What changed in this filing

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Item 1. Financial Statements

2021-11-05 compared with 2021-08-05 · 162 added, 99 removed, 506 unchanged (34% of the section changed)

3 unchanged sentences

(In thousands, except share and per share data)

June 30, December 31,

September 30, December 31,

Current assets

26 unchanged sentences

Redeemable Convertible Preferred Stock

Redeemable convertible preferred stock, $ 0.001 par, 0 and 72,799,602 shares authorized and 0 and 72,225,916 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

Redeemable convertible preferred stock, $ 0.001 par, 0 and 72,799,602 shares authorized and 0 and 72,225,916 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

Stockholders’ Equity (Deficit)

Preferred stock, $ 0.001 par, 10,000,000 and 0 shares authorized and 0 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

Common stock, $ 0.001 par, 500,000,000 and 101,671,156 shares authorized and 87,186,730 and 4,909,529 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

Preferred stock, $ 0.001 par, 10,000,000 and 0 shares authorized and 0 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

Common stock, $ 0.001 par, 500,000,000 and 101,671,156 shares authorized and 88,147,853 and 4,909,529 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

Additional paid-in capital 645,934 —

6 unchanged sentences

(In thousands, except share and per share data)

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

2021 2020 2021 2020

13 unchanged sentences

Loss on financial instruments — ( 14,743 ) ( 3,035 ) ( 14,810 )

( 1,391 ) ( 66 ) ( 3,035 ) ( 67 )

Loss before income taxes

14 unchanged sentences

(In thousands, except share data)

Three months ended June 30, 2021

Three months ended September 30, 2021

Redeemable Convertible Preferred Stock Common Stock Additional Paid-in Capital Accumulated Deficit Total Stockholders’ Equity (Deficit)

Shares Amount Shares Amount

Balance March 31, 2021

Balance June 30, 2021

— $ — 87,186,730 $ 87 $ 640,457 $ ( 289,285 ) $ 351,259

1 unchanged sentence

Exercised stock options — — 749,800 1 1,480 — 1,481

Payment of Series B Dividend upon initial public offering — ( 4,969 ) — — — — —

Issuance of common stock upon initial public offering, net of underwriting discounts and commissions — — 6,900,000 7 192,803 — 192,810

Conversion of redeemable convertible preferred stock to common stock upon initial public offering ( 72,225,916 ) ( 438,571 ) 72,225,916 72 438,498 — 438,570

Conversion of redeemable convertible preferred stock warrants to common stock warrants upon initial public offering — — — — 5,727 — 5,727

Costs in connection with initial public offering ( 5,674 ) ( 5,674 )

Exercised warrants — — 211,323 — 645 — 645

Net loss — — — — — ( 11,219 ) ( 11,219 )

Balance June 30, 2021

Balance September 30, 2021

— $ — 88,147,853 $ 88 $ 645,934 $ ( 300,504 ) $ 345,518

Three months ended June 30, 2020

Three months ended September 30, 2020

Redeemable Convertible Preferred Stock Common Stock Additional Paid-in Capital Accumulated Deficit Total Stockholders’ Equity (Deficit)

Shares Amount Shares Amount

Balance March 31, 2020

Balance June 30, 2020

57,220,137 $ 249,535 4,651,174 $ 5 — $ ( 213,356 ) $ ( 213,351 )

1 unchanged sentence

Stock-based compensation — — — — 439 — 439

Preferred Series E Tranche Liability — — — — ( 892 ) — ( 892 )

Exercised stock options — — 341,121 — 143 — 143

1 unchanged sentence

Net loss — — — — — ( 21,347 ) ( 21,347 )

Balance June 30, 2020

Balance September 30, 2020

72,225,916 $ 442,986 4,992,295 $ 5 $ — $ ( 238,580 ) $ ( 238,575 )

4 unchanged sentences

(In thousands, except share data)

Six months ended June 30, 2021

Nine months ended September 30, 2021

Redeemable Convertible Preferred Stock Common Stock Additional Paid-in Capital Accumulated Deficit Total Stockholders’ Equity (Deficit)

4 unchanged sentences

Exercised stock options — — 4,120,002 4 6,413 — 6,417

Exercised warrants — — 211,323 — 645 — 645

Payment of Series B Dividend upon initial public offering — ( 4,969 ) — — — — —

6 unchanged sentences

Net loss — — — — — ( 33,473 ) ( 33,473 )

Balance June 30, 2021

Balance September 30, 2021

— $ — 88,147,853 $ 88 $ 645,934 $ ( 300,504 ) $ 345,518

Six months ended June 30, 2020

Nine months ended September 30, 2020

Redeemable Convertible Preferred Stock Common Stock Additional Paid-in Capital Accumulated Deficit Total Stockholders’ Equity (Deficit)

8 unchanged sentences

Net loss — — — — — ( 38,869 ) ( 38,869 )

Balance June 30, 2020

Balance September 30, 2020

72,225,916 $ 442,986 4,992,295 $ 5 $ — $ ( 238,580 ) $ ( 238,575 )

3 unchanged sentences

(In thousands)

Six months ended June 30,

Nine months ended September 30,

Cash flows from operating activities:

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Proceeds from stock option exercises 6,417 241

Proceeds from exercise of warrants 645 —

Proceeds on sales of preferred stock, net of issuance costs — 218,040

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Cash and cash equivalents and restricted cash, end of period $ 321,276 $ 205,652

Supplemental disclosure of noncash financing activities

Deferred IPO offering costs not yet paid $ 663 $ —

(1) See Note 3 for additional information regarding noncash investing activities for the nine months ended September 30, 2021, related to the acquisition of MK.

The above financial statements should be read in conjunction with the Notes to the Unaudited Condensed Consolidated Financial Statements.

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Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the accompanying notes for the fiscal year ended December 31, 2020, which are included in the final prospectus (the “Prospectus”) for the Company’s IPO filed with the SEC on April 15, 2021 pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended.

Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of results that may be expected for any other interim period or for the year ending December 31, 2021.

Operating results for the three and nine months ended September 30, 2021 are not necessarily indicative of results that may be expected for any other interim period or for the year ending December 31, 2021.

The Company has no sources of other comprehensive income, and accordingly, net loss presented each period is the same as comprehensive loss.

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Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash, restricted cash and cash equivalents, accounts receivable, accounts payable, long-term debt and stock warrants.

The Company’s financial instruments consist primarily of cash, restricted cash and cash equivalents, accounts receivable, accounts payable, long-term debt, stock warrants and contingent consideration.

The carrying values of cash, restricted cash and cash equivalents, accounts receivable, and accounts payable approximate their respective fair values due to the short-term nature of these instruments.

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In connection with the Company’s IPO, warrants converted from a liability instrument to an equity instrument resulting in a reduction of the warrant liability to $ 0 .

The Company values contingent consideration related to business combinations using a weighted probability calculation of potential payment scenarios discounted at rates reflective of the risks associated with the expected future cash flows.

The Company uses a three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

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The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level in which to classify them for each reporting period.

The following table summarizes the Company’s financial assets measured at fair value as of June 30, 2021 and December 31, 2020 and indicates the fair value hierarchy of the valuation:

The following table summarizes the Company’s financial assets measured at fair value as of September 30, 2021 and December 31, 2020 and indicates the fair value hierarchy of the valuation:

Fair Value at Reporting Date Using

(In thousands) June 30, 2021 Level 1 Level 2 Level 3

(In thousands) September 30, 2021 Level 1 Level 2 Level 3

Money Market Accounts $ 14,647 $ 14,647 $ — $ —

Total Assets $ 14,647 $ 14,647 $ — $ —

Contingent consideration payable $ ( 15,500 ) $ — $ — $ ( 15,500 )

Total Liabilities $ ( 15,500 ) $ — $ — $ ( 15,500 )

Fair Value at Reporting Date Using

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Total Liabilities $ ( 2,692 ) $ — $ — $ ( 2,692 )

The reconciliations of the beginning and ending balances during the six months ended June 30, 2021 for Level 3 assets and liabilities are as follows (in thousands):

The reconciliations of the beginning and ending balances during the nine months ended September 30, 2021 for Level 3 assets and liabilities are as follows (in thousands):

Asset and liability categories Beginning Level 3 Fair Value at January 1, 2021

Fair value adjustment Adjustment for conversion to equity accounting treatment upon IPO

Ending Level 3 Fair Value at June 30, 2021

Ending Level 3 Fair Value at September 30, 2021

Warrant Liabilities $ ( 2,692 ) $ ( 3,035 ) $ 5,727 $ —

The following table represents the changes to the Company’s contingent consideration payable (in thousands):

Balance at January 1, 2021 $ —

Business Combination

Balance at September 30, 2021 $ 15,500

Restricted Cash

The Company defines restricted cash as cash that is legally restricted as to withdrawal or usage.

The amounts included in restricted cash on the condensed consolidated balance sheets at June 30, 2021 and December 31, 2020 represent the additional cash proceeds in deposit with an escrow agent for satisfaction of contingent consideration related to the acquisition of ACH Alert, LLC (“ACH Alert”).

The amounts included in restricted cash on the condensed consolidated balance sheets at September 30, 2021 and December 31, 2020 represent the additional cash proceeds in deposit with an escrow agent for satisfaction of contingent consideration related to the acquisition of ACH Alert, LLC (“ACH Alert”).

In addition, restricted cash representing additional cash proceeds in deposit with an escrow agent for satisfaction of a holdback provision related to the acquisition of MK Decisioning Systems, LLC (“MK”) is included in the condensed consolidated balance sheets at September 30, 2021.

See Note 3 for further information.

June 30, December 31,

September 30, December 31,

(in thousands) 2021 2020

Cash and cash equivalents $ 314,402 $ 166,790

Restricted cash included in Prepaid expenses and other current assets 3,500 —

Restricted cash included in Other assets 3,374 4,873

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Software development costs relate primarily to software coding, systems interfaces, and testing of the Company’s proprietary systems and are accounted for in accordance with ASC 350-40, Internal Use Software.

Internal software development costs are capitalized from the time the

internal use software is in the application development stage until the software is ready for use.

Internal software development costs are capitalized from the time the internal use software is in the application development stage until the software is ready for use.

Business analysis, system evaluation, and software maintenance costs are expensed as incurred.

The capitalized software development costs are reported in property and equipment, net in the condensed consolidated balance sheets.

The Company had $ 0.6 million in capitalized internal software development costs as of June 30, 2021 and no ne as of December 31, 2020.

The Company had $ 1.3 million in capitalized internal software development costs as of September 30, 2021 and no ne as of December 31, 2020.

Capitalized software development costs are amortized using the straight-line method over the estimated useful life of the software, generally three to five years from when the asset is placed in service.

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Generally, contract assets arise as a result of reallocating revenues when discounts are weighted more heavily in the early years of a multi-year contract or the client contract has substantive minimum fees that escalate over the term of the contract.

Contract assets totaled $ 0.9 million and $ 0.8 million as of June 30, 2021 and December 31, 2020, respectively, which are included in other assets in the accompanying condensed consolidated balance sheets.

Contract assets totaled $ 0.8 million and $ 0.8 million as of September 30, 2021 and December 31, 2020, respectively, which are included in other assets in the accompanying condensed consolidated balance sheets.

Contract liabilities are comprised of billings or payments received from the Company’s clients in advance of performance under the contract and are represented in deferred revenues in the condensed consolidated balance sheets.

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Management believes that its contract acceptance, billing, and collection policies are adequate to minimize potential credit risk.

No client represented more than 10% of revenue for the three and six months ended June 30, 2021 and 2020.

As of June 30, 2021 and December 31, 2020, no client represented more than 10% of accounts receivable.

No client represented more than 10% of revenue for the three and nine months ended September 30, 2021 and 2020.

As of September 30, 2021 and December 31, 2020, no client represented more than 10% of accounts receivable.

Recent Accounting Pronouncements

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2016-02, “Leases (Topic 842),” to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the condensed consolidated balance sheets and disclosing key information about leasing arrangements.

The standard is effective for non-public entities for fiscal years beginning after December 15, 2020, and interim periods for the fiscal year beginning after December 15, 2021, and early application is permitted.

The Company anticipates that the adoption of Topic 842 will impact its condensed consolidated balance sheets as most of its operating lease commitments will be subject to the new standard and recognized as right-of-use assets and corresponding operating lease liabilities upon the adoption of ASU 2016-02.

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The effective date for adoption of the new standard was delayed until calendar years beginning after December 15, 2021, with early adoption permitted.

The Company expects to adopt this new standard in interim periods beginning in 2022.

This ASU is not expected to have a material impact on the Company’s financial statements.

Business Combination

ACH Alert, LLC

On October 4, 2020, the Company announced the acquisition of substantially all of the assets of ACH Alert for approximately $ 25 million in cash consideration.

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The Company has classified the amounts held in escrow as restricted cash on the condensed consolidated balance sheets and is accruing the estimated payouts over the requisite service period as a component of general and administrative expense on the condensed consolidated statements of operations.

For the three and six months ended June 30, 2021, the Company recognized compensation expense of $ 0.6 million and $ 1.2 million, respectively, related to this agreement.

For the three and nine months ended September 30, 2021, the Company recognized compensation expense of $ 0.6 million and $ 1.9 million, respectively, related to this agreement.

The Company’s preliminary fair value estimates and assumptions to measure the assets acquired and liabilities assumed were subject to change as the Company obtained additional information during the measurement period.

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This goodwill is expected to be deductible for tax purposes.

No material transaction costs are included within the condensed consolidated statements of operations for the three and six months ended June 30, 2021 and 2020.

No material transaction costs are included within the condensed consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020.

MK Decisioning Systems, LLC

On September 10, 2021, the Company acquired substantially all of the assets of MK for approximately $ 20 million in cash consideration due at closing subject to a $ 2 million holdback provision held in escrow with $ 1 million to be released at the 12 -month anniversary of close and the remainder to be released at the 18 -month anniversary of close.

The Company also agreed to assume certain liabilities associated with MK’s business.

The integrated set of assets and activities acquired from MK through the acquisition meet the definition of a business under ASC 805, as updated by ASU 2017-01.

In addition to the base purchase price, the MK acquisition also included a potential earn-out that is tied to revenue of MK from sales of its products and services within two 12-month periods (the “First Earn-Out Period” and “Second Earn-Out Period”), with the First Earn-Out Period beginning on January 1, 2022 and ending on December 31, 2022 and the Second Earn-Out Period beginning on January 1, 2023 and ending on December 31, 2023.

Pursuant to the terms and conditions set forth in the purchase agreement, the earn-out amount payable, if any, to the former owners, will be a maximum of $ 7.5 million and $ 17.5 million for the First Earn-Out Period and Second Earn-Out Period, respectively, contingent on achievement of certain revenue milestones.

In certain circumstances within both Earn-Out Periods, the earn-out amounts are payable in a mix of cash and shares (based on a reference price of $ 35 and limited to $ 20 million in earn-out shares) of the Company’s common stock subject to the election of the former owners.

Earn-out amounts, if any, would be payable no later than 170 days after the end of each Earn-Out Period.

The Company has classified the amounts held in escrow as restricted cash on the condensed consolidated balance sheets.

The fair value of the contingent earn-out as of September 30, 2021 is $ 15.5 million for which the balance is included in Other non-current liabilities on the condensed

consolidated balance sheets.

The fair value of the contingent earn-out is included as contingent consideration in the total purchase price.

The Company will remeasure the fair value of the contingent consideration on an ongoing basis and will record the adjustment to operating income or loss.

Assumptions used to estimate the fair value of contingent consideration include various financial metrics (revenue performance targets and stock price forecasts) and the probability of achieving the specific targets using a geometric binomial model.

Based on the preliminary purchase accounting, the Company determined that approximately 62 % of the maximum contingent consideration would be paid to the seller in accordance with the terms of the purchase agreement.

The Company’s preliminary fair value estimates and assumptions to measure the assets acquired and liabilities assumed are subject to change as the Company obtains additional information during the measurement period.

The following table summarizes the fair value amounts recognized as of the acquisition date for each major class of asset acquired or liability assumed:

(in thousands) Preliminary Fair Value as of September 10, 2021

Trade accounts receivables $ 437

Other current assets 56

Property and equipment 41

Goodwill 31,849

Intangible assets 3,670

Total assets acquired $ 36,053

Accounts payable and accrued liabilities $ 43

Deferred revenues, net of current 510

Total liabilities assumed 553

Net assets acquired $ 35,500

As of September 30, 2021, the allocation of the purchase price for MK has not been finalized, and the one-year measurement period has not ended.

The preliminary purchase price allocations are based upon the valuation of assets and liabilities.

These estimates and assumptions are subject to change as the Company obtains additional information during the measurement period.

The table below outlines the purchased identifiable intangible assets:

Weighted Average Amortization Period Total

(in years) (in thousands)

Customer relationships 15 $ 170

Developed technology 5 3,500

Total identifiable intangible assets $ 3,670

Goodwill is mainly attributable to advantages expected from the acquisition such as giving the Company a complimentary solution to its existing platform offering, especially for banks.

This goodwill is expected to be deductible for tax purposes.

Transaction costs are included in the condensed consolidated statements of operations for both the three and nine months ended September 30, 2021 were $ 0.3 million.

For the nine months ended September 30, 2021, the Company had noncash investing activities of $ 17.5 million related to unpaid consideration for the acquisition of MK.

Property and Equipment, Net

Depreciation expense was $ 0.6 million and $ 1.2 million for the three and six months ended June 30, 2021, respectively, and $ 0.7 million and $ 1.3 million for the three and six months ended June 30, 2020, respectively.

(in thousands) Useful Life June 30, 2021 December 31, 2020

Depreciation expense was $ 0.6 million and $ 1.8 million for the three and nine months ended September 30, 2021, respectively, and $ 0.7 million and $ 2.0 million for the three and nine months ended September 30, 2020, respectively.

(in thousands) Useful Life September 30, 2021 December 31, 2020

Software 1 to 3 years

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Implementation and integration of the digital banking platform is complex, and the Company has determined that the one-time, upfront services are not distinct.

In determining whether implementation services are distinct from subscription services, the Company considered various factors including the significant level of integration, interdependency, and interrelation between the implementation and subscription service, as well as the inability of the

clients’ personnel or other service providers to perform significant portions of the services.

As a result, the Company defers any arrangement fees for implementation services and recognizes such amounts over time on a ratable basis as one performance obligation with the underlying subscription revenue commencing when the client goes live on the platform, which corresponds with the date the client obtains access to the Company’s digital banking solution and begins to benefit from the service.

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In limited circumstances when a contract calls for certain discounting to be triggered by volumes above contracted minimums, the Company is required to estimate these volumes in order to calculate revenue recognition in line with the standard’s allocation objectives.

The following table disaggregates the Company's revenue by major source for the three and six months ended June 30, 2021 and 2020:

Three months ended June 30,

Six months ended June 30,

The following table disaggregates the Company's revenue by major source for the three and nine months ended September 30, 2021 and 2020:

Three months ended September 30,

Nine months ended September 30,

(in thousands) 2021 2020 2021 2020

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Total revenues $ 39,761 $ 28,941 $ 109,724 $ 78,817

The Company recognized approximately $ 2.0 million and $ 3.7 million of revenue during the three and six months ended June 30, 2021, respectively, and $ 2.7 million and $ 4.5 million during the three and six months ended June 30, 2020, respectively, which was recognized from deferred revenues in the accompanying condensed consolidated balance sheets as of the beginning of each reporting period.

For those contracts that were wholly or partially unsatisfied as of June 30, 2021, minimum contracted subscription revenues to be recognized in future periods total approximately $ 536.0 million.

The Company recognized approximately $ 2.1 million and $ 5.8 million of revenue during the three and nine months ended September 30, 2021, respectively, and $ 2.9 million and $ 7.4 million during the three and nine months ended September 30, 2020, respectively, which was recognized from deferred revenues in the accompanying condensed consolidated balance sheets as of the beginning of each reporting period.

For those contracts that were wholly or partially unsatisfied as of September 30, 2021, minimum contracted subscription revenues to be recognized in future periods total approximately $ 553.4 million.

The Company expects to recognize approximately 47.0 % of this amount as subscription services are transferred to customers over the next 24 months, an additional 33.6 % in the next 25 to 48 months, and the balance thereafter.

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Deferred Cost Recognition

The Company capitalized $ 0.2 million and $ 0.5 million in deferred commissions costs during the three and six months ended June 30, 2021, respectively and $ 0.5 million and $ 0.8 million for the three and six months ended June 30, 2020, respectively, and recognized $ 0.5 million and $ 1.0 million of amortization during the three and six months ended June 30, 2021, respectively, and $ 0.4 million and $ 0.7 million for the three and six months ended June 30, 2020, respectively.

The Company capitalized $ 0.3 million and $ 0.8 million in deferred commissions costs during the three and nine months ended September 30, 2021, respectively and $ 0.3 million and $ 1.1 million for the three and nine months ended September 30, 2020, respectively, and recognized amortization of $ 0.6 million and $ 1.6 million during the three and nine months ended September 30, 2021, respectively, and $ 0.4 million and $ 1.1 million for the three and nine months ended September 30, 2020, respectively.

Amortization expense is included in sales and marketing expenses in the accompanying statements of operations.

Deferred commissions are included in deferred implementation costs in the accompanying condensed consolidated balance sheets in the amount of $ 8.5 million and $ 9.0 million as of June 30, 2021 and December 31, 2020, respectively.

The Company capitalized implementation costs of $ 1.3 million and $ 2.7 million during the three and six months ended June 30, 2021, respectively, and $ 1.0 million and $ 2.2 million for the three and six months ended June 30, 2020, respectively, and recognized amortization of $ 0.7 million and $ 1.2 million during the three and six months ended June 30, 2021, respectively, and $ 0.5 million and $ 1.0 million for the three and six months ended June 30, 2020, respectively.

Deferred commissions are included in deferred implementation costs in the accompanying condensed consolidated balance sheets in the amount of $ 8.4 million and $ 9.0 million as of September 30, 2021 and December 31, 2020, respectively.

The Company capitalized implementation costs of $ 1.3 million and $ 4.0 million during the three and nine months ended September 30, 2021, respectively, and $ 1.0 million and $ 3.2 million for the three and nine months ended September 30, 2020, respectively, and recognized amortization of $ 0.7 million and $ 1.9 million during the three and nine months ended September 30, 2021, respectively, and $ 0.5 million and $ 1.5 million for the three and nine months ended September 30, 2020, respectively.

Amortization expense is included in cost of revenues in the accompanying condensed consolidated statements of operations.

The Company periodically reviews the carrying amount of deferred costs to determine whether events or changes in circumstances have occurred that could impact the period of benefit.

No impairment loss was recognized in relation to these capitalized costs for the three and six months ended June 30, 2021 and 2020.

No impairment loss was recognized in relation to these capitalized costs for the three and nine months ended September 30, 2021 and 2020.

Accounts Receivable

Accounts receivable includes the following amounts at June 30, 2021 and December 31, 2020:

June 30, December 31,

Accounts receivable includes the following amounts at September 30, 2021 and December 31, 2020:

September 30, December 31,

(in thousands) 2021 2020

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Accrued Liabilities

Accrued liabilities consisted of the following at June 30, 2021 and December 31, 2020:

June 30, December 31,

Accrued liabilities consisted of the following at September 30, 2021 and December 31, 2020:

September 30, December 31,

(in thousands) 2021 2020

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The applicable margin for LIBOR rate loans ranges, based on an applicable recurring revenue leverage ratio, from 3.00 % to 3.50 % per annum, and the applicable margin for base rate loans ranges from 2.00 to 2.50 % per annum.

The Company’s minimum interest rate applied to term debt was 4.00 % as of June 30, 2021.

The Company’s minimum interest rate applied to term debt was 4.00 % as of September 30, 2021.

The Company is required to pay a commitment fee of 0.30 % per annum on the undrawn portion available under the Revolving Facility, and variable fees on outstanding letters of credit.

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The Credit Agreement contains customary affirmative and negative covenants, as well as (i) an annual recurring revenue growth covenant requiring the loan parties to have recurring revenues in any four consecutive fiscal quarter period in an amount that is 10 % greater than the recurring revenues for the corresponding four consecutive quarter period in the previous year and (ii) a liquidity (defined as the aggregate amount of cash in bank accounts subject to a control agreement plus availability under the Revolving Facility) covenant, requiring the loan parties to have liquidity, tested on the last day of each calendar month, of $ 10.0 million or more.

The Credit Agreement also contains customary events of default, which if they occur, could result in the termination of commitments under the Credit Agreement, the declaration that all outstanding loans are immediately due and payable in whole or in part, and the requirement to maintain cash collateral deposits in respect of outstanding letters of credit.

The Company was in compliance with all covenants as of June 30, 2021.

The Credit Agreement also contains customary events of default, which if

they occur, could result in the termination of commitments under the Credit Agreement, the declaration that all outstanding loans are immediately due and payable in whole or in part, and the requirement to maintain cash collateral deposits in respect of outstanding letters of credit.

The Company was in compliance with all covenants as of September 30, 2021.

Long-term Debt

The following table summarizes long-term debt obligations as of June 30, 2021 and December 31, 2020 (in thousands):

June 30, 2021 December 31, 2020

The following table summarizes long-term debt obligations as of September 30, 2021 and December 31, 2020 (in thousands):

September 30, 2021 December 31, 2020

Term Debt $ 25,000 $ 25,000

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Long-term portion $ 23,668 $ 24,566

Maturities of long-term debt outstanding as of June 30, 2021, are summarized as follows (in thousands):

Maturities of long-term debt outstanding as of September 30, 2021, are summarized as follows (in thousands):

Total $ 25,000

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With the proceeds from its IPO, the Company paid in full accumulated dividends on its previously outstanding shares of Series B redeemable convertible preferred stock, which totaled approximately $ 5.0 million.

As of June 30, 2021, there was no preferred stock issued or outstanding.

As of September 30, 2021, there was no preferred stock issued or outstanding.

In conjunction with financing arrangements with prior lenders, the Company issued warrants for the purchase of shares of the Company’s redeemable convertible preferred stock.

All of the Company’s outstanding warrants exercisable for shares of redeemable convertible preferred stock converted into warrants exercisable for 212,408 shares of common stock and were classified as equity immediately prior to the effectiveness of the Company’s registration statement relating to its IPO.

All warrants were exercised for aggregate proceeds of $ 0.6 million during the three months ended September 30, 2021.

Equity Compensation

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On February 25, 2021, the Board approved, subject to stockholder approval, which was obtained on March 23, 2021, the Company’s 2021 Incentive Award Plan (the “2021 Plan”), pursuant to which incentive awards may be awarded to employees, directors and consultants.

The Board provided that the maximum number of shares of common stock (subject to stock splits, dividends, recapitalizations and the like) issuable under the 2021 Plan is equal to a number of shares equal to (i) 11.0 % of the shares of common stock outstanding immediately prior to the effectiveness of its IPO after giving effect to the number of shares being sold in its IPO (including shares subject to outstanding equity awards, and the 2021 share reserve and the ESPP share reserve (as described above)) and assuming no exercise of the underwriters’ option to purchase additional shares, plus (ii)

an annual increase on the first day of each year beginning in 2022 and ending in 2031, equal to the lesser of:

provided that the maximum number of shares of common stock (subject to stock splits, dividends, recapitalizations and the like) issuable under the 2021 Plan is equal to a number of shares equal to (i) 11.0 % of the shares of common stock outstanding immediately prior to the effectiveness of its IPO after giving effect to the number of shares being sold in its IPO (including shares subject to outstanding equity awards, and the 2021 share reserve and the ESPP share reserve (as described above)) and assuming no exercise of the underwriters’ option to purchase additional shares, plus (ii) an annual increase on the first day of each year beginning in 2022 and ending in 2031, equal to the lesser of:

(a) 5.0 % of the shares outstanding on the last day of the prior fiscal year or (b) such lesser amount as determined by the Board, plus (iii) any shares underlying awards outstanding under the 2011 Long-Term Incentive Plan, as amended (the “2011 Plan”), as of immediately prior to the effectiveness of its IPO, that are thereafter forfeited, terminated, expired or repurchased for the original purchase price thereof, subject to certain statutory limits related to “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code.

1 unchanged sentence

Stock Options

During the six months ended June 30, 2021, the Company granted an aggregate of 2,811,098 stock options to purchase shares of its common stock to officers and employees pursuant to the 2011 Plan and 2021 Plan, with a weighted average exercise price of $ 19.92 per share.

During the nine months ended September 30, 2021, the Company granted an aggregate of 2,811,098 stock options to purchase shares of its common stock to officers and employees pursuant to the 2011 Plan and 2021 Plan, with a weighted average exercise price of $ 19.92 per share.

The fair value of options granted was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions (i) expected term of 6.03 years, (ii) expected volatility of 36.9 %, (iii) risk-free interest rate 0 .7 % and (iv) expected dividend yield of 0 %.

Restricted Stock Units

In April 2021, the Company granted an aggregate of 213,500 RSUs to officers and employees pursuant to the 2021 Plan.

In the nine months ended September 30, 2021, the Company granted an aggregate of 467,351 RSUs to officers and employees pursuant to the 2021 Plan.

The RSUs vest and settle upon the satisfaction of a service condition.

1 unchanged sentence

Employee Stock Purchase Plan

The first offering period commenced on May 15, 2021, and as of June 30, 2021, no shares had yet been issued under the plan.

The first offering period commenced on May 15, 2021, and as of September 30, 2021, no shares had yet been issued under the plan.

Stock-based compensation expense was included as follows:

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

(in thousands) 2021 2020 2021 2020

4 unchanged sentences

Total stock-based compensation expenses $ 3,351 $ 439 $ 7,793 $ 1,348

The amount of stock-based compensation capitalized as part of deferred implementation costs was insignificant for the three and six months ended June 30, 2021 and June 30, 2020.

The amount of stock-based compensation capitalized as part of deferred implementation costs was insignificant for the three and nine months ended September 30, 2021 and September 30, 2020.

Due to net operating losses, there was no tax expense or benefit recorded in connection with stock-based compensation expense.

The provision for income taxes in the accompanying condensed consolidated statements of operations for the three and six months ended June 30, 2021 and 2020 was $ 0 .

The provision for income taxes in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020 was $ 0 .

The effective tax rate differs from the statutory tax rate primarily due to the impact of the full valuation allowance against the Company’s deferred tax assets.

Earnings Per Share

Net loss attributable to common stockholders used in computing basic and diluted earnings per share (“EPS”) has been calculated as the net loss less Series B cumulative dividends and other adjustments to redeemable convertible preferred stock of $ 0.3 million for both the three and six months ended June 30, 2021 and $ 0.3 million and $ 0.6 million for the three and six months ended June 30, 2020, respectively.

Net loss attributable to common stockholders used in computing basic and diluted earnings per share (“EPS”) has been calculated as the net loss less Series B cumulative dividends and other adjustments to redeemable convertible preferred stock of $ 0.3 million for the nine months ended September 30, 2021 and $ 4.5 million and $ 5.0 million for the three and nine months ended September 30, 2020, respectively.

The holders of the Company’s redeemable convertible preferred stock did not have a contractual obligation to share in the Company’s losses;

therefore, no amount of total undistributed loss was allocated to redeemable convertible preferred stock.

Upon the consummation of its IPO, all preferred stock converted to common stock, and therefore the Company had no issued or outstanding preferred stock as of June 30, 2021.

Upon the consummation of its IPO, all preferred stock converted to common stock, and therefore the Company had no issued or outstanding preferred stock as of September 30, 2021.

Basic net loss per share attributable to common stockholders is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period.

Because the Company has reported a net loss for the three and six months ended June 30, 2021 and 2020, the number of shares used to calculate diluted net loss per share attributable to common stockholders is the same as the number of shares used to calculate basic net loss per share attributable to common stockholders for the period presented because the potentially dilutive shares would have been antidilutive if included in the calculation.

The computation of basic and diluted EPS is as follows for the three and six months ended June 30, 2021 and 2020:

Three months ended June 30,

Six months ended June 30,

Because the Company has reported a net loss for the three and nine months ended September 30, 2021 and 2020, the number of shares used to calculate diluted net loss per share attributable to common stockholders is the same as the number of shares used to calculate basic net loss per share attributable to common stockholders for the period presented because the potentially dilutive shares would have been antidilutive if included in the calculation.

The computation of basic and diluted EPS is as follows for the three and nine months ended September 30, 2021 and 2020:

Three months ended September 30,

Nine months ended September 30,

(In thousands, except shares and per share amounts) 2021 2020 2021 2020

5 unchanged sentences

Loss per common share - basic and diluted $ ( 0.13 ) $ ( 5.34 ) $ ( 0.60 ) $ ( 9.38 )

For the three and six months ended June 30, 2021 and 2020, the following potential shares of common stock were excluded from diluted EPS as the Company had a net loss in each period presented:

As of June 30,

For the three and nine months ended September 30, 2021 and 2020, the following potential shares of common stock were excluded from diluted EPS as the Company had a net loss in each period presented:

As of September 30,

Stock options 10,015,930 12,366,781

6 unchanged sentences

The Company leases office space under non-cancelable operating leases for its corporate headquarters in Plano, Texas pursuant to a ten-year lease agreement under which the Company leases approximately 125,000 square feet of office space with an initial term that expires on August 31, 2028, with the option to extend the lease for either two additional terms of five years each or one additional term of ten years .

Rent expense under operating leases was $ 1.2 million and $ 2.3 million for the three and six months ended June 30, 2021, respectively, and $ 1.2 million and $ 2.3 million for the three and six months ended June 30, 2020, respectively.

Future minimum payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year at June 30, 2021 were as follows (in thousands):

Rent expense under operating leases was $ 1.2 million and $ 3.5 million for the three and nine months ended September 30, 2021, respectively, and $ 1.2 million and $ 3.4 million for the three and nine months ended September 30, 2020, respectively.

Future minimum payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year at September 30, 2021 were as follows (in thousands):

Operating Leases

3 unchanged sentences

Deferred rent and tenant allowances are amortized and applied against rental expense over the lease term on a straight-line basis.

As of June 30, 2021 and December 31, 2020, the Company had deferred rent and tenant allowance balances as follows:

(in thousands) June 30, 2021 December 31, 2020

As of September 30, 2021 and December 31, 2020, the Company had deferred rent and tenant allowance balances as follows:

(in thousands) September 30, 2021 December 31, 2020

Deferred rent and tenant allowance $ 6,066 $ 6,463

12 unchanged sentences

CU Cooperative Systems, Inc.

(“CU Cooperative”), a stockholder of the Company who is also a vendor, was paid fees of $ 1.0 million and $ 2.1 million, for the three and six months ended June 30, 2021, respectively, and $ 1.1 million and $ 2.3 million for the three and six months ended June 30, 2020, respectively, which relate to services resold to the Company’s clients.

As of June 30, 2021, the Company had a $ 0.3 million payable balance due to CU Cooperative, and as of December 31, 2020, accounts payable included amounts due to CU Cooperative of $ 0.3 million.

(“CU Cooperative”), a stockholder of the Company who is also a vendor, was paid fees of $ 1.3 million and $ 3.4 million, for the three and nine months ended September 30, 2021, respectively, and $ 1.0 million and $ 3.7 million for the three and nine months ended September 30, 2020, respectively, which relate to services resold to the Company’s clients.

As of September 30, 2021, the Company had no payable balance due to CU Cooperative, and as of December 31, 2020, accounts payable included amounts due to CU Cooperative of $ 0.3 million.

Todd Clark, who has served as President and Chief Executive Officer of CU Cooperative since 2016, is a member of the Board and was designated to serve as a member of the Board by CU Cooperative.

CU Cooperative held 5 % or more of the Company’s capital stock as of December 31, 2020.

For the three and six months ended June 30, 2021, the Company employed a former owner of the acquired business ACH Alert.

For the three and nine months ended September 30, 2021, the Company employed a former owner of the acquired business ACH Alert.

For certain operating and lease payments made on the former owner’s behalf and lockbox cash receipts due to the Company, a receivable of $ 1.4 million from the former owner was included in prepaid expenses and other current assets as of December 31, 2020.

The Company had no significant receivable balance from the former owner as of June 30, 2021.

The Company had no significant receivable balance from the former owner as of September 30, 2021.

Goodwill and Other Intangibles

1 unchanged sentence

As part of the Company’s business planning cycle, the Company will perform an annual goodwill impairment test in the fourth quarter of the fiscal year beginning in 2021.

There were no indications of impairment of goodwill noted for the three months ended June 30, 2021.

Goodwill had a carrying value of $ 16.5 million and $ 16.2 million as of June 30, 2021 and December 31, 2020, respectively.

The Company recorded $ 0.3 million to goodwill during the six months ended June 30, 2021 due to a change in the purchase price allocation for ACH Alert as is appropriate during the measurement period.

There were no indications of impairment of goodwill noted for the three months ended September 30, 2021.

Goodwill had a carrying value of $ 48.4 million and $ 16.2 million as of September 30, 2021 and December 31, 2020, respectively.

The Company recorded $ 31.8 million to goodwill during the three and nine months ended September 30, 2021 due to the purchase of MK and recorded $ 0.3 million during the nine months ended September 30, 2021 due to a change in the purchase price allocation for ACH Alert as is appropriate during the measurement period.

See Note 3 for additional information.

Total intangibles, net, consisted of the following as of June 30, 2021 and December 31, 2020:

As of June 30, 2021

Total intangibles, net, consisted of the following as of September 30, 2021 and December 31, 2020:

As of September 30, 2021

(In thousands) Carrying Value Accumulated Amortization Net Carrying Value

15 unchanged sentences

Total intangible assets $ 8,475 $ ( 209 ) $ 8,266

Amortization expense recognized on intangible assets was $ 0.2 million and $ 0.4 million for the three and six months ended June 30, 2021, respectively.

The Company did not recognize amortization expense related to intangible assets for the three and six months ended June 30, 2020.

Amortization expense recognized on intangible assets was $ 0.2 million and $ 0.6 million for the three and nine months ended September 30, 2021, respectively.

The Company did not recognize amortization expense related to intangible assets for the three and nine months ended September 30, 2020.

The following table shows the estimated annual amortization expense of the definite-lived intangible assets for the next five years and thereafter (in thousands):

Thereafter 4,747

Subsequent Events

On November 3, 2021, the Board of Directors of the Company (“Board”), appointed Alex Shootman as Chief Executive Officer of the Company, effective November 5, 2021, replacing Michael Hansen who will remain with the Company as Advisor to the Board, effective November 5, 2021, and will continue to serve on the Board.

The Company entered into an employment agreement with Mr.

Under the employment agreement, Mr.

Shootman will serve as Chief Executive Officer of the Company and a member of the Board.

Shootman is also entitled to be granted 1,000,000 restricted stock units that vest as to 25 % of the restricted stock units on December 8, 2022 and in equal quarterly installments over three years thereafter.

In connection with Mr.

Hansen’s departure, the Company entered into a transition and separation agreement with Mr.

Under the transition and separation agreement, Mr.

Hansen will transition to the role of Advisor to the Board and remain employed by the Company through December 17, 2021.

The transition and separation agreement also provides that Mr.

Hansen will serve as a member of the Board through December 31, 2022.

Hansen’s sole compensation while serving on the Board will be in the continued vesting of his outstanding equity awards.

In the event Mr.

Hansen continues to serve on the Board through December 31, 2022, the vesting of all of his outstanding equity awards will be accelerated as of that date.

Hansen will have one year after the end of his Board service date to exercise any vested options.

The Company is evaluating the accounting for the modification of Mr.

Hansen’s unvested equity awards and the Company expects the acceleration of vesting to be significant to its consolidated financial statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements