the
Restricted Stock Units (and the acquisition of Shares) or other taxable events in connection with the Restricted
Stock Units will be transferred to you; and
you authorize the Company and/or your employer to recover an amount sufficient to cover this liability by any
method set forth in the Restricted Stock Units Agreement and/or the Joint Election.
By accepting the Restricted Stock Units through the Company’s online acceptance procedure, you are agreeing to be bound
by the terms of the Joint Election.
Please read the terms of the Joint Election carefully before
accepting the Award Agreement
and the Joint Election.
Please print and keep a copy of the Joint Election
for your records.
13
SERVICESOURCE INTERNATIONAL, INC.
2020 EQUITY INCENTIVE PLAN
Election To Transfer the Employer's National Insurance Liability to the Employee
This Election is between:
A.
B.
The individual who has obtained authorized access to this Election (the “Employee”), who is employed by one of
the employing companies listed in the attached schedule (the “Employer”) and who is eligible to receive stock
options and/or restricted stock units (“Awards”) pursuant to the ServiceSource International, Inc. 2020 Equity
Incentive Plan (the “Plan”), and
ServiceSource International, Inc., with its registered offices at 707 17 Street, Suite 2500, Denver, Colorado
80202, U.S.A. (the “Company”), which may grant Awards under the Plan and is entering into this Election on
behalf of the Employer.
th
I. INTRODUCTION
1.
This Election relates to the employer's secondary Class 1 National Insurance Contributions (the “Employer’s
Liability”) which may arise on the occurrence of a chargeable event within paragraph 3B(1A)(a) of Schedule 1 of
the Social Security Contributions and Benefits Act 1992 (“SSCBA”), including:
(a)
(b)
(c)
(d)
the acquisition of securities pursuant to stock options and/or restricted stock units (within section 477(3)(a)
of the Income Tax (Earnings and Pensions) Act 2003 (“ITEPA”));
the assignment (if applicable) or release of the stock options and/or restricted stock units (within section
477(3)(b) of ITEPA);
the receipt of any other benefit in money or money’s worth in connection with the stock options and/or
restricted stock units (within section 477(3)(c) of ITEPA); and/or
post-acquisition charges relating to shares acquired under the stock options and/or restricted stock units
(within section 427 of ITEPA), each a “Chargeable Event.” This Election is made in accordance with
paragraph 3B(1) of Schedule 1 to SSCBA.
2.
3.
4.
This Election applies to all Awards granted to the Employee under the Plan on or after the Grant Date up to the
termination date of the Plan.
This Election does not apply in relation to any liability, or any part of any liability, arising as a result of regulations
being given retrospective effect by virtue of section 4B(2) of either the SSCBA, or the Social Security
Contributions and Benefits (Northern Ireland) Act 1992.
This Election does not apply to the extent that it relates to relevant employment income which is employment
income of the earner by virtue of Chapter 3A of
14
Part VII of ITEPA (employment income: securities with artificially depressed market value).
II. THE ELECTION
The Employee and the Company jointly elect that the entire liability of the Employer to pay the Employer’s Liability on the
Chargeable Event is hereby transferred to the Employee. The Employee understands that, by clicking the [“ACCEPT” box], he or
she will become personally liable for the Employer’s Liability covered by this Election.
III. PAYMENT OF THE EMPLOYERS’ LIABILITY
1.
The Employee hereby authorizes the Company and/or the Employer to collect the Employer's Liability from the
Employee at any time after the Chargeable Event:
(a)
(b)
(c)
(d)
by deduction from salary or any other payment payable to the Employee at any time on or after the date of
the Chargeable Event; and/or
directly from the Employee by payment in cash or cleared funds; and/or
by arranging, on behalf of the Employee, for the sale of some of the securities which the Employee is
entitled to receive in respect of the Awards; and/or
by any other means specified in the applicable award agreement.
2.
3.
The Company hereby reserves for itself and the Employer the right to withhold the transfer of any securities to the
Employee in respect of the Awards until full payment of the Employer's Liability is received.
The Company agrees to remit the Employer’s Liability to HM Revenue & Customs on behalf of the Employee
within 14 days after the end of the UK tax month during which the Chargeable Event occurs (or within 17 days if
payments are made electronically).
IV. DURATION OF ELECTION
1.
2.
The Employee and the Company agree to be bound by the terms of this Election regardless of whether the
Employee is transferred abroad or is not employed by the Employer on the date on which the Employer’s Liability
becomes due.
This Election will continue in effect until the earliest of the following:
(a)
(b)
(c)
(d)
the Employee and the Company agree in writing that it should cease to have effect;
on the date the Company serves written notice on the Employee terminating its effect;
on the date HM Revenue & Customs withdraws approval of this Election; or
after due payment of the Employer’s Liability in respect of the entirety of the Awards to which this
Election relates or could relate, such that the Election ceases to have effect in accordance with its terms.
15
Acceptance by the Employee
The Employee acknowledges that, by clicking on the [“ACCEPT” box], the Employee agrees to be bound by the terms of
this Election.
16
SCHEDULE OF EMPLOYER COMPANIES
The following are employer companies to which this Election may apply:
SSI Europe UK Limited
Registered Office:
5 New Street Square, London, United Kingdom, EC4A 3TW
Company Registration Number:
7253138
Corporation Tax District:
CT Operations (Large & Complex CRM)
16 North Government Buildings
Ty Glas
Llanishen
Cardiff CF14 5FP
Corporation Tax Reference:
42508 00092
PAYE District:
Customer Operations Employer Office
BP4009
Chillingham House
Benton Park View
Newcastle upon Tyne NE98 1ZZ
PAYE Reference:
083/WA49060
17
Exhibit 10.2
Note: Do not sign and return this document to the Company. By clicking on the [“ACCEPT” box], you acknowledge that you
have read the information below and agree to be bound by the terms of the Plan and Agreement, including the Appendix. To
avoid cancellation of the Option, you must provide such acceptance within ninety (90) days of the Grant Date, as set forth
in Section 14 of the Option Award Terms and Conditions.
2020 Equity Incentive Plan
ServiceSource International, Inc.
Stock Option Award Agreement
Dear %%FIRST_NAME_MIDDLE_NAME_LAST_NAME%-%
We are pleased to inform you that ServiceSource International, Inc. (the “Company”) has granted to you an option (the “Option”)
to purchase the number of shares of the Company’s Common Stock (“Shares”) indicated in this Stock Option Award Agreement
(this “Agreement) at the exercise price set forth below, pursuant to the Company’s 2020 Equity Incentive Plan (the “Plan”). The
grant of the Option is subject to and governed by the Plan generally, and all capitalized terms not defined herein shall have the
meanings given to such terms in the Plan.
Grant Date
%%OPTION_DATE%-%
Vesting Commencement Date
%%VEST_BASE_DATE%-%
Shares of Common Stock Covered
by Option
%%TOTAL_SHARES_GRANTED,’999,999,999’%-%
Type of Option
Exercise Price
Vesting Schedule
Non-Qualified Stock Option
%%OPTION_PRICE,’$999,999,999.99’%-% per Share, which is intended to be no
less than the Fair Market Value per Share on the Grant Date.
Except as set forth below, your Option shall vest in accordance with the following
schedule, subject to your continued employment or service with the Company or its
Subsidiaries through each applicable vesting date.
Vesting Schedule
The Option will vest and become exercisable as to one-third (1/3 ) of the Shares
covered by the Option on each of the first three (3) anniversaries of the Vesting
Commencement Date.
rd
Expiration Date
Ten (10) years from the Grant Date.
Termination of Employment or
Service
Any unvested portion of the Option shall automatically be forfeited immediately
upon the termination of your employment or service with the Company or its
Subsidiaries for any or no reason.
Any vested portion of the Option shall expire as follows:
General
In the event of your termination of employment or service with the Company or its
Subsidiaries for any reason other than death, Disability, or for Cause, the vested
portion of your Option shall expire three (3) months after the last day that you are
employed by, or provided services to, the Company or its Subsidiaries; provided,
however, that in the event of your death during this post-termination period, those
persons entitled to exercise the Option pursuant to the laws of descent and
distribution shall have one (1) year following the date of your death within which to
exercise the vested portion of your Option. In no event may the Option be exercised
after the Expiration Date.
Death or Disability
In the event of your termination of employment or service with the Company or its
Subsidiaries as a result of death or Disability, the vested portion of your Option will
expire twelve (12) months after the last day that you were employed by, or provided
services to, the Company or a Subsidiary. In no event may the Option be exercised
after the Expiration Date.
Cause
In the event of your termination of employment or service with the Company or its
Subsidiaries for Cause, the entirety of the Option, whether vested or unvested, shall
automatically be forfeited immediately upon such termination.
The Administrator shall determine in its discretion whether and when your
employment or service has ended, including as a result of any leave of absence.
Other Terms and Conditions
Are set forth in the accompanying Option Award Terms and Conditions and the
Plan.
2
Online Acceptance of Stock Option Award Agreement
By your online acceptance, you and the Company agree that the Option granted hereby is granted under and governed by the
terms and conditions of the Plan and of this Agreement (including the accompanying Option Award Terms and Conditions) (the
“Award Documents”). You hereby represent and acknowledge that you been provided the opportunity to review the Plan and the
Award Documents in their entirety, and you hereby agree to accept as binding, conclusive, and final all decisions or
interpretations of the Administrator upon any questions relating to the Plan and the Award Documents
3
Option Award Terms and Conditions
The following terms and conditions apply to the Option granted to you by the Company, as specified in the accompanying
Stock Option Award Agreement (the “Award Agreement”).
1. Award of Option. The Company has issued to you an Option covering the number of Shares set forth above in the
Award Agreement, at the exercise price set forth in the Award Agreement. The Award is effective on the Grant Date and is
subject to the terms and conditions set forth in the Award Agreement and these Option Award Terms and Conditions, including
any special terms and conditions for your country of residence contained in the Appendix to these Option Award Terms and
Conditions (together, the “Award Documents”), and the Plan (which is incorporated herein by reference).
2. Vesting. Unless otherwise provided in the Plan, your Option shall vest and become exercisable in accordance with the
Vesting Schedule set forth in the Award Agreement. As the Option becomes exercisable for one or more installments, the
installments shall accumulate, and the Option shall remain exercisable for the accumulated installments until the Option expires
or terminates in accordance with the terms hereof or the terms of the Plan.
3. Notice of Exercise. Your Option, to the extent vested, may be exercised on any business day on which the Company
is generally open for business by delivery of written or electronic notice to an officer, employee, or agent of the Company
designated by the Administrator, on a written or electronic form specified by the Company or its designated agent. The written or
electronic notice shall specify the number of Shares for which the Option is exercised and shall specify the manner in which the
Shares should be registered and the manner in which you are paying the exercise price and satisfying applicable tax withholding
requirements. The notice of exercise will be effective when it is received. Anyone exercising the Option after your death must
provide appropriate documentation to the satisfaction of the Company that the individual is entitled to exercise the Option.
4. Payment of Exercise Price; Issuance of Shares. The exercise price may be paid as set forth in Section 6.4 of the Plan.
Upon receipt of the exercise price, the Company shall issue the purchased Shares to you in the manner set forth in your notice of
exercise, in written or electronic format as selected by the Administrator in its discretion.
5. Term; Expiration Date. Your Option shall expire at 5:00 P.M. Mountain Time on the Expiration Date set forth in the
Award Agreement, unless sooner terminated in accordance with the Award Agreement (such as upon your termination of
employment or service) or the terms of the Plan.
6. Investment Representations. The Administrator may require you (or your estate or heirs) to represent and warrant in
writing that the individual exercising the Option is acquiring Shares for investment and without any present intention to distribute
such Shares, and to make such other representations as are deemed necessary or appropriate by the Company.
7. Stockholder Rights. You and your estate or heirs shall not have any rights as a stockholder of the Company until you
become the holder of record of such Shares, and adjustments shall be made for dividends or other distributions or other rights as
to which there is a record date prior to the date you become the holder of record of such Shares solely as provided in the Plan.
8. Additional Requirements. The transfer of any Shares hereunder shall be effective only at such time as the Company
shall have determined that the issuance and delivery of such Shares is in compliance with all applicable laws and the
requirements of any securities exchange on which the Shares are then traded. You acknowledge that Shares acquired upon
exercise of the Option may bear such legends as the Company deems appropriate to comply with applicable federal, state or
foreign securities laws. In connection therewith and prior to the issuance of the Shares, you may be required to deliver to the
Company such other documents as may be reasonably necessary to ensure compliance with applicable laws.
9. Tax Treatment; Section 409A. You may incur tax liability as a result of the exercise of your Option. You should
consult your own tax adviser for tax advice. You acknowledge that the Administrator, in the exercise of its sole discretion and
without your consent, may amend or modify the Award Documents in any manner and delay the payment of any amounts payable
pursuant to the exercise of your Option to the minimum extent necessary to satisfy the requirements of Section 409A. The
Company will provide you with notice of any such amendment or modification. This Section 9 does not, and shall not be
construed so as to, create any obligation on the part of the Company to adopt any such amendments or to take any other actions
or to indemnify you for any failure to do so.
10. Tax Withholding. You shall make appropriate arrangements with the Company to provide for payment of any
federal, state, local or foreign taxes of any kind required by law to be withheld with respect to your Option. Such arrangements
may include, but are not limited to, the payment of cash directly to the Company, withholding by the Company from other cash
payments of any kind otherwise due to you, withholding from proceeds of the sale of Shares acquired upon exercise either
through a voluntary sale or through a mandatory sale arranged by the Company (on your behalf pursuant to this authorization
without further consent) or Share withholding as described below. Subject to the prior approval of the Administrator, which may
be withheld by the Administrator in its sole discretion, you may be permitted to satisfy the statutory withholding obligations, in
whole or in part, (i) by having the Company withhold Shares otherwise issuable to you, or (ii) by delivering to the Company
Shares already owned by you. The Shares delivered or withheld shall have an aggregate fair market value not in excess of the
maximum statutory rates in your applicable jurisdictions. The fair market value of the Shares used to satisfy the withholding
obligation shall be determined by the Company as of the date on which taxation occurs. Shares used to satisfy any tax
withholding obligation must be vested and cannot be subject to any repurchase, forfeiture, or other similar requirements. Any
election to withhold Shares shall be irrevocable, made in writing, signed by you, and shall be subject to any restrictions or
limitations that the Administrator in its sole discretion deems appropriate. Further, if you become subject to tax in more than one
jurisdiction between the Grant Date and the date of any relevant taxable or tax withholding event, as applicable, you
acknowledge that the Company (or former employer, as applicable) may be required to withhold or account for any federal, state,
local or foreign taxes of any kind in more than one jurisdiction.
11. Acknowledgements. If you reside outside the U.S., the following additional provisions shall apply:
a.
b.
the Option and the Shares subject to the Option are not intended to replace any pension rights;
no claim or entitlement to compensation or damages shall arise from forfeiture of the Option resulting from
termination of your employment or service by the Company or its
5
Subsidiaries (whether or not in breach of employment laws in the country where you resides or are employed or provide services
or the terms of your employment agreement, if any, and whether or not later found to be invalid) and in consideration of the grant
of the Option to which you are otherwise not entitled, you irrevocably agree never to institute any claim against the Company or
its Subsidiaries, waive your ability, if any, to bring any such claim, and release the Company and its Subsidiaries from any such
claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in
the Plan, you shall be deemed irrevocably to have agreed not to pursue such claim and agree to execute any and all documents
necessary to request dismissal or withdrawal of such claims;
c.
in the event of termination of your employment or service (regardless of the reason for such termination
and whether or not in breach of employment laws in the country where you reside or are employed or provide services or the
terms of your employment agreement, if any, and whether or not later found to be invalid), your right to vest in the Option under
the Plan, if any, will terminate effective as of the date that you are no longer actively providing services and will not be extended
by any notice period mandated under employment laws in the country where you reside or are employed or provide services (e.g.,
active employment would not include any contractual notice period or any period of “garden leave” or similar period mandated
under employment laws in the country in which you reside or are employed or provide services or the terms of your employment
agreement, if any); furthermore, in the event of termination of your employment (whether or not in breach of employment laws in
the country where you reside or are employed or provide services or the terms of your employment agreement, if any, and
whether or not later to be found invalid), your right to exercise the Option after termination of employment or service, if any, will
be measured by the date of termination of your active services and will not be extended by any notice period mandated under
employment laws in the country in which you reside or are employed or provide services or the terms of your employment
agreement, if any; the Administrator shall have the exclusive discretion to determine when you are no longer actively providing
services for purposes of the Option grant (including whether you may still be considered actively providing services while on an
approved leave of absence);
d.
the Option and the Shares subject to the Option are extraordinary items that do not constitute compensation
of any kind for services of any kind rendered to the Company or its Subsidiaries, and are outside the scope of your employment
or service contract, if any; and
e.
neither the Company nor any Subsidiary or Affiliate shall be liable for any foreign exchange rate
fluctuation between your local currency and the United States Dollar that may affect the value of the Option or of any amounts
due to you pursuant to the exercise of the Option or the subsequent sale of any Shares acquired upon exercise.
12. Personal Information. The Company and its Subsidiaries may collect, store, disclose, use, or otherwise process
certain personal information about you for the purpose of managing and administering the Plan, such as your name, home address
and telephone number, date of birth, social security number or other employee identification number, salary, nationality, job title,
any shares or directorships held in the Company, details of all Options and other equity awards or any other entitlement to shares
awarded, canceled, purchased, vested, unvested or outstanding in your favor (“Data”). The Company and/or its Subsidiaries may
disclose Data among themselves as necessary for the purpose of implementation, administration and management of your
participation in the Plan and
6
the Company and/or any of its Subsidiaries may each further disclose Data to any third parties assisting the Company in the
implementation, administration and management of the Plan, including E*Trade Financial Services, Inc. and the Plan
recordkeeper. These recipients may be located throughout the world, including the United States. You understand and agree that
these parties may receive, possess, use, retain, transfer, and otherwise process the Data, in electronic or other form, for the
purposes of implementing, administering and managing your participation in the Plan, including any requisite transfer or
disclosure of such Data as may be required for the administration of the Plan and/or the subsequent holding of shares on your
behalf to a broker or other third party with whom you may elect to deposit any shares acquired pursuant to the Plan.
Notwithstanding anything to the contrary in this Section 12, you acknowledge and agree that the Company and its Subsidiaries
may also collect, store, use, disclose, and otherwise process your Data where such processing is necessary to comply with a legal
obligation, for the Company or its Subsidiaries’ legitimate business purposes, or with your consent if applicable law requires
consent. You may, at any time, request to access, correct, delete or restrict processing of your Data by contacting the Company in
writing. Applicable law may allow or require the Company to refuse to provide you with access to, delete or restrict processing of
some or all of the Data that the Company or its Subsidiaries hold about you, or the Company or its Subsidiaries may have
destroyed, erased, or made such Data anonymous in accordance with applicable record retention obligations and practices. If the
Company cannot provide you with access to, delete or restrict processing of your Data, the Company will inform you of the
reasons why, subject to any legal or regulatory restrictions. For more information on the processing of your Data, contact your
human capital representative.
13. Other Employee Benefits. Except as specifically provided otherwise in any relevant employee benefit plan,
program, or arrangement, the Option evidenced hereby is not part of normal or expected compensation for purposes of
calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement
benefits or similar payments.
14. Electronic Delivery. BY YOUR ELECTRONIC ACCEPTANCE OF THIS AWARD, YOU HEREBY CONSENT
TO ELECTRONIC DELIVERY OF THE PLAN, AND ANY DISCLOSURE OR OTHER DOCUMENTS RELATED TO THE
PLAN, INCLUDING FUTURE AWARD DOCUMENTS (COLLECTIVELY, THE “PLAN DOCUMENTS”). THE COMPANY
MAY DELIVER THE PLAN DOCUMENTS ELECTRONICALLY TO YOU BY E-MAIL, BY POSTING SUCH
DOCUMENTS ON ITS INTRANET WEBSITE OR BY ANOTHER MODE OF ELECTRONIC DELIVERY AS
DETERMINED BY THE COMPANY IN ITS SOLE DISCRETION. YOU ACKNOWLEDGE THAT YOU ARE ABLE TO
ACCESS, VIEW AND RETAIN AN E-MAIL ANNOUNCEMENT INFORMING YOU THAT THE PLAN DOCUMENTS
ARE AVAILABLE IN EITHER HTML, PDF OR SUCH OTHER FORMAT AS THE COMPANY DETERMINES IN ITS SOLE
DISCRETION. If you do not accept the Award documents within ninety (90) days of the Grant Date, the Award documents will
be null and void following the ninetieth (90th) day after the Grant date and you will have no right or claim to the Award.
15. Notices. Any notice required or permitted to be given hereunder shall be in writing and shall be given by hand
delivery, by e-mail, by facsimile, or by first class registered or certified mail, postage prepaid, addressed, if to the Company, to its
Corporate Secretary, and if to you, to your address now on file with the Company, or to such other address as either may
designate in writing. Any notice shall be deemed to be duly given as of the date delivered in the case of personal delivery,
7
e-mail, or facsimile, or as of the second day after enclosed in a properly sealed envelope and deposited, postage prepaid, in a
United States post office, in the case of mailed notice.
16. Amendment. Except as provided herein, the Award Documents may not be amended or otherwise modified unless
evidenced in writing and signed by the Company and you.
17. Relationship to Plan. Nothing in the Award Documents shall alter the terms of the Plan. If there is a conflict between the
terms of the Plan and the terms of the Award Documents, the terms of the Plan shall prevail.
18. Construction; Severability. The section headings contained herein are for reference purposes only and shall not in any
way affect the meaning or interpretation of the Award Documents. The invalidity or unenforceability of any provision of the
Award Documents shall not affect the validity or enforceability of any other provision hereof, and each other provision hereof
shall be severable and enforceable to the extent permitted by law.
19. Waiver. Any provision contained in the Award Documents may be waived, either generally or in any particular instance,
by the Administrator appointed under the Plan, but only to the extent permitted under the Plan.
20. Binding Effect. The Award Documents shall be binding upon and inure to the benefit of the Company and to you and
your respective heirs, executors, administrators, legal representatives, successors and assigns.
21. Rights to Employment or Service. Nothing contained in the Award Documents shall be construed as giving you any right
to be retained in the employ or service of the Company or any of its Subsidiaries and the Award Documents are limited solely to
governing your rights and obligations with respect to your Option.
22. Governing Law. The Award Documents shall be governed by and construed in accordance with the laws of the State
of Delaware, without regard to the choice of law principles thereof.
23. Company Policies to Apply; Potential Clawback. The sale of any shares of Common Stock received as a result of the
exercise of your Option is subject to the Company’s policies regulating securities trading by employees, all relevant federal and
state securities laws and the listing requirements of any stock exchange on which the shares of the Company’s Common Stock are
then traded. In addition, your participation in the Plan and your receipt of remuneration as a result of the Option granted to you is
subject in all respects to any laws, regulations or Company compensation policies related to clawback that may be in effect from
time to time.
24. Section 409A Compliance. The Option granted hereunder are intended to be exempt from the requirements of Section
409A, and the Award Documents shall be interpreted and administered in a manner consistent with such intent. You shall be
solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on you in connection with the
Option granted hereunder (including any taxes and penalties under Section 409A), and neither the Company nor any of its
affiliates shall have any obligation to indemnify or otherwise hold you harmless from any or all of such taxes or penalties.
8
25. Disqualifying Disposition. If the Option granted hereunder is an “incentive stock option” within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended, and you dispose of any of the Shares acquired upon exercise of the
Option within two (2) years from the date the Option was granted or within one (1) year after the date of exercise of the Option,
then, in order to provide the Company with the opportunity to claim the benefit of any income tax deduction, you shall promptly
notify the Company of the dates of acquisition and disposition of such Shares, the number of Shares so disposed of, and the
consideration, if any, received for such Shares.
26. Language. If you have received any of the Award Documents or any other document related to the Option and/or the Plan
translated into a language other than English, and if the meaning of the translated version is different than the English version, the
English version will control.
27. Appendix. Notwithstanding any provisions in the Award Agreement and these Option Award Terms and Conditions, the
Option shall be subject to any special terms and conditions set forth in the Appendix for your country of residence. Moreover, if
you relocate to one of the countries included in the Appendix during the life of the Option, the special terms and conditions for
such country shall apply to you, to the extent the Company determines that the application of such terms and conditions is
necessary or advisable in order to comply with the relevant laws concerning the issuance or sale of Shares or to facilitate the
administration of the Plan. The Appendix constitutes part of the Award Documents.
9
Appendix to the Option Award Terms and Conditions
This Appendix to the Option Award Terms and Conditions includes additional terms and conditions that govern participation in
the ServiceSource International, Inc. 2020 Equity Incentive Plan (the “Plan”) if you reside in one of the countries listed herein.
This Appendix forms part of the Stock Option Award Agreement (including the accompanying Option Award Terms and
Conditions) (the “Award Documents”). Capitalized terms used but not defined herein shall have the meanings ascribed to them in
the Award Documents and the Plan.
This Appendix also includes information regarding exchange controls and certain other issues of which you should be aware with
respect to your participation in the Plan. The information is based on the securities, exchange control and other laws in effect in
the respective countries as of 2020. Such laws are often complex and change frequently. As a result, the Company strongly
recommends that you not rely on the information noted herein as the only source of information relating to the consequences of
your participation in the Plan because the information may be out of date at the time you exercise the Option and acquire Shares
or when you subsequently sells Shares acquired under the Plan.
In addition, the information contained herein is general in nature and may not apply to your situation, and the Company is not in
a position to assure you of any particular result. Accordingly, you are advised to seek appropriate professional advice as to how
the relevant laws in your country may apply to your situation.
Finally, if you are a citizen or resident of a country other than the one in which you is currently working, transfer employment to
another country after the Option is granted, or are considered a resident of another country for local law purposes, the information
contained herein may not be applicable to you. In addition, the Company shall, in its sole discretion, determine to what extent the
terms and conditions included herein will apply to you.
CANADA
Terms and Conditions
For Participants who are directors, the following terms and conditions apply to the Award Documents and the Plan:
Termination of Continuous Status as a Director. The following provision replaces Section 11(c) of the Option Award
Terms and Conditions:
Your continuous status as a director shall be considered terminated for vesting and other purposes as of the earlier of (a) the date
on which your continuous status as a director is terminated; (b) the date that you receive notice of termination of your continuous
status as a director from the Company; or (c) the date that you are no longer actively serving as a director of the Company,
regardless of any notice period or period of pay in lieu of such notice required under applicable employment law; the Board shall
have the exclusive discretion to determine when your continuous status as a director is terminated for purposes of the Option
(including
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whether you may still be considered to be actively serving as a director while on a leave of absence).
For Participants who are employees, the following additional terms and conditions apply to the Award Documents and
Plan:
Termination of Engagement as a Service Provider. The following provision replaces Section 11(c) of the Option Award
Terms and Conditions:
Your engagement as an employee or consultant shall be considered terminated for vesting and other purposes as of the earlier of
(a) the date that you are terminated; (b) the date that you receive notice of termination from the Company or its Subsidiary; or (c)
the date that you are no longer actively providing services to the Company or its Subsidiaries, regardless of any notice period or
period of pay in lieu of such notice required under applicable employment law; the Administrator shall have the exclusive
discretion to determine when your engagement as an employee or a consultant is terminated for purposes of the Option (including
whether you may still be considered to be actively providing services while on a leave of absence).
Notifications
Securities Law Information. You are permitted to sell Shares acquired under the Plan, provided that the resale of the
Shares takes place outside of Canada through the facilities of a stock exchange on which the shares are listed. The Shares are
currently listed on the NASDAQ Global Select Market.
IRELAND
Notifications
Director Notification Obligation. You acknowledge that if you are a director, shadow director or secretary of the
Company’s Irish Subsidiary, with interest representing 1% or more of the Company’s voting share capital, you must notify the
Irish Subsidiary in writing within five business days of receiving or disposing of an interest in the Company (e.g., the Option,
Shares, etc.), or within five business days of becoming aware of the event giving rise to the notification requirement or within
five business days of becoming a director or secretary if such an interest exists at the time. This notification requirement also
applies with respect to the interests of your spouse or children under the age of 18 (whose interests will be attributed to you if you
are a director, shadow director or secretary).
JAPAN
Notifications
Foreign Assets Reporting Obligation. You are required to report to the tax authorities on an annual basis the details of any
assets held outside of Japan as of December 31 (including Shares acquired under the Plan), to the extent such assets have a total
net fair market value exceeding ¥100 million. Such report will be due by March 15 each year. You should consult
11
with your personal tax advisor to determine if the reporting obligation applies to your personal situation.
MALAYSIA
Notifications
Insider Trading Information. You understand that Malaysian insider-trading rules exist, which may impact your
acquisition or disposal of Shares under the Plan. Under the Malaysian insider-trading rules, you are prohibited from acquiring or
disposing of Shares or rights to acquire Shares (e.g., the Option) when in possession of information which is not generally
available, and which you know or should know will have a material effect on the price of Shares once such information is
generally available.
Director Notification Obligation. If you are a director of a Subsidiary in Malaysia, you are subject to certain notification
requirements under the Malaysian Companies Act. Among these requirements is an obligation to notify the Malaysian Subsidiary
in writing when you receive an interest in the Company (e.g., the Option, Shares). In addition, you must notify the Malaysian
Subsidiary when you sell Shares of the Company (including when you sell Shares acquired under the Plan). These notifications
must be made within 14 days of acquiring or disposing of any interest in the Company.
SINGAPORE
Notifications
Director Notification Obligation. You acknowledge that if you are a director, associate director or shadow director of a
Singapore Subsidiary, you are subject to certain notification requirements under the Singapore Companies Act. Among these
requirements is an obligation to notify the Singapore Subsidiary in writing when you receive an interest (e.g., the Option or
Shares) in the Company or any Subsidiary within two business days of (i) its acquisition or disposal, (ii) any change in previously
disclosed interest (e.g., when the Shares are sold), or (iii) becoming a director.
Securities Law Information. You understand that the Option is being granted pursuant to the “Qualifying Person”
exemption under section 273(1)(f) of the Singapore Securities and Futures Act (Chapter 289, 2006 Ed.) (“SFA”). You further
understand that neither the Plan nor the Award Documents have been lodged or registered as a prospectus with the Monetary
Authority of Singapore. You understand and acknowledge that the Option is subject to section 257 of the SFA and you will not be
able to make any subsequent sale of Shares in Singapore, or any offer of such subsequent sale of the Shares acquired upon
exercise, unless such sale or offer in Singapore is made pursuant to the exemptions under Part XIII Division (1) Subdivision (4)
(other than section 280) of the SFA.
Insider Trading Information. You should be aware of the Singapore insider trading rules, which may impact the
acquisition or disposal of Shares or rights to Shares under the Plan. Under
12
the Singapore insider trading rules, you are prohibited from selling Shares when in possession of information which is not
generally available and which you know or should know will have a material effect on the price of Shares once such information
is generally available.
UNITED KINGDOM
Terms and Conditions
For Participants who are employees, the following additional terms and conditions apply to the Award Documents and
the Plan. These terms and conditions, as well as the provisions related to withholding contained in the Award Documents and the
Plan, do not apply you are a consultant who is self-employed.
Tax Reporting and Payment Liability. The following provision supplements Sections 9 and 10 of the Option Award Terms
and Conditions:
You agree that if the Company or its Subsidiaries do not withhold or otherwise collect the full amount of income tax that
you owe due to the exercise of the Option or release, assignment or cancellation of the Option (the “Chargeable Event”) from you
within ninety (90) days after the Chargeable Event or such other period as required by U.K. law (the “Due Date”), then the
amount that should have been withheld or collected shall constitute a loan owed by you to the Company, effective on the Due
Date. You agree that the loan will bear interest at the then-current Official Rate of Her Majesty’s Revenue & Customs (“HMRC”)
and it will be immediately due and repayable by you and the Company and/or its Subsidiaries may recover it at any time
thereafter by any of the means referred to in Section 10 of the Option Award Terms and Conditions or Section 9.1 of the Plan.
Notwithstanding the foregoing, if you are an executive officer or director (as within the meaning of the Exchange Act),
the terms of the provision above will not apply. In the event that you are an executive officer or director and income tax is not
collected from or paid by you by the Due Date, the amount of any uncollected income tax may constitute a benefit to you on
which additional income tax and National Insurance Contributions (“NICs”) (including employer’s NICs, as defined below) may
be payable. You acknowledge that you will be responsible for reporting and paying any income tax due on this additional benefit
directly to HMRC under the self-assessment regime and for reimbursing the Company or its Subsidiaries (as applicable) for the
value of any employee NICs due on this additional benefit which the Company or the Subsidiaries may recover from you by any
of the means referred to in Section 10 of the Option Award Terms and Conditions or Section 9.1 of the Plan.
Joint Election. As a condition of participation in the Plan, you agree to accept any liability for secondary Class 1 NICs
which may be payable by the Company and/or its Subsidiaries in connection with the exercise of the Option and any event giving
rise to Tax-Related Items (the “Employer’s NICs”). Without limitation to the foregoing, you agree to enter into a joint election
with the Company (the “Joint Election”), the form of such Joint Election being formally approved by HMRC, and to execute any
other consents or elections required to accomplish the transfer of the Employer’s NICs to you. You further agree to execute such
other
13
joint elections as may be required between you and any successor to the Company and/or any of its Subsidiaries. You further
agree that the Company and/or its Subsidiaries may collect the Employer’s NICs from you by any of the means set forth in
Section 10 of the Option Award Terms and Conditions or Section 9.1 of the Plan.
If you do not enter into a Joint Election, if approval of the Joint Election has been withdrawn by HMRC or if such Joint
Election is jointly revoked by you and the Company or its Subsidiary, as applicable, the Company, in its sole discretion and
without any liability to the Company or its Subsidiaries, may choose not to issue or deliver any shares to you upon exercise of the
Option.
(Joint Election Form below)
14
SERVICESOURCE INTERNATIONAL, INC.
2020 EQUITY INCENTIVE PLAN
Important Note on the Joint Election to Transfer
Employer National Insurance Contributions
As a condition of participation in the ServiceSource International, Inc. 2020 Equity Incentive Plan (the “Plan”) and the
Option that has been granted to you by ServiceSource International, Inc. (the “Company”), you are required to enter into a joint
election to transfer to you any liability for employer national insurance contributions (the “Employer NICs”) that may arise in
connection with the grant of the Option or in connection with future options granted to you by the Company under the Plan (the
“Joint Election”).
If you do not agree to enter into the Joint Election, the grant of the option will be worthless and you will not be
able to exercise the Option or receive any benefit in connection with the Option.
By entering into the Joint Election:
•
•
you agree that any liability for Employer’s NICs that may arise in connection with or pursuant to the exercise of
the Option (and the acquisition of Shares) or other taxable events in connection with the Option will be transferred
to you; and
you authorize the Company and/or your employer to recover an amount sufficient to cover this liability by any
method set forth in the Option Agreement and/or the Joint Election.
By accepting the Option through the Company’s online acceptance procedure, you are agreeing to be bound by the terms of
the Joint Election.
Please read the terms of the Joint Election carefully before
accepting the Award Agreement
and the Joint Election.
Please print and keep a copy of the Joint Election
for your records.
15
SERVICESOURCE INTERNATIONAL, INC.
2020 EQUITY INCENTIVE PLAN
Election To Transfer the Employer's National Insurance Liability to the Employee
This Election is between:
A.
B.
The individual who has obtained authorized access to this Election (the “Employee”), who is employed by one of
the employing companies listed in the attached schedule (the “Employer”) and who is eligible to receive stock
options and/or restricted stock units (“Awards”) pursuant to the ServiceSource International, Inc. 2020 Equity
Incentive Plan (the “Plan”), and
ServiceSource International, Inc., with its registered offices at 707 17 Street, Suite 2500, Denver, Colorado
80202, U.S.A. (the “Company”), which may grant Awards under the Plan and is entering into this Election on
behalf of the Employer.
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I. INTRODUCTION
1.
This Election relates to the employer's secondary Class 1 National Insurance Contributions (the “Employer’s
Liability”) which may arise on the occurrence of a chargeable event within paragraph 3B(1A)(a) of Schedule 1 of
the Social Security Contributions and Benefits Act 1992 (“SSCBA”), including:
(a)
(b)
(c)
(d)
the acquisition of securities pursuant to stock options and/or restricted stock units (within section 477(3)(a)
of the Income Tax (Earnings and Pensions) Act 2003 (“ITEPA”));
the assignment (if applicable) or release of the stock options and/or restricted stock units (within section
477(3)(b) of ITEPA);
the receipt of any other benefit in money or money’s worth in connection with the stock options and/or
restricted stock units (within section 477(3)(c) of ITEPA); and/or
post-acquisition charges relating to shares acquired under the stock options and/or restricted stock units
(within section 427 of ITEPA), each a “Chargeable Event.” This Election is made in accordance with
paragraph 3B(1) of Schedule 1 to SSCBA.
2.
3.
4.
This Election applies to all Awards granted to the Employee under the Plan on or after the Grant Date up to the
termination date of the Plan.
This Election does not apply in relation to any liability, or any part of any liability, arising as a result of regulations
being given retrospective effect by virtue of section 4B(2) of either the SSCBA, or the Social Security
Contributions and Benefits (Northern Ireland) Act 1992.
This Election does not apply to the extent that it relates to relevant employment income which is employment
income of the earner by virtue of Chapter 3A of
16
Part VII of ITEPA (employment income: securities with artificially depressed market value).
II. THE ELECTION
The Employee and the Company jointly elect that the entire liability of the Employer to pay the Employer’s Liability on the
Chargeable Event is hereby transferred to the Employee. The Employee understands that, by clicking the [“ACCEPT” box], he or
she will become personally liable for the Employer’s Liability covered by this Election.
III. PAYMENT OF THE EMPLOYERS’ LIABILITY
1.
The Employee hereby authorizes the Company and/or the Employer to collect the Employer's Liability from the
Employee at any time after the Chargeable Event:
(a)
(b)
(c)
(d)
by deduction from salary or any other payment payable to the Employee at any time on or after the date of
the Chargeable Event; and/or
directly from the Employee by payment in cash or cleared funds; and/or
by arranging, on behalf of the Employee, for the sale of some of the securities which the Employee is
entitled to receive in respect of the Awards; and/or
by any other means specified in the applicable award agreement.
2.
3.
The Company hereby reserves for itself and the Employer the right to withhold the transfer of any securities to the
Employee in respect of the Awards until full payment of the Employer's Liability is received.
The Company agrees to remit the Employer’s Liability to HM Revenue & Customs on behalf of the Employee
within 14 days after the end of the UK tax month during which the Chargeable Event occurs (or within 17 days if
payments are made electronically).
IV. DURATION OF ELECTION
1.
2.
The Employee and the Company agree to be bound by the terms of this Election regardless of whether the
Employee is transferred abroad or is not employed by the Employer on the date on which the Employer’s Liability
becomes due.
This Election will continue in effect until the earliest of the following:
(a)
(b)
(c)
(d)
the Employee and the Company agree in writing that it should cease to have effect;
on the date the Company serves written notice on the Employee terminating its effect;
on the date HM Revenue & Customs withdraws approval of this Election; or
after due payment of the Employer’s Liability in respect of the entirety of the Awards to which this
Election relates or could relate, such that the Election ceases to have effect in accordance with its terms.
17
Acceptance by the Employee
The Employee acknowledges that, by clicking on the [“ACCEPT” box], the Employee agrees to be bound by the terms of
this Election.
18
SCHEDULE OF EMPLOYER COMPANIES
The following are employer companies to which this Election may apply:
SSI Europe UK Limited
Registered Office:
5 New Street Square, London, United Kingdom, EC4A 3TW
Company Registration Number:
7253138
Corporation Tax District:
CT Operations (Large & Complex CRM)
16 North Government Buildings
Ty Glas
Llanishen
Cardiff CF14 5FP
Corporation Tax Reference:
42508 00092
PAYE District:
Customer Operations Employer Office
BP4009
Chillingham House
Benton Park View
Newcastle upon Tyne NE98 1ZZ
PAYE Reference:
083/WA49060
19
Exhibit 10.3
TRANSITION AGREEMENT
THIS TRANSITION AGREEMENT (this “Transition Agreement”) is made as of November 13, 2020 (the “Effective Date”), by and between
Richard Walker (“Employee”) and ServiceSource International, Inc. (the “Company”).
WHEREAS, Employee has resigned his employment with the Company without Good Reason (as defined in Employee’s Employment Agreement
with the Company dated as of November 12, 2018 (the “Employment Agreement”)) and the Company and Employee have mutually agreed that
Employee’s final date of employment shall be December 15, 2020 (the “End Date”); and
WHEREAS, the Company and Employee desire to transition Employee’s job responsibilities as needed by the Company; and
WHEREAS, Employee and the Company desire to enter into an agreement whereby Employee will continue to perform services for the Company
and cooperate with the Company throughout the transition process.
NOW, THEREFORE, the parties agree as follows, in consideration of the mutual covenants and obligations contained herein, and intending to be
legally held bound:
1. Employee’s Duties. Employee agrees to make himself reasonably available by phone or other method reasonably requested by the Company
through the End Date or such earlier time specified by the Company (the “Transition Period”) to answer questions and provide such transition support and
input on the Company’s business as the Company’s Board of Directors, Chief Executive Officer, or members of the finance and accounting team may
reasonably request from time to time. Following the Transition Period, Employee shall cease to be employed by the Company and any affiliate of the
Company, and shall remain a member of the Company’s Board of Directors through the end of the current term or until his earlier resignation or removal.
Employee agrees to cooperate with and assist the Company after the Transition Period with any investigation, lawsuit, arbitration, or other proceeding to
which the Company is subjected. Employee will make himself available for preparation for, and attendance of, hearings, proceedings or trial, including
pretrial discovery and trial preparation. Employee further agrees to perform all acts and execute any documents that may be necessary to carry out the
provisions of this Section.
2. Employee’s Compensation. During the Transition Period, (a) Employee’s employee benefits will remain at their present levels as permitted by
the terms of any applicable employee benefit plans and the Company’s Amended and Restated 2011 Equity Incentive Plan and 2020 Equity Incentive Plan,
as applicable, and (b) the Company will continue to pay Employee’s base salary at the rate of $400,000 per annum in accordance with the Company’s
payroll practices. Following the conclusion of the Transition Period, and contingent on Employee’s timely execution, delivery, and non-revocation of the
Release as set forth in Section 5 below and all other requirements of this Transition Agreement, the Company will pay Employee a one-time bonus in the
amount of $150,000, less applicable tax and other required withholdings (the “Transition Bonus”).
3. Other Agreements.
(a) Nothing in this Transition Agreement changes Employee’s continuing obligations under (i) the Employment Agreement and (ii) the
Proprietary Information and Invention Assignment Agreement executed by Employee in favor of the Company on or about November 14, 2018 (the
“Confidential Information Agreement”). Notwithstanding anything to the contrary, the Company reserves the right to terminate Employee’s employment
for: (1) Cause (as defined in the Employment Agreement) as result of Employee’s actions from and after the Effective Date and through the End Date or
because of the Company learning of any facts or circumstances that constitute, under clauses (i)-(v) of Section 9(c)(i) of the Employment Agreement,
Cause; or (2) material breach of Employee’s obligations under this Transition Agreement. In the event that Employee’s employment is terminated before
the End Date as set forth in this Section 3(a), the Transition Bonus shall not be owed to Employee.
4. Initial Release.
(a) Employee on his own behalf and on behalf of anyone acting by, under or through Employee including his heirs, assigns, executors,
agents and representatives hereby generally releases and discharges the Company and its predecessors, successors (by merger or otherwise), parents,
subsidiaries, affiliates and assigns, together with each and every of their present, past and future officers, managers, directors, stockholders, members,
general partners, limited partners, employees and agents and the successors, assigns, heirs and executors of same (herein collectively referred to as the
“Releasees”) from any and all suits, causes of action, complaints, obligations, demands, common law or statutory claims of any kind, whether in law or in
equity, direct or indirect, known or unknown (hereinafter “Claims”), which Employee ever had or now has against the Releasees, or any one of them
occurring up to and including the Effective Date including, but not limited to, any Claims arising out of Employee’s employment by the Company or the
termination thereof and Employee’s change of responsibilities.
(b) Notwithstanding Section 4(a), Employee is not releasing Claims to enforce this Transition Agreement. Further, this Agreement does not
prohibit Employee from filing a claim or participating in an investigation with the Equal Employment Opportunity Commission or similar state agency, but
Employee waives any right to personal recovery in connection with such a claim.
(c) Employee acknowledges and agrees that this Transition Agreement waives all claims under the Age Discrimination in Employment Act
of 1967 as amended by the Older Workers Benefit Protection Act (“OWBPA”) (the Age Discrimination in Employment Act of 1967 and the OWBPA shall
be referred to collectively as the “ADEA”) and that this waiver of ADEA claims (the “ADEA Waiver”) is knowing and voluntary. Employee specifically
agrees that: (i) this Transition Agreement and the ADEA Waiver are written in a manner which he understands; (ii) the ADEA Waiver specifically relates to
rights or claims under the ADEA; (iii) Employee waives rights or claims under the ADEA in exchange for consideration in addition to anything of value to
which he is already entitled; and (iv) Employee is hereby advised in writing by this Transition Agreement to consult with an attorney prior to executing this
Transition Agreement.
5. Post-Transition Period Release. Employee hereby agrees to execute and deliver to the Company the Release in substantially the form as attached
to Exhibit A (the “Release”) within thirty (30) days following the completion of the Transition Period, and provided that Employee (a) reasonably performs
his obligations under Section 1, (b) has not and does not breach the Confidential Information Agreement or commit Cause prior to or during Transition
Period and (c) Employee does not revoke the Release, Employee shall receive the Transition Bonus.
6. Severability. The provisions contained in this Transition Agreement will each constitute a separate agreement independently supported by good
and adequate consideration, and will each be severable from the other provisions of the Agreement. If any court determines that any term, provision, or
portion of this Transition Agreement is void, illegal, or unenforceable, the other terms, provisions and portions of this Transition Agreement will remain in
full force and effect, and the terms, provisions, and portions that are determined to be void, illegal, or unenforceable will either be limited so that they will
remain in effect to the extent permissible by law.
7. Entire Agreement. This Transition Agreement sets forth the entire understanding between Employee and the Company regarding the subject
matter of this Transition Agreement and supersede all prior agreements and communications, whether oral or written, between Employee and the Company
regarding the subject matter of this Transition Agreement. This Transition Agreement will not be modified except by a written agreement between the
parties.
8. Governing Law, Waiver of Jury Trial. This Agreement shall be governed by the laws of the State of Colorado applicable to contracts entered into
by residents of Colorado and fully performed in Colorado. EACH OF THE PARTIES HERETO HEREBY VOLUNTARILY AND IRREVOCABLY
WAIVES TRIAL BY JURY IN ANY ACTION OR OTHER PROCEEDING BROUGHT IN CONNECTION WITH THIS AGREEMENT OR ANY OF
THE TRANSACTIONS CONTEMPLATED HEREBY.
2
9. Review Period; Advice of Counsel; Revocation Period. Employee acknowledges and understands that he is acting of his own free will,
that he has been afforded a reasonable time to read and review the terms of this Transition Agreement, and that he is voluntarily entering into this
Transition Agreement with full knowledge of its provisions and effects. Employee intends that this Transition Agreement shall not be subject to
any claim for duress. Employee further acknowledges that he has been given at least twenty-one (21) days within which to consider this Transition
Agreement and that if he decides to execute this Transition Agreement before the twenty-one day period has expired, he does so voluntarily and
waives the opportunity to use the full review period. Employee agrees that any changes to the Transition Agreement, including material changes,
will not restart the review period. Employee further acknowledges and understands that he has seven (7) days following his execution of this
Transition Agreement (the “Revocation Period”) to revoke his acceptance of the Agreement, with the Agreement not becoming effective until the
Revocation Period has expired, and that, to be effective, any revocation must be in writing, signed by Employee, and received by the Company’s
Chief Employee Officer prior to the expiration of the Revocation Period. This Transition Agreement shall not become effective until the seven
(7) day Revocation Period has expired without Employee revoking his acceptance.
SIGNATURE PAGE FOLLOWS
3
IN WITNESS WHEREOF, Employee, acknowledging that he is acting of his own free will after having had the opportunity to seek the advice of
counsel and a reasonable period of time to consider the terms of this Transition Agreement, and the Company, have caused the execution of this Transition
Agreement as of this day and year written below.
Employee:
Richard Walker
Signed: /s/ RICHARD G. WALKER
Company:
ServiceSource International, Inc.
Signed: /s/ PATRICIA ELIAS
Name: Patricia Elias
Title: General Counsel
4
EXHIBIT A
RELEASE
THIS RELEASE (this “Agreement”) is made on the 15 day of December, 2020 by and between Richard Walker (“Employee”), and ServiceSource
th
International, Inc., a Delaware corporation (the “Company”). Employee and the Company are sometimes individually referred to in this Agreement as a
“Party” and collectively as the “Parties.”
WHEREAS, the Company desires to provide to Employee certain severance benefits in conjunction with the termination of Employee’s employment
with the Company as described in the Transition Agreement between the Company and Employee dated November 13, 2020 (the “Transition Agreement”)
on the condition that Employee executes and does not revoke this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and mutual covenants and obligations contained herein, Employee and the
Company, each intending to be legally held bound, agree as follows:
1. Employee’s Last Day of Employment. Employee and the Company acknowledge that Employee’s last day of employment with the Company
was December 15, 2020 (the “End Date”).
2. Consideration. In consideration for a release of claims and other promises in this Release Agreement and provided that Employee has not
revoked this Agreement as described in Section 21, the Company shall pay Employee a one-time bonus in the amount of $150,000 (less applicable taxes
and withholdings) (the “Transition Bonus”):
4. Employee’s Release. Subject to Section 5, Employee, for himself and any one acting by, under or through Employee, hereby generally forever
and irrevocably releases and discharges the Company and its predecessors, successors (by merger or otherwise), parents, subsidiaries, affiliates and assigns,
together with each and every present, past and future officers, directors, members, stockholders, general partners, limited partners, employees and agents of
each of the foregoing and the heirs and executors of same (collectively, the “Releasees”) from any and all suits, causes of action, complaints, obligations,
demands and common law or statutory claims of any kind, whether in law or in equity, direct or indirect, known or unknown, which Employee ever had or
now has against the Releasees, or any one or more of them arising out of or relating to any matter, thing or event occurring up to and including the date of
this Agreement (collectively, “Claims”). This release specifically includes, but is not limited to:
(a) any and all Claims for wages and benefits including, without limitation, salary, commissions, stock options, stock, royalties, license fees,
health and welfare benefits, severance pay, vacation pay, and bonuses (except to the extent set forth in Section 2 and to the extent such Claims cannot be
waived by law);
(b) any and all Claims for wrongful discharge, breach of contract, whether express or implied, and for breach of implied covenant of good
faith and fair dealing;
(c) any and all Claims for alleged employment discrimination, harassment or retaliation on the basis of race, color, religion, sex, national
origin, genetic information, veteran status, disability and/or handicap, and ancestry in violation of any federal, state or local statute, ordinance, judicial
precedent or executive order, including but not limited to Claims for discrimination under the following statutes: Title VII of the Civil Rights Act of 1964,
42 U.S.C. § 2000e, et seq.; the Civil Rights Act of 1866, 42 U.S.C. § 1981; the Civil Rights Act of 1991; the Rehabilitation Act of 1972, as amended, 29
U.S.C. § 701, et seq.; the Americans with Disabilities Act, 42 U.S.C. § 12101, et seq.; the Genetic Information Non-Discrimination Act, 42 U.S.C. §
2000ff, et seq., the Pennsylvania Human Relations Act; the Family and Medical Leave Act of 1993, 29 U.S.C. § 2601, et seq.; the Fair Labor Standards
Act, as amended, 29 U.S.C. § 201, et seq.; the Fair Credit Reporting Act, as amended, 15 U.S.C. § 1681, et seq.; and the Employee Retirement Income
Security Act of 1974, as amended, 29 U.S.C. § 1000, et seq. or any comparable or similar state statute or local ordinance;
(d) any and all Claims under the Age Discrimination in Employment Act of 1967 as amended by the Older Workers Benefit Protection Act
(“OWBPA”) (the Age Discrimination in Employment Act of 1967 and the OWBPA shall be referred to collectively as the “ADEA”);
(e) any and all Claims under any federal or state statute relating to employee benefits or pensions;
(f) any and all Claims in tort, including but not limited to, any claims for wrongful termination, assault, battery, misrepresentation,
defamation, interference with contract or prospective economic advantage, intentional or negligent infliction of emotional distress, duress, loss of
consortium, invasion of privacy and negligence;
(g) any and all other Claims under federal, state or local laws; and
(h) any and all Claims for damages of any kind;
(i) any and all Claims for attorneys’ fees and costs.
5. Exceptions to Claims. Notwithstanding Section 4, Employee is not releasing Claims to enforce this Agreement. Further, this Agreement does
not prohibit Employee from filing a claim or participating in an investigation with the Equal Employment Opportunity Commission or similar state agency,
but Employee waives any right to personal recovery in connection with such a claim.
6. ADEA Acknowledgement. Employee acknowledges and agrees that his waiver of Claims under the ADEA (the “ADEA Waiver”) is knowing
and voluntary, and specifically agrees that: (a) this Agreement and the ADEA Waiver are written in a manner which he understands; (b) the ADEA Waiver
specifically relates to rights or claims under the ADEA; (c) Employee waives rights or claims under the ADEA in exchange for consideration in addition to
anything of value to which he is already entitled; and (d) Employee is hereby advised in writing by this Agreement to consult with an attorney prior to
executing this Agreement.
7. Additional Acknowledgment. Employee understands that the release of Claims extends to all of the aforementioned Claims and potential Claims
which arose on or before the date of this Agreement, whether now known or unknown, suspected or unsuspected, and that the scope of this release
constitutes an essential term of this Agreement. Employee further understands and acknowledges the significance and consequences of this Agreement and
of each specific release and waiver, and expressly consents that this Agreement shall be given full force and effect to each and all of its express terms and
provisions, including those relating to unknown and uncompensated Claims, if any, as well as those relating to any other Claims specified herein.
8. No Disparagement; No Application. Employee will not disparage any Releasees or otherwise take any action that could reasonably be expected
to adversely affect the personal or professional reputation of any Releasee. The current members of the Company’s Board of Directors and the Company’s
current Chief Financial Officer, Chief Commercial Officer and General Counsel will not, and will not direct any other person to, disparage Employee or
otherwise take any action that could reasonably be expected to adversely affect Employee’s personal or professional reputation. The Company will provide
only neutral reference information (date of hire and position) to inquiries that are directed to the Company’s Human Resources department.
9. Restrictive Covenants. Employee acknowledges that: (a) he continues to be bound by and will comply with all of his post-employment
obligations to the Company under the Proprietary Information and Invention Assignment Agreement executed by Employee in favor of the Company on
November 14, 2018 (the “Confidential Information Agreement”) and Section 8 (Proprietary and Confidential Information (Including Trade Secrets) of the
Employment Agreement; and (b) nothing in this Agreement relieves Employee from his continuing obligations to the Company under the Confidential
Information Agreement and Section 8 of the Employment Agreement between Employee and the Company dated as of November 12, 2018 (the
“Employment Agreement”). Pursuant to the federal Defend Trade Secrets Act of 2016 (the “DTSA”), the Company gives notice to the Employee that the
Employee has immunity for the confidential disclosure of a trade secret when reporting a suspected violation of law
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to the government or when making a disclosure in a lawsuit alleging retaliation, provided that such disclosure is made in accordance with the DTSA. The
Employee will not be held criminally or civilly liable under federal or state trade secret law for the disclosure of a trade secret that is made: (i) in
confidence to a federal, state, or local government official either directly or indirectly, or to an attorney, solely for the purpose of reporting or investigating
a suspected violation of law; or (ii) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. In addition, if
the Employee files a retaliation lawsuit against the Company for reporting a suspected violation of law, the Employee may disclose the trade secret to his
attorney and use the trade secret information in the court proceeding, so long as the Employee (i) files any document containing the trade secret under seal;
and (ii) does not disclose the trade secret, except pursuant to court order. The Employee acknowledges that by virtue of this immunity notice being
provided to the Employee, if the Employee discloses the Company’s trade secrets, other than as permitted under the DTSA, the Company may pursue
exemplary damages or attorneys’ fees from the Employee in an action by the Company against the Employee for disclosure of its trade secrets.
10. Remedies. All remedies at law or in equity shall be available to the Releasees for the enforcement of this Agreement. This Agreement may be
pleaded as a full bar to the enforcement of any Claim that Employee may assert against the Releasees, except for the Claims described in Section 5.
11. No Admission. Neither the execution of this Agreement by the Company, nor the terms hereof, constitute an admission by the Company of
liability to Employee.
12. Severability. If any term or provision of this Agreement shall be held to be invalid or unenforceable for any reason, then such term or provision
shall be ineffective to the extent of such invalidity or unenforceability without invalidating the remaining terms or provisions hereof, and such term or
provision shall be deemed modified to the extent necessary to make it enforceable.
13. Review Period; Advice of Counsel; Revocation Period. Employee acknowledges and understands that he is acting of his own free will,
that he has been afforded a reasonable time to read and review the terms of this Agreement, and that he is voluntarily entering into this
Agreement with full knowledge of its provisions and effects. Employee intends that this Agreement shall not be subject to any claim for duress.
Employee further acknowledges that he has been given at least twenty-one (21) days within which to consider this Agreement and that if he
decides to execute this Agreement before the twenty-one day period has expired, he does so voluntarily and waives the opportunity to use the full
review period. Employee agrees that any changes to the Agreement, including material changes, will not restart the review period. Employee
further acknowledges and understands that he has seven (7) days following his execution of this Agreement (the “Revocation Period”) to revoke
his acceptance of the Agreement, with the Agreement not becoming effective until the Revocation Period has expired, and that, to be effective, any
revocation must be in writing, signed by Employee, and received by the Company’s Chief Employee Officer prior to the expiration of the
Revocation Period. This Agreement shall not become effective until the seven (7) day Revocation Period has expired without Employee revoking
his acceptance.
14. Permitted Conduct. Nothing in this Agreement restricts or prohibits Employee from initiating communications directly with,
responding to any inquiries from, providing testimony before, providing information to, reporting possible violations of law or regulation to, or
assisting with an investigation directly with any governmental agency or entity or self-regulatory authority (including the Securities and Exchange
Commission), or from making other disclosures that are protected under the whistleblower provisions of state or federal law or regulation.
Employee does not need the prior authorization of the Company to engage in such communications, respond to such inquiries, provide such
information or documents or to make any such reports or disclosures. Employee is not required to notify the Company that Employee has engaged
in such communications, responded to such inquiries or made such reports or disclosures.
15. Employee’s Representations. Employee represents and warrants that he has not assigned any claim that he purports to release hereunder and
that he has the full power and authority to enter into this Agreement and bind each of the persons and entities that Employee purports to bind. Employee
further represents and warrants that he has no knowledge of the existence of any lawsuit, charge, or proceeding against any Releasee arising out of or
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otherwise connected with any of the matters herein released. In the event that any such lawsuit, charge, or proceeding has been filed, Employee
immediately will take all actions necessary to withdraw or terminate that lawsuit, charge, or proceeding, unless the requirement for such withdrawal or
termination is prohibited by applicable law. Employee admits, acknowledges, and agrees that Employee has been fully and finally paid or provided all
wages, compensation, vacation, leave (whether paid or unpaid), bonuses, stock, shares, membership units, stock options, equity, or other benefits from the
Company which are or could be due to Employee under the terms of Employee’s employment with the Company, or otherwise. Employee represents and
acknowledges that he has complied with all obligations under the Confidential Information Agreement and Section 8 of the Employment Agreement,
including any obligation to return property, documents, data and information to the Company upon his separation from the Company.
16. Amendments. Neither this Agreement nor any term of this Agreement may be orally changed, waived, discharged, or terminated, except by a
written agreement signed by the party against whom enforcement of the change, waiver, discharge or termination is sought.
17. Governing Law, Waiver of Jury Trial. This Agreement shall be governed by the laws of the State of Colorado applicable to contracts entered
into by residents of Colorado and fully performed in Colorado. EACH OF THE PARTIES HERETO HEREBY VOLUNTARILY AND IRREVOCABLY
WAIVES TRIAL BY JURY IN ANY ACTION OR OTHER PROCEEDING BROUGHT IN CONNECTION WITH THIS AGREEMENT OR ANY OF
THE TRANSACTIONS CONTEMPLATED HEREBY.
18. Fees and Costs. The parties shall bear their own attorneys’ fees and costs incurred in the negotiation and preparation of this Agreement.
19. Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which shall be considered an original instrument and
all of which, when taken together, shall constitute one and the same instrument.
20. Entire Agreement. This Agreement contains the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior
and contemporaneous discussions, understandings and negotiations between Employee and the Company with respect to its subject matter including the
Transition Agreement with the Employee dated November 13, 2020 and the Employment Agreement (except as set forth herein) but excluding Section 8 of
the Employment Agreement, the Confidential Information Agreement and the Amended and Restated Indemnification Agreement between the Company
and Employee dated October 9, 2017, each which shall continue to survive in accordance with their respective terms. This Agreement shall be binding
upon and inure to the benefit of the respective heirs, executors, administrators, successors and permitted assigns of each of Employee and the Company.
The Company may assign its rights under this Agreement. No other assignment is permitted except by written permission of the parties.
(signature page follows)
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IN WITNESS WHEREOF, Employee, acknowledging that he is acting of his own free will after having had the opportunity to seek the advice of
counsel and a reasonable period of time to consider the terms of this Agreement, and the Company have caused the execution of this Agreement as of the
date(s) written below.
Employee:
Richard Walker
Signed: /s/ RICHARD G. WALKER
Company:
ServiceSource International, Inc.
Signed: /s/ PATRICIA ELIAS
Name: Patricia Elias
Title: General Counsel
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Exhibit 10.4
AMENDED AND RESTATED
EMPLOYMENT AND CONFIDENTIAL INFORMATION AGREEMENT
This Amended and Restated Employment and Confidential Information Agreement (the “Agreement”) by and between
ServiceSource International, Inc. (“ServiceSource” or the “Company”) and Chad W. Lyne (“Executive”) is entered into and is effective as
of November 16, 2017 (the “Effective Date”).
Recitals
WHEREAS, Executive has been employed as the Company’s Senior Vice President, Strategy since April 18, 2016, and effective as
of such date, Executive and Company entered into that certain Employment and Confidential Information Agreement (the “Original
Agreement”);
WHEREAS, Executive is a key employee of the Company and the Company benefits from the knowledge, experience, expertise and
advice of Executive to manage its business for the benefit of the Company;
WHEREAS, ServiceSource and Executive desire to amend and restate the Original Agreement and enter into this Agreement to
encourage Executive to devote and continue to devote full attention and dedication to the success of ServiceSource, to provide for the
protection of the proprietary information of ServiceSource, and to provide specified compensation to Executive in the event of certain events
leading to the termination of Executive’s employment by ServiceSource.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements of the parties contained herein, the parties
acknowledge and agree as follows:
1. DUTIES.
(a) Responsibilities. Executive’s title is Senior Vice President, Strategy, reporting to ServiceSource’s Chief Executive Officer.
Executive shall be responsible for and expected to perform all duties and tasks as is typical for the Senior Vice President, Strategy of a
publicly-traded company, and shall perform any additional duties as directed by the Chief Executive Officer.
(b) Loyal and Full Time Performance of Duties. While employed by ServiceSource, Executive shall devote his full professional time
and attention to the performance of his duties, and shall not directly or indirectly engage in any Competitive Activity. For the purpose of this
Agreement, “Competitive Activity” is any activity which is the same as or directly competitive with a principal line of business of
ServiceSource during Executive’s employment by ServiceSource. As of the date of this Agreement, Competitive Activities include the
provision of renewals management, outsourced inside sales, and customer engagement business process outsourcing.
(c) ServiceSource Policies. Executive agrees to abide by ServiceSource’s rules, regulations, policies and practices, as they may from
time to time be adopted or modified by ServiceSource at its sole discretion, provided Executive first has been notified of such rules,
regulations, policies and practices. ServiceSource’s written rules, policies, practices and procedures shall be binding on Executive unless
superseded by or in conflict with this Agreement.
2. EMPLOYMENT AT-WILL. Executive and ServiceSource acknowledge and agree that during Executive’s employment with
ServiceSource the parties intend to strictly maintain an at-will employment relationship. This means that at any time during the course of
Executive’s employment with ServiceSource, Executive is entitled to resign with or without cause and with or without advance notice.
Similarly, ServiceSource specifically reserves the same right to terminate Executive’s employment at any time with or without cause and with
or without advance notice. Nothing in this Agreement or the relationship between the parties now or in the future may be construed or
interpreted to create an employment relationship for a specific length of time or a right to continued employment. Executive and
ServiceSource understand and agree that only ServiceSource’s Chief Executive Officer possesses the authority to alter the at-will nature of
Executive’s employment status, and that any such change may be made only by an express written employment contract signed by
ServiceSource’s Chief Executive Officer. No implied contract concerning any employment-related decision or term or condition of
employment can be established by any other statement, conduct, policy or practice.
3. CASH COMPENSATION: BASE SALARY AND TARGET BONUS. In consideration for the services and covenants
described in this Agreement, ServiceSource agrees to pay Executive an annual base salary of two hundred and seventy-five thousand dollars
($275,000), paid on ServiceSource’s normal payroll dates, subject to all applicable withholdings. In addition, Executive will be eligible for a
potential annual target Corporate Incentive Plan (“CIP”) bonus amount equal to sixty percent (60%) of his base salary (as of the date hereof,
one hundred sixty-five thousand dollars). The CIP is a discretionary incentive program that ServiceSource funds based on the achievement of
business results and individual objectives established by ServiceSource and may also be subject to applicable performance requirements as
determined by the Board of Directors of ServiceSource (the “Board of Directors”) or its Compensation Committee in their sole discretion.
Except as otherwise specifically provided in this Agreement, Executive must be employed as of the date of the scheduled bonus
payment in order to be eligible for any form of bonus payment. In no event shall any such bonus be paid after the later of (i) the fifteenth
(15th) day of the third (3rd) month following the close of ServiceSource’s fiscal year in which any such bonus is earned or (ii) March 15
following the calendar year in which any such bonus is earned.
Executive’s annual base salary and potential annual target CIP bonus amount may be changed from time to time by mutual
agreement of Executive and ServiceSource, and any such mutually-agreed upon change shall be deemed to supersede and replace this Section
3.
4. EQUITY COMPENSATION. Executive will be eligible to participate in the ServiceSource International, Inc. 2011 Equity
Incentive Plan (the “Equity Incentive Plan”) and the ServiceSource International, Inc. 2011 Employee Stock Purchase Plan (the “Employee
Stock Purchase Plan”), subject to the requirements of the applicable plan.
5. BENEFITS. As a full-time employee, Executive shall be entitled to all of the benefits provided to ServiceSource employees, in
accordance with any benefit plan or policy adopted by ServiceSource from time to time during the existence of this Agreement. Executive’s
rights and those of Executive’s dependents under any such benefit plan or policy shall be governed solely by the terms of such plan or policy.
ServiceSource reserves the right to cancel or change the benefit plans and policies it offers to its employees at any time. ServiceSource
reserves to itself or its designated administrators exclusive authority and discretion to determine all issues of eligibility, interpretation and
administration of each such benefit plan or policy.
6. PAID TIME OFF. Per Company policy, Executive will not accrue paid time off or be required to track or report paid time off.
Instead, time off is left to the mutual agreement of Executive and the Chief Executive Officer.
7. PROPRIETARY AND CONFIDENTIAL INFORMATION (INCLUDING TRADE SECRETS). Executive acknowledges
that his employment with ServiceSource allows him access to Proprietary and Confidential Information. Executive understands that
Proprietary and Confidential Information includes customer and applicant lists, whether written or solely a function of memory, databases,
business files, contracts and all other information used in the day-to-day operation of ServiceSource that is not known to persons not
employed by ServiceSource and that ServiceSource undertakes efforts to maintain its secrecy. Executive understands and agrees that the
Proprietary and Confidential Information is confidential information that the law treats as privileged, therefore protecting an employer from
use without consent.
(a) Definition. “Proprietary and Confidential Information” is defined as all information and any idea in whatever form, tangible
or intangible, of a confidential or secret nature that pertains in any manner to the business of ServiceSource. As used in this Agreement, the
term “Confidential Information” includes any and all non-public information relating to ServiceSource or its business, operations, financial
affairs, performance, assets, pricing and pricing strategies, technology, research and development, processes, products, contracts, customers,
licensees, sublicensees, suppliers, personnel, plans or prospects, whether or not in written form and whether or not expressly designated as
confidential, including any such information consisting of or otherwise relating to trade secrets, know-how, technology (including software
and programs), designs, drawings, photographs, samples, processes, license or sublicense arrangements, formulae, proposals, product
specifications, customer lists or preferences, referral sources, marketing or sales techniques or plans, operating manuals, service manuals,
financial information or projections, lists of suppliers or distributors or sources of supply.
Proprietary and Confidential Information includes both information developed by Executive for ServiceSource and information
Executive obtained while in ServiceSource’s employment. All Proprietary and Confidential Information, whether created by Executive or
other employees, shall remain the property of ServiceSource.
(b) Non-Disclosure and Return. Executive agrees that he will not, under any circumstances, or at any time, whether as an individual,
partnership, or corporation, or employee, principal, agent, partner or shareholder thereof, in any way, either directly or indirectly, divulge,
disclose, copy, use, divert or attempt to divulge, disclose, copy, use or divert ServiceSource’s Proprietary and Confidential Information,
except to the extent authorized and necessary to carry out Executive’s responsibilities during employment with ServiceSource, or as required
by law. Upon termination of Executive’s employment with ServiceSource, Executive shall immediately return to ServiceSource all property
in Executive’s possession or control that belongs to ServiceSource, including all property in electronic form and all copies of Proprietary and
Confidential Information.
(c) Former Employer Information. Executive agrees that Executive will not, during Executive’s employment with ServiceSource,
improperly use or disclose any proprietary information or trade secrets of any former or concurrent employer or other person or entity and
that Executive will not bring onto the premises of ServiceSource any unpublished document or proprietary information belonging to any such
employer, person or entity unless consented to in writing by such employer, person or entity. Executive represents and warrants to
ServiceSource that Executive is not in breach of any agreement with any former Employer by accepting employment with ServiceSource.
(d) Third Party Information. Executive recognizes that ServiceSource may have received and in the future may continue to receive
from third parties their confidential or proprietary information as they may so designate, subject to a duty on ServiceSource’s part to maintain
the confidentiality of such information and to use it only for certain limited purposes. Executive agrees to hold all such confidential or
proprietary information in the strictest confidence and not to disclose it to any person,
firm or corporation or to use it except as necessary in carrying out Executive’s work for ServiceSource consistent with ServiceSource’s
agreement with such third party.
(e) Notification to New Employer. In the event that Executive’s employment with ServiceSource ends, Executive consents to
notification by ServiceSource to any subsequent employer of Executive’s rights and obligations under this Agreement.
(f) No Solicitation of Clients Using Proprietary and Confidential Information. Executive acknowledges and agrees that the names,
addresses, and contact information of ServiceSource’s clients and all other confidential information relating to those clients, have been
compiled by ServiceSource at great expense and represent a real asset of ServiceSource. Executive further understands and agrees that this
information is deemed confidential by ServiceSource and constitutes trade secrets of ServiceSource. Executive understands that this
information has been provided to Executive in confidence, and Executive agrees that the sale or unauthorized use or disclosure of any of
ServiceSource’s trade secrets obtained by Executive during employment with ServiceSource constitutes unfair competition. Executive agrees
and promises not to engage in any unfair competition with ServiceSource. Executive further agrees not to, directly or indirectly, during or
after termination of employment, make known to any person, firm, or company any Proprietary and Confidential Information concerning any
of the clients of ServiceSource. In addition, Executive shall not use any such Proprietary and Confidential Information to solicit, take away,
or attempt to call on, solicit or take away any of the clients of ServiceSource on whom Executive called or whose accounts Executive had
serviced during employment with ServiceSource, whether on Executive’s own behalf or for any other person, firm, or ServiceSource.
(g) No Solicitation of Employees. Executive understands and acknowledges that as an employee of ServiceSource he has certain
fiduciary duties to ServiceSource that would be violated by the solicitation and/or encouragement of ServiceSource employees to leave the
employ of ServiceSource. Executive therefore agrees that he will not, either during his employment or for a period of one year after his
employment has terminated, solicit any of ServiceSource’s employees for a competing business or otherwise induce or attempt to induce such
employees to terminate employment with ServiceSource, either directly or through any third parties. Executive agrees that any such
solicitation during such one-year period would constitute unfair competition.
(h) Assignment of Rights. All Proprietary and Confidential Information and all patents, patent rights, copyrights, trade secret rights,
trademark rights and other rights (including intellectual property rights) owned by or otherwise belonging to ServiceSource anywhere in the
world in connection therewith, is and shall be the sole property of the ServiceSource. Executive hereby assigns to ServiceSource any and all
rights, title and interest Executive may have or acquire in ServiceSource’s Proprietary and Confidential Information and ServiceSource’s
property.
8. SEVERANCE BENEFITS.
(a) Termination Without Cause or Resignation for Good Reason. If ServiceSource terminates Executive’s employment without Cause
or if Executive resigns for Good Reason (as such terms are defined below) then the following will apply:
(i) Base Salary Severance. Executive shall receive nine months of Executive’s then-current base salary, paid out in the
Company’s normal pay cycle over the nine-month period following termination (the “Severance Period”) and subject to all
applicable withholding requirements. This severance payment will only be paid so long as Executive does not engage in any
Competitive Activity during the Severance Period.
(ii) CIP Payment. Executive will be paid for CIP earned while an employee prior to the termination date and through the
period nine (9) months following the termination date, even if not employed on the pay-out date as required by the CIP plan. Such
payment will be made at the same time and at the same percentage as other similarly situated employees. For example, if Executive
is terminated on September 1, 2018, Executive would receive a CIP payment as if Executive were employed through May 2019.
Such payment will be paid out per the normal pay cycle (and prior to the latest dates of payment set forth in Section 3, above) in or
around February and August based on Company achievement per the applicable plan, and accordingly all such CIP payments shall be
treated as “short-term deferrals” exempt from the requirements of Code Section 409A.
(iii) COBRA Coverage. Executive shall be entitled to receive an additional lump-sum payment (less applicable withholding
taxes) equal to the product obtained by multiplying nine by the amount of the monthly premium that would be required for the first
month of coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended and all applicable regulations
(referred to collectively as “COBRA”), with the premium calculated on the assumption that the Executive in fact elects coverage for
himself, and any eligible spouse and/or dependents of the Executive that were enrolled in the applicable Company health plan
immediately prior to his last date of employment. Executive will be eligible for this payment without regard to whether he actually
elects COBRA continuation coverage. Such payments shall be made on the fifty-third (53 ) day following Executive’s employment
termination date.
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(b) Termination Without Cause or Resignation for Good Reason Following a Change in Control (Equity Acceleration). If
ServiceSource or a successor should terminate Executive’s employment without Cause or Executive should resign from his employment for
Good Reason, in either case within 18 (eighteen) months following a “Change in Control” (as defined below), then, in addition to the benefits
set forth above in Section 8(a), all of Executive’s outstanding equity compensation awards (including all stock options, restricted stock,
restricted stock units and any other equity compensation awards) shall immediately have their vesting accelerated 100%, so as to become
fully vested.
(c) Definitions: For purposes of this Section 8:
(i) “Cause” shall mean the occurrence of any of the following events: (i) Executive’s commission of any felony or any crime
involving fraud or dishonesty under the laws of the United States or any state thereof; (ii) Executive’s commission of, or participation
in, a fraud or act of dishonesty against ServiceSource; (iii) Executive’s willful violation of any contract or agreement between
Executive and ServiceSource or any statutory duty owed to ServiceSource; (iv) Executive’s unauthorized use or disclosure of
Proprietary and Confidential Information; or (v) Executive’s gross misconduct; and
(ii) “Good Reason” shall mean the occurrence of any one of the following events, without Executive’s written consent: (1) a
material adverse change in Executive’s job title as offered in this Agreement, including the assignment of the same job title at the
divisional level of any lesser organizational unit (for the avoidance of doubt, Executive having the same position as offered in this
Agreement for a division or subsidiary of ServiceSource or of the surviving entity following a Change of Control, rather than having
that job title for the entire surviving parent entity, would be Good Reason); (2) a material adverse change in Executive’s duties,
authorities or job responsibilities that is not commensurate with the role as offered in this Agreement; (3) a relocation of Executive’s
principal place of employment beyond the metropolitan area of Denver, Colorado (though frequent travel to ServiceSource’s global
locations is an inherent part of the job); (4) a change in reporting relationship to any individual other than ServiceSource’s Chief
Financial Officer or Chief Executive Officer, or (5) any material reduction in Executive’s base salary, target bonus or aggregate level
of benefits; provided that Executive has notified ServiceSource in writing of the event described in (1), (2), (3), (4), or (5) above
within ninety (90) days after the occurrence of such event, ServiceSource (or its successor) has within thirty (30) days thereafter
failed to restore Executive to the appropriate job title, duties, authorities, responsibility, location, reporting relationship, salary, target
commissions or benefits and Executive actually terminates employment within thirty (30) days following the expiration of
ServiceSource’s thirty (30)-day cure period described above; and
(iii) “Change of Control” shall mean the occurrence of one of the following events: a sale of all or substantially all of the
shares of stock of ServiceSource; a merger, consolidation or similar transaction involving ServiceSource following which the persons
entitled to elect a majority of the members of the Board of Directors of ServiceSource immediately before the transaction are not
entitled to elect a majority of the members of the Board of Directors of ServiceSource or the surviving entity following the
transaction; or a sale of all or substantially all of the assets of ServiceSource. As applied relative to a Change of Control, the Good
Reason standards will all be based from terms in effect immediately prior to the Change of Control. Notwithstanding the foregoing, a
transaction shall not constitute a Change of Control unless the transaction qualifies as a “change in control event” within the meaning
of Section 409A.
(d) Release. Notwithstanding the foregoing, the severance benefits described in this Section 8 are subject to Executive’s execution
and delivery of a binding general separation and release of claims agreement, which includes language consistent with Schedule A, and such
release shall become effective, binding and irrevocable in accordance with its terms within fifty-two (52) days following the termination date.
No severance payments or vesting acceleration under this Agreement shall be paid or provided unless and until the release becomes effective.
Any severance payment to which Executive is entitled that would otherwise be paid on or prior to the 52 day following the termination date
shall be withheld and shall instead be paid by ServiceSource in full on the fifty-third (53 ) day following Executive’s employment
termination date or such later date as is required to avoid the imposition of additional taxes under Code Section 409A and the regulations and
guidance thereunder, and any applicable state law equivalent (together, “Section 409A”). The foregoing shall not apply to CIP earned prior to
the Executive’s termination, the payment of which shall not be delayed by this subsection.
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(e) Section 409A Compliance. Notwithstanding any provision to the contrary herein, no Deferred Payments (as defined below) that
become payable under this Agreement by reason of Executive’s termination of employment with ServiceSource (or any successor entity
thereto) will be made unless such termination of employment constitutes a “separation from service” within the meaning of Section 409A.
Further, if Executive is a “specified employee” of ServiceSource (or any successor entity thereto) within the meaning of Section 409A on the
date of Executive’s termination of employment (other than a termination of employment due to death), then the Deferred Payments that are
payable within the first six (6) months following Executive’s termination of employment, shall be delayed until the first payroll date that
occurs on or after the date that is six (6) months and one (1) day after the date of Executive’s termination of employment, when they shall be
paid in full arrears. All subsequent Deferred Payments, if any, will be paid in accordance with the payment schedule applicable to each
payment or benefit. Notwithstanding anything herein to the contrary, if Executive dies following Executive’s employment termination but
prior to the six (6) month anniversary of his employment termination, then any payments delayed in accordance with this paragraph will be
payable in a lump sum as soon as administratively practicable after the date of death and all other Deferred Payments will be payable in
accordance with the payment schedule applicable to each payment or benefit. Each payment and benefit payable under this Agreement is
intended to constitute a separate payment for purposes of Section 409A-2(b)(2) of the Treasury Regulations (for avoidance of doubt, the
foregoing shall be interpreted to provide as well that any payments to be made in installments shall be deemed to be a series of separate
payments). For the purposes of this Agreement, “Deferred Payment” means any severance pay or benefits to be paid or provided to
Executive (or Executive’s estate or beneficiaries) pursuant to this Agreement and any other severance payments or separation benefits, that in
each case, when considered together, are considered deferred compensation under Section 409A. The foregoing provisions and all payments
and benefits under this Agreement are intended to be exempt from or comply with the requirements of Section 409A so that none of the
severance payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any
ambiguities or ambiguous terms herein will be interpreted to so comply or be exempt. ServiceSource and Executive agree to work together in
good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to
avoid imposition of any additional tax or income recognition prior to actual payment to Executive under Section 409A.
(f) Termination of Employment for Other Reasons. The above severance benefits in this Section 8 shall not be paid or provided in the
event of the termination of Executive’s employment due to Executive’s death, disability or resignation (other than a resignation for Good
Reason upon or following a Change in Control as set forth above), or the termination of his employment by ServiceSource or its successor
for Cause (as defined above). For purposes of clarity, a termination by reason of Executive’s death or disability shall not be deemed a
termination without “Cause” under this Agreement.
9. SEVERABILITY. In the event that any provision of this Agreement is determined by a court of competent jurisdiction to be
illegal, invalid or unenforceable to any extent, such term or provision shall be enforced to the fullest extent permissible under the law and all
remaining terms and provisions hereof shall continue in full force and effect.
10. MODIFICATION OF AGREEMENT. This Agreement may be modified only in writing by mutual agreement of
ServiceSource and Executive. Any such writing must specifically state that it is intended to modify the parties’ Agreement and state which
specific provision or provisions this writing intends to modify. Such written modification will only be effective if signed by ServiceSource’s
Chief Executive Officer, Chief Human Resources Officer, or Chief Financial Officer.
Any attempt to modify this Agreement orally, or by a writing signed by any person other than ServiceSource’s Chief Executive Officer, Chief
Human Resources Officer, or Chief Financial Officer, or by any other means, shall be null and void. This Agreement is intended to be the
final and complete statement of the parties’ agreement concerning the legal nature of their employment relationship in any and all disputes
arising from that relationship.
12. COMPLETE AND VOLUNTARY AGREEMENT. This Agreement constitutes the entire understanding of the parties on the
subject covered. The parties expressly warrant that they have read and fully understand this Agreement; that they have had the opportunity to
consult with legal counsel of their own choosing to have the terms of this Agreement fully explained to them; that they are not executing this
Agreement in reliance on any promises, representations or inducements other than those contained herein; and that they are executing this
Agreement voluntarily, free of any duress or coercion.
13. DISPUTE RESOLUTION. This Agreement shall be governed by Colorado law, without regard to its principles of conflicts of
laws. Any dispute arising from this Agreement shall be subject to the exclusive jurisdiction of state and federal courts located in Denver,
Colorado, and each party hereby waives any and all objections to that venue. The prevailing party in any such dispute shall recover its
reasonable attorneys’ fees and costs from the losing party, including any fees or costs arising from an appeal.
14. SUCCESSORS AND ASSIGNS. This Agreement will be binding upon Executive’s heirs, executors, administrators and other
legal representatives and will be for the benefit of ServiceSource, its successors, and its assigns.
15. GOLDEN PARACHUTE BEST AFTER TAX RESULTS. If any of the payments to Executive (prior to any reduction, below)
provided for in this Agreement, together with any other payments which Executive has the right to receive from ServiceSource or any
corporation which is a member of an “affiliated group” as defined in Section 1504(a) of the Internal Revenue Code of 1986, as amended
(“Code”), without regard to Section 1504(b) of the Internal Revenue Code), of which ServiceSource is a member (the “Payments”) would
constitute a “parachute payment” (as defined in Section 280G(b)(2) of the Code), and if the Safe Harbor Amount is greater than the Taxed
Amount, as determined on a net, after-tax basis as described below, then the total amount of such Payments shall be reduced to the Safe
Harbor Amount. The “Safe Harbor Amount” is the largest portion of the Payments that would result in no portion of the Payments being
subject to the excise tax set forth at Section 4999 of the Code (“Excise Tax”). The “Taxed Amount” is the total amount of the Payments
(without any reduction, above) notwithstanding that all or some portion of the Payments may be subject to the Excise Tax. Solely for the
purpose of comparing which of the Safe Harbor Amount and the Taxed Amount is greater, the determination of each such amount, shall be
made on an after-tax basis, taking into account all applicable federal, state and local employment taxes, income taxes, and, if applicable, the
Excise Tax (all of which shall be computed at the highest applicable marginal rate regardless of Executive’s actual marginal rate). If a
reduction of the Payments to the Safe Harbor Amount is necessary, then the reduction shall occur in the following order: reduction of cash
payments; cancellation of accelerated vesting of equity awards the value of which is not determined under Q&A 24(c) of the 280G Treasury
Regulations; cancellation of accelerated vesting of equity awards the value of which is determined under Q&A 24(c) of the 280G Treasury
Regulations; and reduction of employee benefits. In the event that acceleration of vesting of a category of equity awards is to be reduced,
such acceleration of vesting shall be cancelled in the reverse order of the date on which awards of such category would have vested absent
the change in control transaction. If two or more equity awards of the same category are granted on the same date, and reduction of
acceleration is required under this paragraph, each award will be reduced on a pro-rata basis. In no event shall
Executive have any discretion with respect to the ordering of payment reductions. ServiceSource and its tax advisors shall make all
determinations and calculations required to be made to effectuate this paragraph at ServiceSource’s expense.
SERVICESOURCE INTERNATIONAL, INC.
EXECUTIVE
By: /s/ PATRICIA ELIAS
Name: Patricia Elias
Title: General Counsel
/s/ CHAD W. LYNE
Chad W. Lyne
Schedule A
Form of Release
In exchange for the consideration provided by ServiceSource International, Inc. or its successor (the “Company”) to the undersigned current
or former employee of the Company (the “Employee”) under this Agreement or the employment agreement between the Company and the
Employee, that Employee is not otherwise entitled to receive, and subject to the Company’s compliance with its post-termination obligations
to Employee, Employee hereby generally and completely releases the Company and its directors, officers, employees, shareholders, partners,
agents, attorneys, predecessors, successors, parent and subsidiary entities, insurers, affiliates, and assigns from any and all claims, liabilities
and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring prior to
my signing this Agreement. This general release includes: (1) all claims arising out of or in any way related to Employee’s employment with
the Company or the termination of that employment; (2) all claims related to Employee’s compensation or benefits from the Company,
including salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any
other ownership interests in the Company; (3) all claims for breach of contract, wrongful termination, and breach of the implied covenant of
good faith and fair dealing; (4) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public
policy; and (5) all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or
other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990, the federal
Age Discrimination in Employment Act of 1967 (as amended) (“ADEA”), the Family and Medical Leave Act; the Employee Retirement
Income Security Act; any state labor code; the Equal Pay Act, of 1963, as amended. Notwithstanding the above, it is understood and agreed
to by the parties that neither party is waiving rights relative to compliance with those terms of the Employment Agreement and Company’s
Proprietary Confidential Information Agreement that impose duties on either party upon and following Employee’s termination of
employment.
ADEA Waiver and Release. Employee acknowledges that Employee knowingly and voluntarily waives and releases any rights Employee
may have under the ADEA, as amended. Employee also acknowledges that the consideration given for the waiver and release in the
preceding paragraph hereof is in addition to anything of value to which Employee was already entitled. Employee further acknowledges that
Employee has been advised by this writing, as required by the ADEA, that: (a) his waiver and release does not apply to any rights or claims
that may arise after the execution date of this Agreement; (b) Employee has been advised that he has the right to consult with an attorney
prior to executing this Agreement; (c) Employee has been given twenty-one (21) days to consider this Agreement; (d) Employee has seven
(7) days following the execution of this Agreement by the parties to revoke the Agreement; and (e) this Agreement will not be effective until
the date upon which the revocation period has expired, which will be the eighth day after this Agreement is executed by Employee, provided
that the Company has also executed this Agreement by that date (“Effective Date”). The parties acknowledge and agree that revocation by
Employee of the ADEA Waiver and Release is not effective to revoke his waiver or release of any other claims pursuant to this Agreement.
SUBSIDIARIES OF SERVICESOURCE INTERNATIONAL, INC.
Exhibit 21.1
SUBSIDIARIES
ServiceSource International, Inc.
ServiceSource Delaware, Inc.
ServiceSource Europe, Ltd.
SSI Europe UK Limited
ServiceSource International Singapore Pte. Ltd.
ServiceSource International Malaysia SDN. BHD.
ServiceSource International Japan G.K.
ServiceSource International Philippines, Inc.
ServiceSource International Bulgaria EOOD
STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION
Delaware
Delaware
Ireland
United Kingdom
Singapore
Malaysia
Japan
Philippines
Bulgaria
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the following Registration Statements:
•
•
•
•
(1) Registration Statement (Form S-8 No. 333-173116) pertaining to the:
ServiceSource International, Inc. 2011 Equity Incentive Plan
ServiceSource International, Inc. 2011 Employee Stock Purchase Plan
ServiceSource International, LLC 2008 Share Option Plan
ServiceSource International, LLC 2004 Omnibus Share Plan
(2) Registration Statement (Form S-8 No. 333-181104) pertaining to the:
ServiceSource International, Inc. 2011 Equity Incentive Plan
ServiceSource International, Inc. 2011 Employee Stock Purchase Plan
•
•
(3) Registration Statement (Form S-8 No. 333-188652) pertaining to the:
ServiceSource International, Inc. 2011 Equity Incentive Plan
ServiceSource International, Inc. 2011 Employee Stock Purchase Plan
•
•
(4) Registration Statement (Form S-8 No. 333-194440) pertaining to the:
ServiceSource International, Inc. 2011 Equity Incentive Plan
ServiceSource International, Inc. 2011 Employee Stock Purchase Plan
•
•
(5) Registration Statement (Form S-8 No. 333-202809) pertaining to the:
ServiceSource International, Inc. 2011 Equity Incentive Plan
ServiceSource International, Inc. 2011 Employee Stock Purchase Plan
•
•
(6) Registration Statement (Form S-8 No. 333-210014) pertaining to the:
ServiceSource International, Inc. 2011 Equity Incentive Plan
ServiceSource International, Inc. 2011 Employee Stock Purchase Plan
•
•
(7) Registration Statement (Form S-8 No. 333-216472) pertaining to the:
ServiceSource International, Inc. 2011 Equity Incentive Plan
ServiceSource International, Inc. 2011 Employee Stock Purchase Plan
•
•
(8) Registration Statement (Form S-8 No. 333-223413) pertaining to the:
ServiceSource International, Inc. 2011 Equity Incentive Plan
ServiceSource International, Inc. 2011 Employee Stock Purchase Plan
•
•
(9) Registration Statement (Form S-8 No. 333- 239211) pertaining to the:
ServiceSource International, Inc. 2020 Equity Incentive Plan
•
of our reports dated February 24, 2021, with respect to the consolidated financial statements of ServiceSource International, Inc., and the effectiveness of
internal control over financial reporting of ServiceSource International, Inc. included in this Annual Report (Form 10-K) of ServiceSource International,
Inc. for the year ended December 31, 2020.
/s/ Ernst & Young LLP
Denver, Colorado
February 24, 2021
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Gary B. Moore, certify that:
1.
I have reviewed this annual report on Form 10-K of ServiceSource International, Inc.;
Exhibit 31.1
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
controls over financial reporting.
Dated:
February 24, 2021
By:
/s/ GARY B. MOORE
Gary B. Moore
Chief Executive Officer and Director
(Principal Executive Officer)
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Chad W. Lyne, certify that:
1.
I have reviewed this annual report on Form 10-K of ServiceSource International, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal
controls over financial reporting.
Dated:
February 24, 2021
By:
/s/ CHAD W. LYNE
Chad W. Lyne
Chief Financial Officer
(Principal Financial and Accounting Officer)
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
I, Gary B. Moore, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the annual
report of ServiceSource International, Inc. on Form 10-K for the fiscal year ended December 31, 2020 fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in such Form 10-K fairly presents, in all material respects, the
financial condition and results of operations of ServiceSource International, Inc.
Dated:
February 24, 2021
By:
/s/ GARY B. MOORE
Gary B. Moore
Chief Executive Officer and Director
(Principal Executive Officer)
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
I, Chad W. Lyne, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the annual
report of ServiceSource International, Inc. on Form 10-K for the fiscal year ended December 31, 2020 fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in such Form 10-K fairly presents, in all material respects, the
financial condition and results of operations of ServiceSource International, Inc.
Dated:
February 24, 2021
By:
/s/ CHAD W. LYNE
Chad W. Lyne
Chief Financial Officer
(Principal Financial and Accounting Officer)