SERVICESOURCE INTERNATIONAL, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-K)

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 2021, 55% of our net revenue
was earned in NALA, 30% in EMEA and 15% in APJ, compared to 57% in NALA, 28% in
EMEA and 15% in APJ during 2020. 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 to twelve months.

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

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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 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
clients' 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 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 had a material effect on our
business, financial condition or results of operations as of December 31,
2021 and December 31, 2020. 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.

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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
even during periods of volatility such as those experienced since early 2020. As
of December 31, 2021, we had total available liquidity of $46.5 million
consisting of cash on hand and borrowing 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 years
ended December 31, 2021 and 2020 as a result of the COVID-19 pandemic. We expect
to continue to invest capital to allow our employees to function in our virtual,
work-from-home operating model. However, we are benefiting and will continue to
benefit from decreases in certain costs related to our facilities and reduced
travel and entertainment costs.

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. The Company
received and recognized income related to the grants of approximately
$0.3 million and $1.3 million from the grant during the years ended December 31,
2021 and 2020, respectively. The Company does not expect to receive additional
income related to these 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

The majority 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."

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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 two 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.

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 employees' severance
payments and related employee benefits, related legal fees and charges related
to lease termination costs.

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. As of December 31, 2021, the
Company does not expect to incur additional restructuring charges related to
this 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.

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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 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, 2021

? GAAP revenue was $195.7 million, compared with $194.6 million reported for

the year ended December 31, 2020.

GAAP net loss was $14.7 million or $0.15 per diluted share, compared with GAAP

? net loss of $18.5 million or $0.19 per diluted share reported for the year

ended December 31, 2020.

Adjusted EBITDA, a non-GAAP financial measure, was $9.8 million compared with

? $4.3 million reported for the year ended December 31, 2020. See “Non-GAAP

Financial Measurements” below for a reconciliation of Adjusted EBITDA from net

loss.

Ended the year with $30.8 million of cash and cash equivalents and restricted

? cash and $10.0 million of borrowings under the Company’s $35.0 million

   Revolver.


Results of Operations

For the Year Ended December 31, 2021 Compared to the Year Ended December 31,
2020

Net Revenue, Cost of Revenue and Gross Profit

                                                       For the Year Ended December 31,
                                                   2021                               2020
                                                           % of Net                           % of Net
                                           Amount           Revenue           Amount           Revenue          $ Change        % Change
                                       (in thousands)                     (in thousands)                     (in thousands)
Net revenue                           $        195,704          100 %    $        194,601          100 %    $          1,103         1 %
Cost of revenue                                140,002           72 %             137,041           70 %               2,961         2 %
Gross profit                          $         55,702           28 %    $         57,560           30 %    $        (1,858)       (3) %


Net revenue increased by $1.1 million, or 1%, for the year ended December 31,
2021 compared to the same period in 2020, primarily due to lower client churn
and increased bookings.

Cost of revenue increased $3.0 million, or 2%, for the year ended December 31,
2021
compared to the same period in 2020, primarily due to the following:

? $3.0 million increase in employee related costs primarily due to increased

compensation expense associated with higher revenue attainment;

? $2.5 million increase in depreciation and amortization expense; and

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? $1.2 million increase in information technology costs; partially offset by

? $3.7 million decrease in facility costs primarily related to transitioning to a

virtual-first operating model and sublease income.

Operating Expenses

                                                            For the Year Ended December 31,
                                                        2021                                 2020
                                                                % of Net                            % of Net
                                              Amount             Revenue           Amount            Revenue           $ Change        % Change
                                          (in thousands)                       (in thousands)                       (in thousands)
Operating expenses:
Sales and marketing                      $         17,056              9 %     $        24,999            13 %     $        (7,943)       (32) %
Research and development                            5,183              3 %               5,602             3 %                (419)        (7) %
General and administrative                         45,051             23 %              41,970            22 %                3,081          7 %
Restructuring and other related costs               1,071              1 % 
             1,542             1 %                (471)       (31) %
Total operating expenses                 $         68,361             35 %     $        74,113            38 %     $        (5,752)        (8) %


Sales and Marketing

Sales and marketing expense decreased $7.9 million, or 32%, for the year ended
December 31, 2021 compared to the same period in 2020, primarily due to a $4.9
million decrease in employee related costs largely associated with a reduction
in headcount, a $2.8 million decrease in information technology and facility
costs related to transitioning to a virtual-first operating model, and a $0.2
million decrease in marketing cost.

Research and Development

Research and development expense decreased $0.4 million, or 7%, for the year
ended December 31, 2021 compared to the same period in 2020, primarily due to a
$0.7 million decrease in information technology and facility costs and a $0.5
million decrease in professional fees, partially offset by a $0.4 million
increase in employee related costs primarily due to increased compensation
expense associated with higher revenue attainment and a $0.4 million reduction
in third-party capitalizable software development costs.

General and Administrative

General and administrative expense increased $3.1 million, or 7%, for the year
ended December 31, 2021 compared to the same period in 2020, primarily due to
the following:

? $3.9 million increase in information technology and facility costs;

? $1.3 million increase in stock-based compensation costs; and

? $0.2 million increase in professional fees; partially offset by

? $1.7 million decrease in depreciation and amortization expense; and

? $0.6 million decrease in employee related costs primarily associated with a

reduction in headcount.

Restructuring and Other Related Costs

Restructuring and other related costs decreased $0.5 million, or 31%, for
the year ended December 31, 2021 compared to the same period in 2020 due to
decreased costs incurred during the year ended December 31, 2021 related to
restructuring efforts resulting in a reduction of headcount and office lease
costs compared to the year ended December 31, 2020.

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Interest and Other Expense, Net

                                                             For the Year Ended December 31,
                                                       2021                                   2020
                                                                % of Net                              % of Net
                                             Amount             Revenue             Amount            Revenue            $ Change        % Change
                                         (in thousands)                         (in thousands)                        (in thousands)
Interest expense                        $          (471)                - %               (608)               - %    $            137         23 %
Other expense, net                      $        (1,313)              (1) %               (671)               - %    $          (642)       (96) %

Interest expense decreased $0.1 million, or 23%, for the year ended December 31,
2021
compared to the same period in 2020 primarily due to lower average
borrowings on the Revolver.

Other expense, net increased $0.6 million, or 96%, for the year ended
December 31, 2021 compared to the same period in 2020 primarily due to foreign
currency fluctuations.

Income Tax Provision

                                                               For the Year Ended December 31,
                                                          2021                                   2020
                                                                  % of Net                               % of Net
                                               Amount              Revenue             Amount            Revenue            $ Change         % Change
                                           (in thousands)                          (in thousands)                        (in thousands)
Provision for income tax expense          $          (278)               (0) %    $          (709)               - %    $            431        61 %

Provision for income tax expense resulted primarily from profitable
jurisdictions where current taxes are required to be provided. Income tax
expense decreased $0.4 million, or 61% for the year ended December 31, 2021
compared to 2020, primarily due to approval of a one-year tax holiday and a
decrease 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 to the extent that pandemic-related challenges continue.

As of December 31, 2021, we had cash and cash equivalents of $28.5 million,
which primarily consist of demand deposits and money market mutual funds.
Included in cash and cash equivalents was $6.5 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,
2021, the Company had no unremitted earnings from our foreign subsidiaries.

In July 2021, ServiceSource, together with its wholly owned subsidiary,
ServiceSource Delaware, Inc., entered into the 2021 Credit Agreement, which
provides for a $35.0 million revolving line of credit allowing each borrower to
borrow against its receivables as defined in the 2021 Credit Agreement. At the
Company's request and subject to customary conditions, the aggregate commitments
under the 2021 Credit Agreement may be increased up to an additional $10.0
million, for a total maximum commitment amount of $45.0 million. The Revolver in
the 2021 Credit Agreement matures in July 2024 and bears interest at a rate
equal to BSBY plus 2.00% to 2.50% per annum or, at our election, an alternate
base rate plus 1.00% to 1.50% per annum.

As of December 31, 2021, the Company had $10.0 million of borrowings under the
Revolver through a three-month BSBY borrowing at an effective interest rate of
2.40% maturing February 2022. An additional $18.0 million was available for
borrowing under the Revolver as of December 31, 2021. The BSBY borrowings may be
extended upon maturity, converted into a base rate borrowing upon

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maturity or require an incremental payment if the borrowing base decreases below
the current amount outstanding during the term of the BSBY borrowing. Proceeds
from the Revolver are used for working capital and general corporate purposes.

The obligations under the 2021 Credit Agreement are secured by substantially all
of the assets of ServiceSource and certain of its subsidiaries, including
pledges of equity in certain of the Company's subsidiaries. The 2021 Credit
Agreement has financial covenants which the Company was in compliance with as of
December 31, 2021.

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 "Prepaid expenses and other" and "Other assets" in the
Consolidated Balance Sheets.

Cash Flows

The following table presents a summary of our cash flows:

                                                                                       For the Year Ended December 31,
                                                                                          2021                  2020

                                                                                                (in thousands)
Net cash provided by operating activities                                           $          3,605      $            401
Net cash used in investing activities                                                        (3,932)               (7,855)
Net cash (used in) provided by financing activities                                          (5,743)                14,301

Effect of exchange rate changes on cash and cash equivalents and restricted cash

                 545                    96
Net change in cash and cash equivalents and restricted cash                

$ (5,525) $ 6,943

Depreciation and amortization expense were comprised of the following:

                                                For the Year Ended December 31,
                                                   2021                 2020

                                                       (in thousands)

Internally developed software amortization $ 9,388 $

7,701

Property and equipment depreciation                     5,279              

6,224

Total depreciation and amortization           $        14,667      $       
13,925


Operating Activities
Net cash provided by operating activities increased $3.2 million during the year
ended December 31, 2021 compared to the same period in 2020, primarily as a
result of lower payments for operating costs and increased revenue, partially
offset by a decrease in cash collections from our clients.

Investing Activities

Net cash used in investing activities decreased $3.9 million during the year
ended December 31, 2021 compared to the same period in 2020, due to decreased
cash outflows from purchases of property and equipment during the year ended
December 31, 2021.

Financing Activities

Net cash provided by financing activities decreased $20.0 million during
the year ended December 31, 2021 compared to the same period in 2020, primarily
due to $5.0 million in net cash outflows from repayments on the Revolver during
the current period compared to $15.0 million in net cash inflows from borrowings
on the Revolver during the prior period.

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Critical Accounting 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, 2021 and are consistent
with the year ended December 31, 2020.

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.

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.

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.

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.

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. Judgment is
required to estimate achievement of the performance metrics.

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

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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 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
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 a 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, costs attributable to
establishing a litigation reserve, and loss (gain) on disposal of fixed assets
and other, net.

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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:

                                                           For the Year Ended December 31,
                                                              2021                  2020

                                                                    (in thousands)
Net loss                                                $       (14,721)      $       (18,541)
Provision for income tax expense                                     278                   709
Interest and other expense, net                                    1,784   
             1,279
Depreciation and amortization                                     14,667                13,925
EBITDA                                                             2,008               (2,628)
Stock-based compensation                                           6,127                 4,865
Restructuring and other related costs                              1,071                 1,542
Amortization of contract acquisition asset costs -
ASC 606 initial adoption                                             215                   605
Litigation reserve                                                     -                  (74)
Loss on disposal of fixed assets and other, net                      377                     -
Adjusted EBITDA                                         $          9,798   

$ 4,310

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