What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-05 compared with 2022-05-06 · 154 added, 141 removed, 270 unchanged (52% 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 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.

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 filings with the Securities and Exchange Commission (“SEC”), 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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• 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;

• security breaches or other compromises of our security measures or those of third parties upon which we rely, including in connection with cybersecurity

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

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• 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;

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

• stock price volatility and no intention to pay dividends;

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In fiscal 2020, we acquired ACH Alert, LLC (“ACH Alert”) to pursue adjacent product opportunities, such as fraud prevention and to expand our addressable market.

In addition, in September 2021, we acquired MK Decisioning Systems, LLC (“MK”), a technology platform for digital account opening, credit card and loan origination solutions.

In September 2021, we acquired MK Decisioning Systems, LLC (“MK”), a technology platform for digital account opening, credit card and loan origination solutions.

In April 2022, we acquired Segmint Inc.

(“Segmint”), a leading cloud-based financial data analytics and transaction data cleansing provider.

Our domain expertise in retail and business banking has enabled us to develop a suite of products tailored to address key challenges faced by FIs.

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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 March 31, 2022 , including core systems, payment cards, mortgages, bill pay, electronic documents, money movement, personal financial management and account opening.

Scalability and extensibility driven by more than 270 real-time integrations to back office systems and third-party fintech solutions as of June 30, 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 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 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 June 30, 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 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.

For the three months ended June 30, 2022 and 2021, our total revenues were $50.5 million and $36.7 million, respectively, representing a 37.7% increase period-over-period.

SaaS subscription revenues, as further described below, represented 94.6% and 95.0% of total revenues for the three and six months ended June 30, 2022, respectively and 94.3% and 94.6% of total revenues for the three and six months ended June 30, 2021, respectively.

We incurred net losses of $20.2 million and $33.6 million for the three and six months ended June 30, 2022, respectively, and net losses of $11.4 million and $22.3 million for the three and six months ended June 30, 2021, respectively, largely on the basis of significant continued investment in sales, marketing, product development and post-sales client activities.

Recent Developments

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.

On April 25, 2022, the Company consummated its previously announced merger with Segmint, pursuant to the Agreement and Plan of Merger (the "Merger Agreement"), dated March 25, 2022, with Segmint surviving as 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.

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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 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.

As of June 30, 2022, we served 182 FIs through the Alkami Platform and over 320 clients through the ACH Alert, MK and Segmint products, representing 91.3% annual client growth since June 30, 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 March 31, 2022 enables us to deliver thousands of configurations aligned with the digital platform strategies adopted by our clients.

Our platform model with more than 270 integrations as of June 30, 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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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 had one and five client renewals in the three and six months ended June 30, 2022, respectively.

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 31.6% of our revenues for the three months ended March 31, 2022.

We remain committed to investing in our platform, notably through our research and development spend, which was 32.8% and 32.3% of our revenues for the three and six months ended June 30, 2022, respectively.

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

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The continued global impact of COVID-19 has resulted in various measures to combat the spread of the virus.

With the development of variants and increased vaccinations rates, the status of ongoing measures varies widely.

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.

With the development of variants, the status of ongoing measures varies widely.

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 ongoing COVID-19 pandemic and which may be exacerbated if such actions or restrictions are prolonged.

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 March 31, 2022.

Our client relationships are primarily based on multi-year contracts that have an average contract life of 70 months as of June 30, 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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We recognize revenues at the point in time the services are transferred to the client.

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

Three months ended March 31,

The following disaggregates our revenues for the three and six months ended June 30, 2022 and 2021 by major source:

Three months ended June 30,

Six months ended June 30,

2022 2021 2022 2021

(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 services 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, the amortization of capitalized internal use software, 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 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:

Our gross margin for the three and six months ended June 30, 2022 was 54.0% and 54.6%, respectively, and 55.9% and 54.7% for the three and six months ended June 30, 2021, respectively.

The major components of cost of revenues represented the following percentages of revenues for the three months ended June 30, 2022:

third-party hosting services (7.8%), the direct costs of bill-pay and other third-party intellectual property included in our solutions (16.0%), our implementation team (10.7%), our client success team (5.5%), our development team responsible for maintaining and releasing updates to our platform (4.1%) and amortization of intangible assets (1.8%).

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

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

third-party hosting services (8.3%), the direct costs of bill-pay and other third-party intellectual property included in our solutions (15.3%), our implementation team (9.9%), our client success team (5.9%), our development team responsible for maintaining and releasing updates to our platform (4.3%) and amortization of intangible assets (0.3%).

The major components of cost of revenues represented the following percentages of revenues for the six months ended June 30, 2022:

third-party hosting services (7.7%), the direct costs of bill-pay and other third-party intellectual property included in our solutions (16.0%), our implementation team (10.5%), our client success team (5.6%), our development team responsible for maintaining and releasing updates to our platform (4.1%) and amortization of intangibles (1.3%).

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

third-party hosting services (9.2%), the direct costs of bill-pay and other third-party intellectual property included in our solutions (15.7%), our implementation team (9.7%), our client success team (5.9%), our development team responsible for maintaining and releasing updates to our platform (4.3%) and amortization of intangible assets (0.3%).

Operating Expenses

Research and Development.

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.

Research and development costs consist primarily of personnel-related costs for our engineering, information technology and products, including salaries, bonuses, 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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Sales and marketing expenses consist primarily of personnel-related costs of our sales, marketing and a portion of account management employees, including salaries, bonuses, commissions, other incentive-related compensation, employee benefits and stock-based compensation.

Sales and marketing expenses also include travel and related costs, outside consulting fees and marketing programs, including lead generation, costs of our annual client conference, advertising, trade shows, other event expenses and amortization of acquired client relationships.

We expect sales and marketing expenses will continue to increase as we expand our direct sales teams to pursue our market opportunity.

General and Administrative.

General and administrative expenses consist primarily of personnel-related costs for our general and administrative teams including salaries, bonuses, commissions, other incentive-related compensation, employee benefits and stock-based compensation associated with our executive, finance, legal, human resources, information technology, security and compliance as well as other administrative personnel.

administrative personnel.

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.

Acquisition-Related Expenses, net.

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

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

Amortization of Acquired Intangibles.

Amortization of acquired intangibles represents the amortization of intangibles recorded in connection with our business acquisitions, which are amortized on a straight-line basis over the estimated useful lives of the related assets.

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, unrealized losses on marketable securities, and changes in fair value of warrants, and tranche rights.

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, loss from extinguishment of debt, and changes in fair value of warrants, and tranche rights.

Provision for Income Taxes

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Results of Operations

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,

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 consolidated statements of operations data for the three and six months ended June 30, 2022 and 2021.

Three months ended June 30,

Six months ended June 30,

($ In thousands, except share and per share amounts) 2022 2021 2022 2021

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General and administrative 18,731 12,185 35,777 21,932

Acquisition-related expenses, net 796 625 (582) 1,263

Amortization of acquired intangibles 331 91 426 182

Total operating expenses 46,657 30,334 84,473 57,038

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Loss on financial instruments (254) (1,391) (387) (3,035)

(133) (1,644)

Loss on extinguishment of debt (76) — (76) —

Loss before income taxes

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$ (20,233) $ (11,375) $ (33,639) $ (22,254)

(1) Includes amortization of acquired technology of $0.9 million and $0.1 million for the three months ended June 30, 2022 and 2021, respectively, and $1.2 million and $0.2 million for the six months ended June 30, 2022 and 2021, respectively.

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

Three months ended March 31,

Three months ended June 30,

Six months ended June 30,

2022 2021 2022 2021

($ 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 March 31,

Three months ended June 30,

Six months ended June 30,

2022 2021 2022 2021

($ in thousands)

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Amortization of intangible assets 1,244 209 1,646 418

Amortization of capitalized internal use software 75 — 75 —

Depreciation 625 587 1,241 1,164

Stock-based compensation expense 11,268 3,023 21,042 4,441

Legal settlement 52 — 52 —

Loss on extinguishment of debt 76 — 76 —

Acquisition-related expenses, net (1)

796 625 (582) 1,263

Adjusted EBITDA (2)

$ (5,324) $ (5,370) $ (8,916) $ (11,467)

(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.

(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 acquisitions of MK and Segmint, primarily related to legal, consulting, and professional fees.

In the six months ended June 30, 2022, 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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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.

We define adjusted EBITDA as net loss before provision for income taxes;

(gain) loss on financial instruments;

interest (income) expense, net;

We define adjusted EBITDA as net loss;

provision for income taxes;

loss on financial instruments;

interest expense, net;

amortization of intangible assets;

amortization of capitalized internal use software;

depreciation;

stock-based compensation expense;

and acquisition-related expenses.

legal settlement;

loss on extinguishment of debt;

and acquisition-related expenses, net.

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

Adjusted EBITDA was $(5.3) million and $(8.9) million for the three and six months ended June 30, 2022, respectively, and $(5.4) million and $(11.5) million for the three and six months ended June 30, 2021, respectively.

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 $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%.

ARR was $204.5 million as of June 30, 2022 and $144.7 million as of June 30, 2021, an increase of $59.8 million, or 41.3%.

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 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%.

We had 13.3 million registered users as of June 30, 2022 and 10.7 million as of June 30, 2021, an increase of 2.6 million, or 24.3%.

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 $13.80 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,

RPU was $15.33 as of June 30, 2022 and $13.48 as of June 30, 2021, an increase of $1.85, or 13.7%.

Comparison of Three and Six Months ended June 30, 2022 and 2021

Three months ended June 30,

Change Six months ended June 30,

2022 2021 $ % 2022 2021 $ %

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Revenue per Registered User (RPU) $ 15.33 $ 13.48 $ 1.85 13.7 %

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).

Revenues increased $13.8 million, or 37.7%, and $25.4 million, or 36.2% for the three and six months ended June 30, 2022, compared to the same period in 2021.

The increase of $13.8 million in revenues for the three months ended June 30, 2022 was primarily due to registered user growth from new and existing clients, RPU growth, as well as the acquisition of Segmint completed on April 25, 2022, which contributed $2.3 million for the three months ended June 30, 2022.

The increase of $25.4 million in revenues for the six months ended June 30, 2022 was primarily due to registered user growth of 2.6 million, comprised of 1.4 million in registered user growth from existing clients (net of attrition) and 1.2 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 13.7%.

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.

RPU growth was primarily driven by cross-sell activity to existing clients, higher average RPU of new clients implemented in the last 12 months on our digital banking platform compared to aggregate RPU and the acquisition of Segmint completed on April 25, 2022, which contributed $2.3 million in the six months ended June 30, 2022.

The average RPU of users from new clients implemented on our digital platform in the last 12 months of $16.46 as of June 30, 2022, is 7.4% higher than the aggregate RPU as of June 30, 2022.

Cost of Revenues and Gross Margin

Three months ended March 31,

Three months ended June 30,

Change Six months ended June 30,

2022 2021 $ % 2022 2021 $ %

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Cost of Revenues

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.

Cost of revenues increased $7.1 million, or 43.7%, and $11.6 million, or 36.5%, for the three and six months ended June 30, 2022, respectively compared to the same periods in 2021, generating a gross margin of 54.0% and 54.6% for the three and six months ended June 30, 2022, respectively, compared to a gross margin of 55.9% and 54.7% for the same periods in 2021.

The increase in cost of revenues for the three months ended June 30, 2022 was primarily driven by a $2.3 million increase in personnel-related costs (which includes stock-based compensation of $0.5 million) resulting from headcount increases supporting our growth in site reliability engineering, client implementation and client support, as well as $2.4 million in higher costs of our third-party partners where we resell their solutions as part of the digital platform, $0.7 million increase in hosting costs, $0.7 million related to the acquisition of Segmint (which includes stock-based compensation of $0.1 million) and $0.8 million of amortization of intangibles, $0.7 million of which is related to the acquisition of Segmint.

The increase in cost of revenues for the six months ended June 30, 2022 was primarily driven by a $4.6 million increase in personnel-related costs (which includes stock-based compensation of $1.2 million) resulting from headcount increases supporting our growth in the following teams:

site reliability engineering, client implementation and client support, as well as $4.3 million in higher cost of our third party partners where we resell their solutions as part of the digital platform and $0.6 million in incremental hosting costs, incurred from an increase in revenues derived from existing and new client growth.

In addition, we incurred $0.7 million related to the acquisition of Segmint (which includes stock-based compensation of $0.1 million) and $1.0 million of amortization of intangibles, $0.7 million of which is related to the acquisition of Segmint.

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

Operating Expenses

Three months ended March 31,

Three months ended June 30,

Change Six months ended June 30,

2022 2021 $ % 2022 2021 $ %

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General and administrative 18,731 12,185 6,546 53.7 % 35,777 21,932 13,845 63.1 %

Acquisition-related expenses, net 796 625 171 27.4 % (582) 1,263 (1,845) (146.1) %

Amortization of acquired intangibles 331 91 240 263.7 % 426 182 244 134.1 %

Total operating expenses 46,657 30,334 $ 16,323 53.8 % $ 84,473 $ 57,038 $ 27,435 48.1 %

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Research and Development

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.

Research and development expenses increased $4.5 million, or 37.1%, and $7.7 million, or 33.6%, for the three and six months ended June 30, 2022, respectively, compared to the same periods in 2021.

For the three months ended June 30, 2022, the increase was primarily due to a $3.3 million increase in personnel-related costs (which includes stock-based compensation of $1.4 million) resulting from headcount growth in our engineering, information technology and product teams dedicated to platform enhancements and innovation.

In addition, we incurred $1.1 million related to the Segmint acquisition (which includes stock-based compensation of $0.5 million), $0.4 million in higher consulting costs and $0.1 million of higher hosting costs associated with internal usage.

These expenses were partially offset by an increase of $0.6 million in capitalized development costs related to new strategic projects.

For the six months ended June 30, 2022, the increase was primarily due to a $6.7 million increase in personnel-related costs (which includes stock-based compensation of $3.0 million) resulting from headcount growth in our engineering, information technology and product teams dedicated to platform enhancements and innovation, as well as $1.0 million in higher consulting costs and $1.1 million related to the Segmint acquisition (which includes stock-based compensation of $0.5 million).

These expenses were partially offset by an increase of $1.8 million in capitalized development costs related to new strategic projects.

Sales and Marketing

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.

Sales and marketing expenses increased $4.9 million, or 91.6%, and $7.5 million, or 70.1%, for the three and six months ended June 30, 2022, respectively, compared to the same periods in 2021.

For the three months ended June 30, 2022, the increase was primarily due to a $2.2 million increase in personnel-related costs (which includes stock-based compensation of $0.7 million) resulting from headcount growth in our sales and marketing teams.

In addition, we incurred $0.8 million related to the Segmint acquisition (which includes stock-based compensation of $0.1 million), $0.1 million in higher consulting costs, as well as $0.4 million in higher travel costs for the sales team and $1.4 million in higher costs related to industry conferences and trade shows as we return to pre-COVID-19 pandemic sales activities such as our in-person client conference, Co:Lab.

For the six months ended June 30, 2022, the increase was primarily due to a $4.3 million increase in personnel-related costs (which includes stock-based compensation of $1.3 million) resulting from headcount growth in our sales and marketing teams.

In addition, we incurred $0.8 million related to the Segmint acquisition (which includes stock-based compensation of $0.1 million), $0.3 million in higher consulting costs, as well as $0.3 million in higher travel costs for the sales team and $1.8 million in higher costs related to industry conferences and trade shows as we return to pre-COVID-19 pandemic sales activities such as our in-person client conference, Co:Lab.

General and Administrative

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.

General and administrative expenses increased $6.5 million, or 53.7%, and $13.8 million, or 63.1%, for the three and six months ended June 30, 2022, respectively, compared to the same periods in 2021.

For the three months ended June 30, 2022, the increase was primarily due to a $5.5 million increase in personnel-related and other costs (which includes stock-based compensation of $4.9 million).

In addition, we incurred a $0.3 million related to the Segmint acquisition (which includes stock-based compensation of $0.1 million), $0.2 million increase in insurance costs for public company director and officer coverage and $0.3 million higher software costs.

For the six months ended June 30, 2022, the increase in general and administrative expenses was primarily due to an $11.2 million increase in personnel-related and other costs (which includes stock-based compensation of $10.3 million).

In addition, we incurred a $0.3 million related to the Segmint acquisition (which includes stock-based compensation of $0.1 million), $1.3 million increase in insurance costs for public company director and officer coverage and $0.7 million higher software costs.

Acquisition-related expenses, net

Acquisition-related expenses, net increased $0.2 million and decreased $(1.8) million for the three and six months ended June 30, 2022, respectively, compared to the same periods in 2021.

For the three months ended June 30, 2022, the increase was primarily due to additional acquisition expenses related to legal, consulting, and professional fees for the acquisition of Segmint.

For the six months ended June 30, 2022, the decrease was primarily due to the $2.7 million gain on contingent consideration related to the purchase of MK, partially offset by $0.8 million of acquisition expenses related to legal, consulting, and professional fees for the acquisition of Segmint.

Amortization of acquired intangibles

Amortization of acquired intangibles increased $0.2 million and $0.2 million for the three and six months ended June 30, 2022, respectively, primarily due to additional amortization of intangible assets related to the acquisitions of MK in September 2021 and Segmint in April 2022.

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.

Non-operating expense decreased $0.9 million and $2.5 million for the three and six months ended June 30, 2022, respectively compared to same periods in 2021.

For the three months ended June 30, 2022, the decrease was primarily due to $1.3 million in non-operating loss related to the increase in fair value of our warrant liabilities for the three months ended June 30, 2021, partially offset by net $0.3 million of other non-operating expenses for the three months ended June 30, 2022.

For the six months ended June 30, 2022, the increase was primarily due to $3.0 million in non-operating loss related to the increase in fair value of our warrant liabilities and $0.5 million of net interest expense for the six months ended June 30, 2021, partially offset by net interest expense of $0.5 million, $0.3 million of unrealized losses on marketable securities, and $0.1 million related to loss on extinguishment of debt for the six months ended June 30, 2022.

Provision for Income Taxes

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.

The Company recorded $0.2 million and $0.2 million of provision for income taxes for the three and six months ended June 30, 2022, respectively, resulting in an effective tax rate of (0.8)% and (0.7)%, respectively, compared to no income tax expense for the three and six months ended June 30, 2021.

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

Liquidity and Capital Resources

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.

As of June 30, 2022, we had $213.4 million in cash and cash equivalents and marketable securities, and an accumulated deficit of $347.5 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 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.

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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 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 believe that our existing cash resources, including our Amended 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:

Three months ended March 31,

Six months ended June 30,

(in thousands) 2022 2021

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Net cash used in investing activities (259,576) (1,446)

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

Net cash provided by financing activities 62,584 185,422

Net Cash Used in Operating Activities

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.

During the six months ended June 30, 2022, net cash used in operating activities was $16.3 million, which consisted of a net loss of $33.6 million, adjusted by non-cash charges of $22.3 million and net cash outflows from the change in net operating assets and liabilities of $8.1 million.

The non-cash charges were primarily comprised of a non-operating loss related to depreciation and amortization expense of $3.0 million, and stock-based compensation expense of $21.4 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 net cash outflows from the change in our net operating assets and liabilities were primarily due to a $4.8 million increase in accounts receivable, a $3.5 million increase in prepaid expenses and other current assets and a $1.4 million increase in deferred implementation costs, partially offset by a $1.6 million increase in accounts payable and accrued liabilities.

During the six months ended June 30, 2021, net cash used in operating activities was $12.3 million, which consisted of a net loss of $22.3 million, adjusted by non-cash charges of $9.1 million and net cash inflows from the change in net operating assets and liabilities of $0.9 million.

The non-cash charges primarily were 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 $1.6 million, and stock-based compensation expense of $4.4 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.

The net cash inflows from the change in our net operating assets and liabilities were primarily due to a $7.9 million increase in accounts payable and accrued liabilities, partially offset by a $3.3 million increase in prepaid expenses and other current assets and a net $3.7 million in other balance sheet changes.

Net Cash Used in Investing Activities

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

On October 16, 2020, we entered into our credit agreement with Silicon Valley Bank and KeyBank National Association (“Credit Agreement”).

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

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 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 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.

During the six months ended June 30, 2022, net cash used in investing activities was $259.6 million, primarily consisting of $143.6 million for the purchase of marketable securities, $132.0 million related to our acquisition of Segmint, $2.4 million related to capitalized software development costs, and capital expenditures related to updates for computer and other equipment of $0.6 million, partially offset by $19.0 million in proceeds from maturities and redemptions of marketable securities.

During the six months ended June 30, 2021, net cash used in investing activities was $1.4 million, primarily consisting of $0.6 million related to capitalized software development costs, $0.3 million related to the finalization of working capital adjustments on our acquisition of ACH Alert, and capital expenditures related to updates for computer and other equipment of $0.5 million.

Net Cash Provided by Financing Activities

For the six months ended June 30, 2022, net cash provided by financing activities was $62.6 million, which was primarily due to proceeds of $85.0 million from issuance of long-term debt, $1.3 million from the exercise of stock options to purchase 0.6 million shares of our common stock, and proceeds from issuances under the Employee Stock Purchase Plan (“ESPP”) of $1.8 million, partially offset by $24.7 million of principal payments on debt and debt issuance costs paid of $0.9 million.

For the six months ended June 30, 2021, net cash provided by financing activities was $185.4 million, which primarily was due to the receipt of proceeds from our IPO of $192.8 million and proceeds of $4.9 million from the exercise of stock options to purchase 3.4 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 $3.9 million payment of deferred IPO issuance costs, and the repurchase of shares of our common stock in the amount of $3.5 million.

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.

On April 29, 2022, we 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.

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• 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 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 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.

The Amended Credit Agreement also permits us, 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 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 our subsidiaries and secured by all or substantially all of our assets and our subsidiaries’ assets pursuant to an Amended and Restated Guarantee and Collateral Agreement executed contemporaneously with the Amended Credit Agreement.

The Amended 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 $15.0 million or more.

The Amended Credit Agreement also contains customary events of default, which if they occur, could result in the termination of commitments under the Amended 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 six months ended June 30, 2022 was $0.8 million and $1.1 million, respectively, and $0.6 million and $0.2 million for the three and six months ended June 30, 2021, respectively.

In conjunction with closing the Amended Credit Agreement in 2022, we incurred issuance costs of $0.8 million, which were deferred and were scheduled to be amortized over the three-year term.

Unamortized debt issuance costs totaled $0.6 million and $0.1 million as of June 30, 2022 and December 31, 2021, respectively.

Amortization expense was less than $0.1 million and $0.2 million for the three and six months ended June 30, 2022, respectively.

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

Contractual Obligations and Commitments

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.

There were no material changes to our contractual obligations and commitments as of June 30, 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

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.

In preparing our unaudited condensed 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.

Actual amounts could differ from those estimated at the time the condensed 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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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