What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-06 compared with 2021-11-05 · 186 added, 161 removed, 225 unchanged (61% of the section changed)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our final prospectus (the “Prospectus”) for our Initial Public Offering (“IPO”) of our common stock, filed with the Securities and Exchange Commission (“SEC”) on April 15, 2021 pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended (the “Securities Act”).

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and in our other SEC filings, including the audited consolidated financial statements and the accompanying notes for the fiscal year ended December 31, 2021, which are included in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 25, 2022.

Unless the context otherwise requires, all references in this report to the “Company,” “Alkami,” “we,” “us” and “our” refer to Alkami Technology, Inc., a Delaware corporation, and its consolidated subsidiary taken as a whole.

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Although we believe that these forward-looking statements are based on reasonable assumptions at the time they are made, you should be aware that many factors could affect our actual results or results of operations and could cause actual results to differ materially from those expressed in the forward-looking statements.

The following important factors, along with the factors discussed in “Risk Factors” in the Prospectus, may materially affect such forward-looking statements:

• Our limited operating history and history of operating losses;

• Our ability to manage future growth;

• Our ability to attract new clients and expand existing clients’ use of our solutions;

The following important factors, along with the factors discussed in “Risk Factors” in the Annual Report on Form 10-K, may materially affect such forward-looking statements:

• our ability to manage our rapid growth;

• our ability to attract new clients and retain and broaden our existing clients’ use of our solutions;

• our ability to maintain, protect and enhance our brand;

• Our ability to accurately predict the long-term rate of client subscription renewals or adoption of our solutions;

• Our reliance on third-party software, content and services;

• Our ability to effectively integrate our solutions with other systems used by our clients;

• Intense competition in our industry;

• Any downturn, consolidation or decrease in technology spend in the financial services industry;

• Our ability and the ability of third parties on which we rely to prevent and identify breaches of security measures and resulting disruptions of our systems or operations and unauthorized access to client customer and other data;

• Our ability to comply with regulatory and legal requirements and developments;

• Our ability to attract and retain key employees;

• The political, economic and competitive conditions in the markets and jurisdictions where we operate, including the impact of the COVID-19 pandemic and the various governmental, industry and consumer actions related thereto;

• Our ability to maintain, develop and protect our intellectual property;

• Our ability to respond to evolving technological requirements to develop or acquire new and enhanced products that achieve market acceptance in a timely manner;

• Our ability to estimate our expenses, future revenues, capital requirements and needs for additional financing and our ability to obtain additional capital.

• our ability to predict the long-term rate of client subscription renewals or adoption of our solutions;

• the unpredictable and time-consuming nature of our sales cycles;

• our integration with and reliance on third-party software, content and services;

• defects, errors or performance problems associated with our solutions;

• retaining our management team and key employees and recruiting and retaining new employees;

• managing the increased complexity of our solutions and a higher volume of implementations;

• providing client support;

• mergers and acquisitions;

• intense competition in the markets we serve;

• our focus and reliance on the financial services industry as the source of our revenue;

• evolving technological requirements and changes and additions to our solution offerings;

• regulations applicable to us, our clients and our solutions;

• security breaches or other compromises of our security measures or those of third parties upon which we rely;

• increased privacy concerns and our processing and use of the personal information of end users;

• protecting our intellectual property rights and defending ourselves against claims that we are misappropriating the intellectual property rights of others;

• open-source software in our solutions;

• litigation or threats of litigation;

• the fluctuation of our quarterly and annual results of operations relative to our expectations and guidance;

• the way we recognize revenue, which has the effect of delaying changes in the subscriptions for our solutions from being reflected in our operating results;

• changes in financial accounting standards or practices;

• our limited operating history, our history of operating losses and our ability to use our net operating loss (“NOL”) carryforwards;

• our ability to raise sufficient capital and the resulting dilution and the terms of our credit agreements;

• stock price volatility and no intention to pay dividends;

• maintaining proper and effective internal controls;

• expenses and administrative burdens as a public company;

• anti-takeover provisions in our charter documents and Delaware law.

Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

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• Integrations :

Scalability and extensibility driven by 230 real-time integrations to back office systems and third-party fintech solutions as of September 30, 2021 , including core systems, payment cards, mortgages, bill pay, electronic documents, money movement, personal financial management and account opening.

Scalability and extensibility driven by 230 real-time integrations to back office systems and third-party fintech solutions as of March 31, 2022 , including core systems, payment cards, mortgages, bill pay, electronic documents, money movement, personal financial management and account opening.

• Deep data capabilities :

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Given the long-term nature of our contracts, a typical sales cycle can range from approximately three to 12 months, with the subsequent implementation timeframe generally ranging from six to 12 months depending on the depth of integration.

We derive our revenues almost entirely from multi-year contracts that are based on an average contract life of approximately 70 months as of September 30, 2021.

We derive our Alkami Platform revenues almost entirely from multi-year contracts that are based on an average contract life of approximately 70 months as of March 31, 2022.

We predominantly employ a per-registered-user pricing model, with incremental fees above certain contractual minimum commitments for each licensed solution.

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Similarly, we continue to expand our sales and marketing organization focusing on new client wins, cross-selling opportunities and client renewals.

For the three months ended September 30, 2021 and 2020 our total revenues were $39.8 million and $28.9 million, respectively, representing a 37.4% increase period-over-period.

For the nine months ended September 30, 2021 and 2020 our total revenues were $109.7 million and $78.8 million, respectively, representing a 39.2% increase period-over-period.

SaaS subscription revenues, as further described below, represented 94.3% and 94.4% of total revenues for the three and nine months ended September 30, 2021, respectively and 93.5% and 93.5% for the three and nine months ended September 30, 2020, respectively.

We incurred net losses of $11.2 million and $33.5 million for the three and nine months ended September 30, 2021, respectively, and net losses of $21.3 million and $38.9 million for the three and nine months ended September 30, 2020, respectively, largely on the basis of significant continued investment in sales, marketing, product development and post-sales client activities.

For the three months ended March 31, 2022 and 2021, our total revenues were $44.8 million and $33.3 million, respectively, representing a 34.7% increase period-over-period.

SaaS subscription revenues, as further described below, represented 95.6% and 94.9% of total revenues for the three months ended March 31, 2022 and 2021, respectively.

We incurred net losses of $13.4 million and $10.9 million for the three months ended March 31, 2022 and 2021, respectively, largely on the basis of significant continued investment in sales, marketing, product development and post-sales client activities.

Recent Developments

Initial Public Offering.

On April 13, 2021, the Company's registration statement relating to our IPO of our common stock was declared effective by the SEC.

In connection with our IPO, the Company issued and sold 6,900,000 shares of common stock (including 900,000 shares issued pursuant to the exercise in full of the underwriters' option to purchase additional shares) at a public offering price of $30.00 per share for net proceeds of $192.8 million, after deducting underwriters' discounts and commissions (excluding other IPO costs as of April 13, 2021).

Acquisition of MK.

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.

MK expands our total addressable market by over $2.0 billion while gaining new cross-selling opportunities among a larger installed base.

Merger with Segmint.

On April 25, 2022, subsequent to the condensed consolidated balance sheet date, the Company completed its previously announced merger with Segmint Inc.

Pursuant to the Merger Agreement, Segmint merged with and into a wholly owned subsidiary of the Company.

Segmint operates a marketing analytics and messaging delivery platform with patented software that enables financial institutions and merchants to understand and leverage data, interact with customers, and measure results.

The aggregate consideration paid in exchange for all of the outstanding equity interests of Segmint at closing was approximately $135.5 million.

A portion of the consideration was placed into escrow to secure certain post-closing indemnification obligations in the Merger Agreement.

Amended Credit Agreement.

On April 29, 2022, subsequent to the condensed consolidated balance sheet date, the Company entered into an amended and restated credit agreement with Silicon Valley Bank, Comerica Bank, and Canadian Imperial Bank of Commerce (the “Amended Credit Agreement”).

The Amended Credit Agreement amends and restates the prior credit facility provided by Silicon Valley Bank and KeyBank National Association.

The Amended Credit Agreement matures on April 29, 2025.

The Amended Credit Agreement includes the following among other features:

• Revolving Facility:

The Amended Credit Agreement provides $40.0 million in aggregate commitments for secured revolving loans (“Amended Revolving Facility”).

A term loan of $85.0 million (the “Amended Term Loan”) was borrowed on the closing date of the Amended Credit Agreement.

The additional proceeds received from the Amended Term Loan were used to replenish cash used to fund the acquisition of Segmint.

• Accordion Feature:

The Amended Credit Agreement also allows the Company, subject to certain conditions, to request additional revolving loan commitments in an aggregate principal amount of up to $50.0 million.

Amended Revolving Facility loans under the Amended Credit Agreement may be voluntarily prepaid and re-borrowed.

Principal payments on the Amended Term Loan are due in quarterly installments equal to an initial amount of approximately $1.1 million, beginning on June 30, 2023 and continuing through March 31, 2024 and increasing to approximately $2.1 million beginning on June 30, 2024 through the Amended Credit Agreement maturity date.

Once repaid or prepaid, the Amended Term Loan may not be re-borrowed.

Borrowings under the Amended Credit Agreement bear interest at a variable rate based upon the Secured Overnight Financing Rate (“SOFR”) plus a margin of 3.00% to 3.50% per annum depending on the applicable recurring revenue leverage ratio.

If the SOFR rate is ever less than 0%, then the SOFR rate shall be deemed to be 0%.

The Amended Credit Agreement is subject to certain liquidity and operating covenants and includes customary representations and warranties, affirmative and negative covenants and events of default.

Obligations under the Amended Credit Agreement are guaranteed by the Company’s subsidiaries and secured by all or substantially all of the assets of the Company and its subsidiaries pursuant to an Amended and Restated Guarantee and Collateral Agreement executed contemporaneously with the Amended Credit Agreement.

Factors Affecting our Operating Results

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A key part of our strategy is to grow our FI client base.

As of September 30, 2021, we served 169 FIs through the Alkami Platform and an additional 114 clients through the ACH Alert suite of solutions, representing 92.5% annual client growth since September 30, 2020.

As of March 31, 2022, we served 179 FIs through the Alkami Platform and over 150 clients through the ACH Alert and MK suites of solutions, representing 38.3% annual client growth since March 31, 2021.

Each of our digital banking client wins is a competitive takeaway, and as such, our historical ability to grow our client base has been a function of product depth, technological excellence and a sales and marketing function able to match our solutions with the strategic objectives of our clients.

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The depth of our product suite is a function of technology and platform partnerships.

Our platform model with 230 integrations as of September 30, 2021 enables us to deliver thousands of configurations aligned with the digital platform strategies adopted by our clients.

Our platform model with 230 integrations as of March 31, 2022 enables us to deliver thousands of configurations aligned with the digital platform strategies adopted by our clients.

We expect our future success in winning new clients to be partially driven by our ability to continue to develop and deliver new, innovative products to FI clients in a timely manner.

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In addition to extending existing relationships, renewals provide an opportunity to grow minimum contract value, as over the course of a contract term our clients often grow or their needs evolve.

Client renewals are also an important lever in driving our long-term gross margin targets, as we generally achieve approximately 70% gross margin upon renewal.

We had three and seven client renewals in the three and nine months ended September 30, 2021, respectively.

Client renewals are also an important lever in driving our long-term gross margin targets.

We had four client renewals in the three months ended March 31, 2022.

We expect client renewals to continue to play a key role in our future success.

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In particular, our single code base, built on a multi-tenant infrastructure and combined with continuous software delivery enables us to bring new, innovative products to market quickly and positions us with what we believe is market-leading breadth in terms of product offerings and feature set.

We remain committed to investing in our platform, notably through our research and development spend, which was 32.4% and 32.7% of our revenues for the three and nine months ended September 30, 2021.

We remain committed to investing in our platform, notably through our research and development spend, which was 31.6% of our revenues for the three months ended March 31, 2022.

Our future success will depend on our continued leadership in innovation.

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We transitioned our employee base to work-from-home in March 2020, creating challenges in executing sales and implementations that have resurfaced due to the renewal of certain actions and restrictions in response to the COVID-19 pandemic and which may be exacerbated if such actions or restrictions are prolonged.

We believe actions and restrictions in response to the COVID-19 pandemic have served to highlight the criticality of our products, which we expect to drive increased demand over time.

We continue to face significant uncertainty concerning the duration of the COVID-19 pandemic as well as the severity of any future infection surges.

Components of Results of Operations

Our client relationships are primarily based on multi-year contracts that have an average contract life of 70 months as of September 30, 2021.

Our client relationships are primarily based on multi-year contracts that have an average contract life of 70 months as of March 31, 2022.

We derive the majority of our revenues from SaaS subscription services charged for the use of our digital banking solution.

For each client, we invoice monthly a contractual minimum fee for each licensed solution.

For each client, we

invoice monthly a contractual minimum fee for each licensed solution.

In addition, we invoice monthly an additional subscription fee for the number of registered users using each solution and the number of bill-pay and certain other transactions those registered users conduct through our digital banking platform in excess of their contractual minimum commitments.

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Occasionally, our clients request custom development and other professional services, which we provide.

These are generally one-time in nature and involve unique, non-standard features, functions or integrations that are intended to enhance or modify their licensed SaaS solutions.

These are generally one-time requests and involve unique, non-standard features, functions or integrations that are intended to enhance or modify their licensed SaaS solutions.

We recognize revenues at the point in time the services are transferred to the client.

The following disaggregates our revenues for the three and nine months ended September 30, 2021 and 2020 by major source.

Three months ended September 30,

Nine months ended September 30,

2021 2020 2021 2020

The following disaggregates our revenues for the three months ended March 31, 2022 and 2021 by major source:

Three months ended March 31,

(In thousands)

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This includes the costs of our implementation, client support and client success teams, development personnel responsible for maintaining and releasing updates to our platform, as well as third-party cloud-based hosting services.

Cost of revenues also includes the direct costs of bill-pay and other third-party intellectual property included in our solutions, the amortization of acquired technology and depreciation.

Cost of revenues also includes the direct costs of bill-pay services and other third-party intellectual property included in our solutions, the amortization of acquired technology and depreciation.

We capitalize certain personnel costs directly related to the implementation of our solutions to the extent those costs are recoverable from future revenues.

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We expect cost of revenues to continue to grow in absolute dollars as we grow our business, but to vary as a percentage of revenues from period to period as a function of the utilization of implementation and support personnel and the extent to which we recognize fees from bill-pay services and other third-party functionality integrated into our solutions.

Our gross margin for the three and nine months ended September 30, 2021 was 56.3% and 55.3%, respectively, and 52.4% and 50.6% for the three and nine months ended September 30, 2020, respectively.

The major components of cost of revenues represented the following percentages of revenues for the three months ended September 30, 2021:

third-party hosting services (7.9%), the direct costs of bill-pay and other third-party intellectual property included in our solutions (17.0%), our implementation team (9.3%), our client success team (5.4%), our development team responsible for maintaining and releasing updates to our platform (3.8%) and amortization of intangible assets (0.3%).

The major components of cost of revenues represented the following percentages of revenues for the three months ended September 30, 2020:

third-party hosting services (9.8%), the direct costs of bill-pay and other third-party intellectual property included in our solutions (14.9%), our implementation team (11.4%), our client success team (6.6%) and our development team responsible for maintaining and releasing updates to our platform (5.1%).

The major components of cost of revenues represented the following percentages of revenues for the nine months ended September 30, 2021:

Our gross margin for the three months ended March 31, 2022 and 2021 was 55.4% and 53.4%, respectively.

The major components of cost of revenues represented the following percentages of revenues for the three months ended March 31, 2022:

third-party hosting services (7.5%), the direct costs of bill-pay and other third-party intellectual property included in our solutions (16.1%), our implementation team (10.4%), our client success team (5.7%), our development team responsible for maintaining and releasing updates to our platform (4.2%) and amortization of intangible assets (0.7%).

The major components of cost of revenues represented the following percentages of revenues for the nine months ended September 30, 2020:

third-party hosting services (9.5%), the direct costs of bill-pay and other third-party intellectual property included in our solutions (16.4%), our implementation team (11.6%), our client success team (6.7%) and our development team responsible for maintaining and releasing updates to our platform (5.3%).

The major components of cost of revenues represented the following percentages of revenues for the three months ended March 31, 2021:

third-party hosting services (10.3%), the direct costs of bill-pay and other third-party intellectual property included in our solutions (16.2%), our implementation team (9.5%), our client success team (5.9%), our development team responsible for maintaining and releasing updates to our platform (4.3%) and amortization of intangibles (0.4%).

Operating Expenses

Research and Development.

Research and development costs consist primarily of personnel-related costs for our engineering, information technology and product, including salaries, bonuses, commissions, other incentive-related compensation, employee benefits and stock-based compensation.

Research and development costs consist primarily of personnel-related costs for our engineering, information technology and products, including salaries, bonuses, commissions, other incentive-related compensation, employee benefits and stock-based compensation.

In addition, we also include third-party contractor expenses, software development and testing tools, allocated corporate expenses, and other expenses related to developing new solutions and upgrading and enhancing existing solutions.

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General and administrative expenses also include accounting, auditing and legal professional services fees, travel and other unallocated corporate-related expenses such as the cost of our facilities, employee relations, corporate telecommunication and software.

In addition, these expenses are inclusive of any (gain) loss on revaluation of contingent consideration.

We expect that general and administrative expenses will continue to increase as we scale our business and as we incur costs associated with being a publicly traded company, including legal, audit, business insurance and consulting fees.

Non-operating Income (Expense)

Non-operating income (expense) consists primarily of interest income from our cash balances, interest expense from borrowings under our revolving line of credit, amortization of deferred debt costs and changes in fair value of warrants (In connection with our IPO, warrants converted from a liability instrument to an equity instrument resulting in a reduction of the warrant liability to $0.).

Non-operating income (expense) consists primarily of interest income from our cash balances, interest expense from borrowings under our revolving line of credit, amortization of deferred debt costs, unrealized losses on marketable securities, and changes in fair value of warrants, and tranche rights.

Provision for Income Taxes

Our effective tax rate differs from the statutory tax rate primarily due to the impact of the full valuation allowance against our deferred tax assets.

As a result of our valuation allowance, provision for income taxes consists primarily of state income taxes and deferred taxes related to the tax amortization of acquired goodwill.

Our effective tax rate differs from the statutory tax rate primarily due to the impact of the valuation allowance against our deferred tax assets.

Results of Operations

The results of operations presented below should be reviewed in conjunction with the condensed consolidated financial statements and notes included elsewhere in this filing.

The following table presents our selected condensed consolidated statements of operations data for the three and nine months ended September 30, 2021 and 2020.

Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

The results of operations presented below should be reviewed in conjunction with the consolidated financial statements and notes included elsewhere in this filing.

The following table presents our selected consolidated statements of operations data for the three months ended March 31, 2022 and 2021.

Three months ended March 31,

($ In thousands, except share and per share amounts)

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(1) Includes stock-based compensation expenses as follows:

Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

Three months ended March 31,

($ in thousands)

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The following table presents our reconciliation of GAAP net loss to adjusted EBITDA for the periods indicated.

Three months ended September 30,

Nine months ended September 30,

2021 2020 2021 2020

Three months ended March 31,

($ in thousands)

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Stock-based compensation expense 9,774 1,418

Acquisition-related expenses (1)

915 112 2,177 112

Acquisition-related expenses, net (1)

Adjusted EBITDA (2)

$ (3,592) $ (6,097)

(1) Acquisition-related expenses are associated with the accrual of deferred compensation due to the former owner of the acquired business, ACH Alert, in addition to acquisition related-expenses associated with purchase of MK, primarily related to legal, consulting, and professional fees.

(1) Acquisition-related expenses, net include the accrual of deferred compensation due to the former owner of ACH Alert, in addition to acquisition related-expenses associated with the purchase of MK and Segmint, primarily related to legal, consulting, and professional fees.

These expenses are offset by the $2.7 million gain on contingent consideration related to the purchase of MK.

(2) Adjusted EBITDA is a non-GAAP financial measure and should not be considered an alternative to GAAP net loss as a measure of operating performance or as a measure of liquidity.

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stock-based compensation expense;

and acquisition-related costs.

and acquisition-related expenses.

We believe adjusted EBITDA provides investors and other users of our financial information consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations.

Adjusted EBITDA was $(6.1) million and $(17.5) million for the three and nine months ended September 30, 2021, respectively and $(5.4) million and $(20.5) million for the three and nine months ended September 30, 2020, respectively.

Adjusted EBITDA was $(3.6) million for the three months ended March 31, 2022 and $(6.1) million for the three months ended March 31, 2021.

Annual Recurring Revenue (ARR).

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We believe ARR provides important information about our future revenue potential, our ability to acquire new clients, and our ability to maintain and expand our relationship with existing clients.

ARR was $154.8 million as of September 30, 2021 and $113.9 million as of September 30, 2020, an increase of $40.9 million, or 35.9%, period-over-period.

ARR was $176.9 million as of March 31, 2022 and $133.8 million as of March 31, 2021, an increase of $43.1 million, or 32.2%.

Registered Users.

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We believe growth in the number of registered users provides important information about our ability to expand market adoption of our digital banking platform and its associated software products, and therefore to grow revenues over time.

We had 11.4 million registered users as of September 30, 2021 and 9.0 million as of September 30, 2020, an increase of 2.4 million, or 26.1%, period-over-period.

We had 12.8 million registered users as of March 31, 2022 and 10.0 million as of March 31, 2021, an increase of 2.8 million, or 28.3%.

Revenue per Registered User (RPU).

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We believe RPU provides important information about our ability to grow the number of software products adopted by new clients over time, as well as our ability to expand the number of software products that our existing clients add to their contracts with us over time.

RPU was $13.57 as of September 30, 2021 and $12.59 as of September 30, 2020, an increase of $0.98, or 7.8%, period-over-period.

Comparison of Three and Nine Months ended September 30, 2021 and 2020

Three months ended September 30,

Change Nine months ended September 30,

RPU was $13.80 as of March 31, 2022 and $13.40 as of March 31, 2021, an increase of $0.40, or 3.0%.

Comparison of Three Months ended March 31, 2022 and 2021

Three months ended March 31,

2022 2021 $ %

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Revenues $ 44,790 $ 33,262 $ 11,528 34.7 %

Revenues increased $10.8 million, or 37.4%, and $30.9 million, or 39.2%, for the three and nine months ended September 30, 2021, respectively, compared to the same periods in 2020.

The increase of $10.8 million in revenues for the three months ended September 30, 2021 was primarily due to registered user growth from new and existing clients, RPU growth, as well as the acquisition of ACH Alert completed on October 4, 2020, which contributed $1.4 million in three months ended September 30, 2021.

The increase of $30.9 million in revenues for the nine months ended September 30, 2021 was primarily due to registered user growth of 2.4 million, comprised of 1.4 million in registered user growth from existing clients (net of attrition) and 1.0 million in registered users from new clients implemented through our digital banking platform.

Annual Recurring Revenue (ARR) $ 176,897 $ 133,807 $ 43,090 32.2%

Registered Users 12,819 9,989 2,830 28.3%

Revenue per Registered User (RPU) $ 13.80 $ 13.40 $ 0.40 3.0%

Revenues increased $11.5 million, or 34.7%, for the three months ended March 31, 2022, compared to the same period in 2021.

The increase of $11.5 million in revenues for the three months ended March 31, 2022 was primarily due to registered user growth of 2.8 million, comprised of 1.5 million in registered user growth from existing clients (net of attrition) and 1.3 million in registered users from new clients implemented through our digital banking platform (contractual minimums).

In addition, increased revenues were due to RPU growth of 3.0%.

RPU growth was primarily driven by cross-sell activity to existing clients and the acquisition of ACH Alert completed on October 4, 2020, which contributed $3.8 million in the nine months ended September 30, 2021.

The average RPU of new clients implemented on our digital platform in the last year of $16.13 as of September 30, 2021, is 18.9% higher than the aggregate RPU as of September 30, 2021.

RPU growth was primarily driven by cross-sell activity to existing clients and higher average RPU of new clients implemented in the last 12 months on our digital banking platform compared to aggregate RPU.

The average RPU of users from new clients implemented on our digital platform in the last 12 months of $14.55 as of March 31, 2022, is 5.5% higher than the aggregate RPU as of March 31, 2022.

Cost of Revenues and Gross Margin

Three months ended September 30,

Change Nine months ended September 30,

Three months ended March 31,

2022 2021 $ %

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Cost of Revenues

Cost of revenues increased $3.6 million, or 26.2%, and $10.2 million, or 26.1%, for the three and nine months ended September 30, 2021, respectively, compared to the same periods in 2020, generating a gross margin of 56.3% and 55.3% for the three and nine months ended September 30, 2021, respectively, compared to a gross margin of 52.4% and 50.6% for the same periods in 2020.

The increase in cost of revenues for the three months ended September 30, 2021 was primarily driven by a $0.6 million increase in personnel-related costs (which includes stock-based compensation) resulting from headcount increases supporting our growth in the following teams:

site reliability engineering, client implementation and client support, $2.4 million in higher costs of our third-party partners where we resell their solutions as part of the digital platform and $0.4 million in incremental hosting costs, both incurred from an increase in revenues derived from existing and new client growth.

The increase in cost of revenues for the nine months ended September 30, 2021 was primarily driven by a $2.8 million increase in personnel-related costs (which includes stock-based compensation) resulting from headcount increases supporting our growth in the following teams:

site reliability engineering, client implementation and client support, $4.6 million in higher costs of our third-party partners where we resell their solutions as part of the digital platform and $2.3 million in incremental hosting costs, both incurred from an increase in revenues derived from existing and new client growth.

We expect the cost of revenues will continue to increase as SaaS subscription services and the associated implementation services increase over time.

However, we expect gross margin to continue to improve due to operational scaling.

Cost of revenues increased $4.5 million, or 28.9%, for the three months ended March 31, 2022 compared to the same period in 2021, generating a gross margin of 55.4% for the three months ended March 31, 2022, compared to a gross margin of 53.4% for the same period in 2021.

The increase in cost of revenues for the three months ended March 31, 2022 was primarily driven by a $2.1 million increase in personnel-related costs (which includes stock-based compensation) resulting from headcount increases supporting our growth in site reliability engineering, client implementation and client support, $1.9 million in higher costs of our third-party partners where we resell their solutions as part of the digital platform, and $0.5 million in miscellaneous other costs.

Operating Expenses

Three months ended September 30,

Change Nine months ended September 30,

Three months ended March 31,

2022 2021 $ %

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Research and Development

Research and development expenses increased $3.0 million, or 30.1%, and $6.5 million, or 22.2%, for the three and nine months ended September 30, 2021, respectively, compared to the same periods in 2020.

For the three months ended September 30, 2021, the increase was primarily due to a $2.0 million increase in personnel-related costs (which includes stock-based compensation) resulting from headcount growth in our engineering, information technology and product teams dedicated to platform enhancements and innovation.

In addition we incurred $0.7 million in higher incremental hosting costs.

For the nine months ended September 30, 2021, the increase was primarily due to a $5.9 million increase in personnel-related costs (which includes stock-based compensation) resulting from headcount growth in our engineering, information technology and product teams dedicated to platform enhancements and innovation.

In addition we incurred $0.5 million in higher incremental hosting costs.

Research and development expenses increased $3.2 million, or 29.7%, for the three months ended March 31, 2022, compared to the same period in 2021.

For the three months ended March 31, 2022, the increase was primarily due to a $3.3 million increase in personnel-related costs (which includes stock-based compensation) resulting from headcount growth in our engineering, information technology and product teams dedicated to platform enhancements and innovation.

In addition, we incurred $0.6 million in higher consulting costs, and $0.3 of higher hosting costs associated with internal usage.

These expenses were partially offset by an increase of $1.0 million in capitalized development costs related to new strategic projects.

Sales and Marketing

Sales and marketing expenses increased $3.3 million, or 82.8%, and $5.6 million, or 44.5%, for the three and nine months ended September 30, 2021, respectively, compared to the same periods in 2020.

For the three months ended September 30, 2021, the increase was primarily due to a $1.5 million increase in personnel-related costs (which includes stock-based compensation) resulting from headcount growth in our sales and marketing teams.

In addition, we incurred $1.3 million in higher conference and trade show costs primarily due to conducting our annual client conference in September 2021 instead of our typical April timing.

We also incurred $0.3 million in higher consulting costs and $0.2 million in higher travel costs.

For the nine months ended September 30, 2021, the increase was primarily due to a $3.9 million increase in personnel-related costs (which includes stock-based compensation) resulting from headcount growth in our sales and marketing teams.

In addition, we incurred $0.8 million in higher conference and trade show costs due to conducting our annual client conference in September 2021 instead of our typical April timing, $0.7 million in higher consulting costs and $0.2 million in higher travel and other costs.

Sales and marketing expenses increased $2.6 million, or 47.8%, for the three months ended March 31, 2022, compared to the same period in 2021.

For the three months ended March 31, 2022, the increase was primarily due to a $2.1 million increase in personnel-related costs (which includes stock-based compensation) resulting from headcount growth in our sales and marketing teams.

In addition, we incurred $0.4 million in higher tradeshow costs, and $0.2 million in higher consulting costs, partially offset by $0.1 million in lower travel costs.

General and Administrative

General and administrative expenses increased $5.5 million, or 69.6%, and $14.7 million, or 67.0%, for the three and nine months ended September 30, 2021, respectively, compared to the same periods in 2020.

For the three months ended September 30, 2021, the increase was primarily due to a $2.7 million increase in personnel-related and other costs (which includes stock-based compensation) from increased headcount, including the impact from the acquisition of ACH Alert, and a $0.6 million increase in non-personnel related costs from the acquisitions of ACH Alert and MK.

In addition, we incurred a $1.1 million increase in insurance costs for public company D&O coverage, a $0.3 million increase in accounting, audit and consulting expenses, primarily in support of our public company operations, and a $0.4 million increase in software costs.

For the nine months ended September 30, 2021, the increase was primarily due to a $7.8 million increase in personnel-related and other costs (which includes stock-based compensation) from increased headcount, including the impact from the acquisition of ACH Alert, and a $1.9 million increase in non-personnel related costs from the acquisitions of ACH Alert and MK.

In addition, we incurred a $1.6 million increase in accounting, audit and consulting expenses primarily in support of our IPO and public company operations, a $2.2 million increase in insurance costs for public company D&O coverage and a $0.9 million increase in software costs.

Non-Operating Expense, Net

Non-operating expense, net decreased $14.7 million and $11.4 million for the three and nine months ended September 30, 2021, respectively, compared to the same periods in 2020.

For the three months ended September 30, 2021, the decrease was primarily due to $14.7 million in non-operating loss related to the increase in fair value of our warrant liabilities for the three months ended September 30, 2020.

For the nine months ended September 30, 2021, the decrease was primarily due to $14.8 million in non-operating loss related to the increase in fair value of our warrant liabilities for the nine months ended September 30, 2020, partially offset by $3.0 million in non-operating loss related to the increase in fair value of our warrant liabilities for the nine months ended September 30, 2021.

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

General and administrative expenses increased $5.3 million, or 50.9%, for the three months ended March 31, 2022, compared to the same period in 2021.

For the three months ended March 31, 2022, the increase was primarily due to a $5.4 million increase in stock-based compensation and $0.7 million increase from acquisition-related expenses, net due to transaction expenses from the acquisition of Segmint.

In addition, we incurred a $1.1 million increase in insurance costs for public company director and officer coverage, $0.3 million higher software costs, $0.5 million in higher miscellaneous other costs, partially offset by a gain on revaluation of contingent consideration of $2.7 million related to MK.

Non-Operating Income (Expense), Net

Non-operating expense decreased $1.6 million for the three months ended March 31, 2022, compared to same period in 2021.

For the three months ended March 31, 2022, the decrease was primarily due to $1.6 million in non-operating loss related to the increase in fair value of our warrant liabilities for the three months ended March 31, 2021, partially offset by $0.3 million in non-operating loss related to an unrealized loss on marketable securities for the three months ended March 31, 2022.

Provision for Income Taxes

We had no provision for income taxes for the three and nine months ended September 30, 2021 and 2020.

Our effective tax rate differs from the statutory tax rate primarily due to the impact of the full valuation allowance against our deferred tax assets.

The Company recorded $0.1 million of income tax expense for the three months ended March 31, 2022, resulting in an effective tax rate of (0.7%), compared to no income tax expense for the three months ended March 31, 2021.

Our 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.

Liquidity and Capital Resources

As of September 30, 2021, we had $314.4 million in cash and cash equivalents, and an accumulated deficit of $300.5 million.

As of March 31, 2022, we had $299.3 million in cash and cash equivalents and marketable securities, and an accumulated deficit of $327.3 million.

Our net losses have been driven by our investments in developing our digital banking platform, expanding our sales, marketing and implementation organizations and scaling our administrative functions to support our rapid growth.

We have financed our operations primarily through the net proceeds we have received from the sales of our redeemable convertible preferred stock and common stock, cash generated from the sale of SaaS subscription services and borrowings under our Credit Agreement (as defined below).

On April 15, 2021, we completed our IPO, in which we issued and sold 6,900,000 shares of our common stock, including 900,000 shares of common stock that were sold pursuant to the exercise in full of the underwriters’ option to purchase additional shares of common stock at $30.00 per share.

On April 15, 2021, we completed our initial public offering (“IPO”), in which we issued and sold 6,900,000 shares of our common stock, including 900,000 shares of common stock that were sold pursuant to the exercise in full of the underwriters’ option to purchase additional shares of common stock at $30.00 per share.

Our IPO resulted in net proceeds of $192.8 million after deducting underwriting discounts, commissions and other offering costs.

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Our future capital requirements will depend on many factors, including revenue growth and costs incurred to support client usage and growth in our client base, increased research and development expenses to support the growth of our business and related infrastructure, increased general and administrative expenses associated with being a publicly traded company, investments in office facilities and other capital expenditure requirements and any potential future acquisitions or other strategic transactions.

We believe that our existing cash resources, including our Credit Agreement, will be sufficient to finance our continued operations, growth strategy, planned capital expenditures and the additional expenses we expect to incur as a public company for at least the next 12 months.

We believe that our existing cash resources, including our Amended and Restated Credit Agreement, will be sufficient to finance our continued operations, growth strategy, planned capital expenditures and the additional expenses we expect to incur as a public company for the short term (at least the next 12 months) and longer term.

We may from time to time seek to raise additional capital to support our growth.

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The following table summarizes our cash flows for the periods indicated:

Nine months ended September 30,

Three months ended March 31,

(in thousands) 2022 2021

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Net cash used in investing activities (113,621) (750)

Net cash provided by financing activities 186,886 218,270

Net cash provided by (used in) financing activities 623 (2,013)

Net Cash Used in Operating Activities

During the nine months ended September 30, 2021, net cash used in operating activities was $16.8 million, which consisted of a net loss of $33.5 million, adjusted by non-cash charges of $13.3 million and net cash inflows from the change in net operating assets and liabilities of $3.4 million.

The non-cash charges were primarily comprised of a non-operating loss related to the increase in fair value of warrant liabilities of $3.0 million, depreciation and amortization expense of $2.4 million, and stock-based compensation expense of $7.8 million.

The net cash inflows from the change in our net operating assets and liabilities were primarily due to a $12.8 million increase in accounts payable and accrued liabilities, partially offset by a $5.7 million increase in accounts receivable, a $0.7 million increase in prepaid expenses and other current assets, and a net $3.0 million in other balance sheet changes.

During the nine months ended September 30, 2020, net cash used in operating activities was $23.1 million, which consisted of a net loss of $38.9 million, adjusted by non-cash charges of $18.2 million, and net cash outflows from the change in net operating assets and liabilities of $2.4 million.

Non-cash charges were primarily comprised of depreciation expense of $2.0 million and stock-based compensation expense of $1.3 million.

The net cash outflows from the change in our net operating assets and liabilities were primarily due to a $4.1 million increase in accounts payable and accrued liabilities, offset by a $2.6 million increase in accounts receivable, a $1.7 million increase in prepaid expenses and other current assets, and a $2.2 million increase in deferred implementation costs.

During the three months ended March 31, 2022, net cash used in operating activities was $8.3 million, which consisted of a net loss of $13.4 million, adjusted by non-cash charges of $8.4 million and net cash outflows from the change in net operating assets and liabilities of $3.3 million.

The non-cash charges were primarily comprised of a non-operating loss related to depreciation and amortization expense of $1.0 million, and stock-based compensation expense of $10.0 million, partially offset by a gain on revaluation of contingent consideration of $2.7 million.

The net cash outflows from the change in our net operating assets and liabilities were primarily due to a $2.5 million increase in accounts receivable, a $0.4 million decrease in deferred revenues, and a net $0.4 million in other balance sheet changes.

During the three months ended March 31, 2021, net cash used in operating activities was $2.0 million, which consisted of a net loss of $10.9 million, adjusted by non-cash charges of $3.9 million and net cash inflows from the change in net operating assets and liabilities of $5.1 million.

The non-cash charges primarily were comprised of a non-operating loss related to the increase in fair value of warrant liabilities of $1.6 million, depreciation and amortization expense of $0.8 million, and stock-based compensation expense of $1.4 million.

The net cash inflows from the change in our net operating assets and liabilities primarily were due to a $7.4 million increase in accounts payable and accrued liabilities, partially offset by a $1.2 million increase in prepaid expenses and other current assets and a net $1.1 million in other balance sheet changes.

Net Cash Used in Investing Activities

During the nine months ended September 30, 2021, net cash used in investing activities was $20.5 million, primarily consisting of $18 million for the purchase of MK, $0.3 million related to the finalization of working capital adjustments on our acquisition of ACH Alert, $1.3 million related to capitalized software development costs, and capital expenditures related to updates for computer and other equipment of $0.9 million.

During the nine months ended September 30, 2020, net cash used in investing activities was $1.5 million, primarily consisting of capital expenditures related to the expansion and updates to our corporate facilities of $1.1 million and purchases of computer and other equipment of $0.4 million.

Net Cash Provided by Financing Activities

For the nine months ended September 30, 2021, net cash provided by financing activities was $186.9 million, which was primarily due to the receipt of proceeds from our IPO of $192.8 million and proceeds of $6.4 million from the exercise of stock options to purchase 4.1 million shares of our common stock, partially offset by the cash payment of our Series B dividend of $5.0 million upon the consummation of our IPO, the $4.5 million payment of deferred IPO issuance costs, and the repurchase of shares of our common stock in the amount of $3.5 million.

During the nine months ended September 30, 2020, cash provided by financing activities was $218.3 million, consisting primarily of proceeds from the sale of preferred stock of $218.0 million.

During the three months ended March 31, 2022, net cash used in investing activities was $113.6 million, primarily consisting of $112.1 million for the purchase of marketable securities, $1.3 million related to capitalized software development costs, and capital expenditures related to updates for computer and other equipment of $0.3 million.

During the three months ended March 31, 2021, cash used in investing activities was $0.8 million, primarily consisting of $0.3 million related to the finalization of working capital adjustments on our acquisition of ACH Alert, capital expenditures related to updates for computer and other equipment of $0.2 million and capitalized software development costs of $0.2 million.

Net Cash Provided by (Used in) Financing Activities

For the three months ended March 31, 2022, net cash provided by financing activities was $0.6 million, which was primarily due to proceeds of $0.9 million from the exercise of stock options to purchase 0.4 million shares of our common stock, partially offset by a principal payment on debt of $0.3 million.

For the three months ended March 31, 2021, net cash used in financing activities was $2.0 million, which primarily was due to the repurchase of common stock in the amount of $3.5 million and $1.3 million of deferred IPO issuance costs paid, partially offset by cash proceeds of $2.8 million from the exercise of options to purchase 2.1 million shares of our common stock.

Credit Agreement

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The Credit Agreement replaced our prior credit facility provided by Comerica Bank.

The Credit Agreement matures on October 16, 2023, and is secured by a first priority lien on substantially all of our tangible and intangible personal property and the tangible and intangible personal property of our subsidiaries that are guarantors.

In addition, the Credit Agreement includes the following:

The Credit Agreement was scheduled to mature on October 16, 2023 and was secured by a first priority lien on substantially all of our tangible and intangible personal property and the tangible and intangible personal property of our subsidiaries that are guarantors.

In addition, the Credit Agreement included the following:

• Revolving Facility:

The Credit Agreement provides $25.0 million in aggregate commitments for secured revolving loans, with sub-limits of $10.0 million for the issuance of letters of credit and $7.5 million for swingline loans (“Revolving Facility”).

A term loan of $25.0 million (“Term Loan”) was borrowed on October 16, 2020.

The Credit Agreement provided $25.0 million in aggregate commitments for secured revolving loans, with sub-limits of $10.0 million for the issuance of letters of credit and $7.5 million for swingline loans (“Revolving Facility”).

A term loan of $25.0 million (the “Term Loan”) was borrowed on October 16, 2020.

The proceeds from the Term Loan were used to partially fund the acquisition of ACH Alert.

• Accordion Feature:

The Credit Agreement also allows us, subject to certain conditions, to request additional revolving loan commitments in an aggregate principal amount of up to $30.0 million.

Revolving Facility loans under the Credit Agreement may be voluntarily prepaid and re-borrowed.

Principal payments on the Term Loan are due in quarterly installments equal to an initial amount of approximately $0.3 million, which begin December 31, 2021 and continue through September 30, 2022 and increase to approximately $0.6 million beginning on December 31, 2022 through the Credit Agreement maturity date.

Once repaid or prepaid, the Term Loan may not be re-borrowed.

Borrowings under the Credit Agreement bear interest at a variable rate based upon, at our option, either the LIBOR rate or the base rate (in each case, as customarily defined) plus an applicable margin.

The minimum LIBOR rate to be applied is 1.00%.

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.

Our minimum interest rate applied to term debt was 4.00% as of September 30, 2021.

We are 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.

All outstanding principal and accrued but unpaid interest is due, and the commitments for the Revolving Facility terminate, on the maturity date.

The loans are subject to mandatory prepayment requirements in the event of certain asset sales or if certain insurance or condemnation events occur, subject to customary reinvestment provisions.

We may prepay the Term Loan in whole or in part at any time without premium or penalty.

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.

Total interest expense, including commitment fees and unused line fees, for the three and nine months ended September 30, 2021 was $0.3 million and $0.9 million, respectively, and none and $0.2 million for the three and nine months ended September 30, 2020, respectively.

In conjunction with closing the Credit Agreement in 2020, we incurred issuance costs of $0.1 million which were deferred and will be amortized over the three-year term.

Unamortized debt issuance costs totaled $0.1 million and $0.1 million as of September 30, 2021 and December 31, 2020, respectively.

Amortization expense totaled $0.2 million and $0.6 million for the three and nine months ended September 30, 2021, respectively.

The Company recognized no amortization expense for the three and nine months ended September 30, 2020.

The Credit Agreement also allowed us, subject to certain conditions, to request additional revolving loan commitments in an aggregate principal amount of up to $30.0 million.

Revolving Facility loans under the Credit Agreement were permitted to be voluntarily prepaid and re-borrowed.

Principal payments on the Term Loan were due in quarterly installments equal to an initial amount of approximately $0.3 million, which began on December 31, 2021 and were scheduled to increase to approximately $0.6 million beginning on December 31, 2022 through the Credit Agreement maturity date.

Once repaid or prepaid, the Term Loan were not permitted to be re-borrowed.

Borrowings under the Credit Agreement bore interest at a variable rate based upon, at our option, either the LIBOR rate or the base rate (in each case, as customarily defined) plus an applicable margin.

The minimum LIBOR rate to be applied was 1.00%.

The applicable margin for LIBOR

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

Our minimum interest rate applied to the Term Loan was 4.00% as of March 31, 2022.

We were 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.

All outstanding principal and accrued but unpaid interest was due, and the commitments for the Revolving Facility were scheduled to terminate, on the maturity date.

The Term Loan was subject to mandatory prepayment requirements in the event of certain asset sales or if certain insurance or condemnation events occurred, subject to customary reinvestment provisions.

We were permitted to prepay the Term Loan in whole or in part at any time without premium or penalty.

The Credit Agreement contained 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 contained customary events of default, which if they occurred, could have resulted in the termination of commitments under the Credit Agreement, the declaration that all outstanding loans were immediately due and payable in whole or in part, and the requirement to maintain cash collateral deposits in respect of outstanding letters of credit.

Total interest expense, including commitment fees and unused line fees, for the three months ended March 31, 2022 and 2021 was $0.3 million and $0.3 million, respectively.

In conjunction with closing the Credit Agreement in 2020, we incurred issuance costs of $0.1 million which were deferred and were scheduled to be amortized over the three-year term.

Unamortized debt issuance costs totaled $0.1 million and $0.1 million as of March 31, 2022 and December 31, 2021, respectively.

Amortization expense was less than $0.1 million and $0.2 million for the three months ended March 31, 2022 and 2021, respectively.

Amended Credit Agreement

On April 29, 2022, we entered into the Amended Credit Agreement with Silicon Valley Bank, Comerica Bank, and Canadian Imperial Bank of Commerce.

The Amended Credit Agreement amends and restates the prior credit facility provided by Silicon Valley Bank and KeyBank National Association.

The Amended Credit Agreement matures on April 29, 2025.

The Amended Credit Agreement includes the following, among other features:

• Revolving Facility:

The Amended Credit Agreement provides $40.0 million in aggregate commitments for the Revolving Facility.

The Amended Term Loan of $85.0 million was borrowed on the closing date of the Amended Credit Agreement.

The additional proceeds received from the Amended Term Loan were used to replenish cash used to fund the acquisition of Segmint Inc., which closed on April 25, 2022.

• Accordion Feature:

The Amended Credit Agreement also allows the Company, subject to certain conditions, to request additional revolving loan commitments in an aggregate principal amount of up to $50.0 million.

Amended Revolving Facility loans under the Amended Credit Agreement may be voluntarily prepaid and re-borrowed.

Once repaid or prepaid, the Amended Term Loan may not be re-borrowed.

Borrowings under the Amended Credit Agreement bear interest at a variable rate based upon SOFR plus a margin of 3.00% to 3.50% per annum depending on the applicable recurring revenue leverage ratio.

If the SOFR rate is ever less than 0%, then the SOFR rate shall be deemed to be 0%.

Contractual Obligations and Commitments

There were no material changes to our contractual obligations and commitments as of September 30, 2021 compared to those discussed as of December 31, 2020 in the Prospectus filed with the SEC on April 15, 2021 pursuant to Rule 424(b)(4) under the Securities Act.

There were no material changes to our contractual obligations and commitments as of March 31, 2022 compared to those discussed as of December 31, 2021 in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 25, 2022.

Off-Balance Sheet Arrangements

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Critical Accounting Policies and Significant Judgments and Estimates

Our unaudited condensed consolidated financial statements are prepared in accordance with GAAP.

The preparation of these financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures.

Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these judgments and estimates under different assumptions or conditions and any such differences may be significant.

There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in “Management's Discussion and Analysis of Financial Condition and Results of Operations” set forth in the Prospectus filed with the SEC on April 15, 2021 pursuant to Rule 424(b)(4) under the Securities Act.

In preparing our unaudited consolidated financial statements in conformity with GAAP, we must make decisions that impact the reported amounts of assets, liabilities, revenues and expenses, and the related disclosures.

Such decisions include the selection of the appropriate accounting principles to be applied and the assumptions on which to base accounting estimates.

In reaching such decisions, we apply judgments based on our understanding and analysis of relevant circumstances, historical experience, and actuarial valuations.

Actual amounts could differ from those estimated at the time the consolidated financial statements are prepared.

There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and

estimates described in “Management's Discussion and Analysis of Financial Condition and Results of Operations” set forth in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 25, 2022.

Recently Issued Accounting Pronouncements

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Emerging Growth Company Status

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).

We are an “emerging growth company,” as defined in the JOBS Act.

Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies.

We have elected to use this extended transition period to enable us to comply with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.

As a result, our condensed consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

As a result, our consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

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 2. Management’s Discussion and Analysis