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Item 8. Financial Statements and Supplementary Data

2023-02-24 compared with 2022-02-25 · 346 added, 264 removed, 723 unchanged (46% of the section changed)

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Alkami Technology, Inc.

To the Stockholders and the Board of Directors of Alkami Technology, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Alkami Technology, Inc.

(the Company) as of December 31, 2021 and 2020, and the related consolidated statements of operations, changes in redeemable convertible preferred stock and stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

(the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, changes in redeemable convertible preferred stock and stockholders’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for the three years in the period ended December 31, 2022, in conformity with U.S.

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Cash and cash equivalents $ 108,720 $ 308,581

Marketable securities 87,635 —

Accounts receivable, net 26,246 20,821

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Property and equipment, net 13,561 11,828

Right of use assets 14,670 —

Deferred implementation costs, net of current portion 24,783 17,991

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Total assets $ 488,885 $ 436,510

Liabilities, Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit)

Liabilities, Preferred Stock, and Stockholders' Equity

Current liabilities

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Accrued liabilities 21,643 19,083

Deferred rent and tenant allowance, current 705 596

Deferred rent and tenant allowance, current portion — 705

Deferred revenues, current portion 8,835 8,198

Lease liabilities, current portion 3,657 —

Total current liabilities 41,614 33,198

Long-term debt, net 81,392 23,053

Warrant liability — 2,692

Deferred revenues, net of current portion 13,904 13,873

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Deferred income taxes 1,712 85

Lease liabilities, net of current portion 15,817 —

Other non-current liabilities 400 16,500

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Commitments and contingencies (Note 11 and 13)

Redeemable Convertible Preferred Stock

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

Stockholders’ Equity (Deficit)

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

Common stock, $ 0.001 par value, 500,000,000 and 101,671,156 shares authorized and 89,954,657 and 4,909,529 shares issued and outstanding as of December 31, 2021 and 2020, respectively

Stockholders’ Equity

Preferred stock, $ 0.001 par value, 10,000,000 shares authorized and 0 shares issued and outstanding as of December 31, 2022 and 2021

Common stock, $ 0.001 par value, 500,000,000 shares authorized and 92,112,749 and 89,954,657 shares issued and outstanding as of December 31, 2022 and 2021, respectively

Additional paid-in capital 706,407 658,374

Accumulated deficit ( 372,453 ) ( 313,853 )

Total stockholders’ equity (deficit) 344,611 ( 263,523 )

Total liabilities, redeemable convertible preferred stock and stockholders' equity (deficit) $ 436,510 $ 249,166

Total stockholders’ equity 334,046 344,611

Total liabilities and stockholders' equity $ 488,885 $ 436,510

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

(1) For December 31, 2020, prepaid expenses and other current assets includes $ 1.4 million of related party balances.

(2) Includes related party accounts payable of $ 0.3 million for December 31, 2020.

(1) Includes related party accounts payable of $ 0.3 million and none as of December 31, 2022 and December 31, 2021, respectively.

ALKAMI TECHNOLOGY, INC.

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General and administrative 71,247 50,398 36,437

53,380 37,276 24,920

Acquisition-related expenses, net ( 12,529 ) 2,983 839

Amortization of acquired intangibles 1,155 368 91

Total operating expenses 166,013 126,723 94,259

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Interest expense ( 3,868 ) ( 1,186 ) ( 489 )

(Loss) gain on financial instruments

( 3,035 ) ( 15,818 ) 509

Loss on financial instruments ( 200 ) ( 3,035 ) ( 15,818 )

Loss before income taxes

( 59,061 ) ( 46,650 ) ( 51,355 )

Provision for income taxes 172 — —

Provision (benefit) for income taxes ( 461 ) 172 —

$ ( 58,600 ) $ ( 46,822 ) $ ( 51,355 )

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______________

(1) Includes fees paid to a significant investor of $ 4.4 million for each of the years ended December 31, 2021, 2020, and 2019, respectively.

(2) Includes fees paid to a related party of less than $ 0.1 million for the year ended December 31, 2020.

(1) Includes amortization of acquired technology of $ 3.9 million, $ 0.7 million, and $ 0.1 million for the years ended December 31, 2022, 2021, and 2020, respectively .

(2) Includes fees paid to a related party of $ 4.4 million for each of the years ended December 31, 2022, 2021, and 2020, respectively.

ALKAMI TECHNOLOGY, INC.

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Stock-based compensation — — — — 1,954 — 1,954

Exercised warrants 10,000 16 — — — — —

Exercised stock options — — 357,675 1 297 — 298

Cumulative dividends and adjustments to redeemable convertible preferred stock — 1,212 — — ( 1,212 ) — ( 1,212 )

Net loss — — — — — ( 41,869 ) ( 41,869 )

Balance December 31, 2019

54,290,383 210,033 4,537,955 5 335 ( 195,730 ) ( 195,390 )

Issuance of redeemable convertible preferred stock, net of issuance costs 17,935,533 227,940 — — — — —

Stock-based compensation — — — — 1,954 — 1,954

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

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Balance December 31, 2020 72,225,916 443,263 4,909,529 5 — ( 263,528 ) ( 263,523 )

72,225,916 443,263 4,909,529 5 — ( 263,528 ) ( 263,523 )

Stock-based compensation — — — — 14,535 — 14,535

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Balance December 31, 2021 — — 89,954,657 90 658,374 ( 313,853 ) 344,611

Stock-based compensation — — — — 45,395 — 45,395

Issuance of common stock upon restricted stock unit vesting — — 698,841 1 ( 1 ) — —

Common stock issued under Employee Stock Purchase Plan (ESPP) — — 323,905 — 2,906 — 2,906

Exercised stock options — — 1,135,346 1 2,398 — 2,399

Payments for taxes related to net settlement of equity awards

— — — — ( 2,665 ) — ( 2,665 )

Net loss — — — — — ( 58,600 ) ( 58,600 )

Balance December 31, 2022

— $ — 92,112,749 $ 92 $ 706,407 $ ( 372,453 ) $ 334,046

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

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Depreciation and amortization expense 8,075 3,443 2,775

Accrued interest on marketable securities, net ( 369 ) — —

Stock-based compensation expense 45,395 14,535 1,954

Amortization of debt issuance costs 152 50 61

Loss (gain) on financial instruments

Gain on revaluation of contingent consideration ( 15,500 ) — —

Loss on financial instruments

200 3,035 15,818

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Cash flows from investing activities:

Purchase of marketable securities ( 187,217 ) — —

Proceeds from maturities and redemptions of marketable securities 99,750 — —

Purchases of property and equipment ( 1,057 ) ( 1,120 ) ( 2,147 )

Capitalized software development costs ( 3,645 ) ( 2,577 ) —

Acquisition of business ( 18,326 ) ( 25,073 ) —

Acquisition of business, net of cash acquired (1)

( 131,839 ) ( 18,326 ) ( 25,073 )

Net cash used in investing activities

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Payments on line of credit — — ( 13,000 )

Payment of holdback funds from acquisition ( 1,000 ) — —

Payments for taxes related to net settlement of equity awards ( 2,665 ) — —

Proceeds from stock option exercises 2,399 9,112 1,986

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61,179 192,273 225,046

Net increase (decrease) in cash and cash equivalents and restricted cash

Net (decrease) increase in cash and cash equivalents and restricted cash

( 200,617 ) 141,291 159,681

Cash, restricted cash, and cash equivalents, beginning of period 171,663 11,982 24,562

Cash, restricted cash, and cash equivalents, end of period $ 312,954 $ 171,663 $ 11,982

Cash and cash equivalents and restricted cash, beginning of period 312,954 171,663 11,982

Cash and cash equivalents and restricted cash, end of period $ 112,337 $ 312,954 $ 171,663

Supplemental disclosure of cash flow information:

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Supplemental disclosure of noncash investing and financing activities:

Accrued property additions $ — $ — $ 467

Deferred IPO offering costs not yet paid $ — $ — $ 419

(1) See Note 3 for additional information regarding noncash investing activities for the year ended December 31, 2021, related to the acquisition of MK.

(1) See Note 3 for additional information regarding noncash investing activities for the years ended December 31, 2022 and December 31, 2021, related to the acquisition of Segmint and MK.

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

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The Company was incorporated in Delaware in August 2011, and its principal offices are located in Plano, Texas.

Initial Public Offering

On April 13, 2021, the Company's registration statement relating to the initial public offering ("IPO") of its common stock was declared effective by the Securities and Exchange Commission ("SEC").

In connection with its 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).

Prior to the Company’s IPO, deferred offering costs, which consist of legal, accounting, consulting and other direct fees and costs relating to its IPO, were capitalized in prepaid expenses and other current assets.

Upon consummation of the Company’s IPO, these costs were offset against the proceeds from its IPO and recorded in additional paid-in capital.

In addition, in connection with its IPO, the Company's certificate of incorporation was amended and restated such that the total number of shares of common stock authorized to be issued was increased to 500,000,000 shares and the total number of shares of preferred stock authorized to be issued was reduced to 10,000,000 shares.

Immediately prior to the effectiveness of the Company’s registration statement, the Company’s outstanding shares of redeemable convertible preferred stock converted into an aggregate of 72,225,916 shares of common stock.

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

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

Summary of Significant Accounting Policies

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

Reclassification.

Acquisition-related expenses, net, and amortization of acquired intangibles previously included in general and administrative expense and sales and marketing expense, respectively, were reclassified into separate individual captions within the consolidated statements of operations to conform with the current year presentation.

Use of Estimates

The preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

Significant estimates and assumptions include determining the timing and amount of revenue recognition, recoverability and amortization period related to costs to obtain and fulfill contracts, deferred implementation costs, and business combinations.

Operating Segments

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Significant unobservable inputs which are supported by little or no market activity.

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

The Company’s financial instruments consist primarily of cash, restricted cash and cash equivalents, marketable securities, accounts

receivable, accounts payable, long-term debt, stock warrants and contingent consideration.

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

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Cash equivalents include amounts held in money market accounts that are measured at fair value using observable market prices.

Warrant liabilities are valued using the Black-Scholes option pricing method and are presented at estimated fair value at the end of the reporting period.

The assumptions used in preparing the Black-Scholes option pricing calculation include weighted average grant date fair value, volatility, risk-free interest rate, dividends, and weighted average expected life in years.

Marketable securities include debt securities that are measured at fair value using observable inputs.

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

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The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

At December 31, 2021 and 2020, $ 308.1 million and $ 143.3 million, respectively, was held in a cash equivalent money market account.

At December 31, 2022 and 2021, $ 28.2 million and $ 308.1 million, respectively, was held in a cash equivalent money market and marketable securities accounts.

The Company maintains its cash and cash equivalent balances at primarily one financial institution.

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

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

In addition, restricted cash representing additional cash proceeds in deposit with an escrow agent for satisfaction of a holdback provision related to the acquisition of MK Decisioning Systems, LLC (“MK”) is included in the consolidated balance sheets at December 31, 2021.

The amounts included in restricted cash on the consolidated balance sheets at December 31, 2022 and December 31, 2021 represent the additional cash proceeds in deposit with an escrow agent for satisfaction of deferred compensation related to the acquisition of ACH Alert, LLC (“ACH Alert”), additional cash proceeds in deposit with an escrow agent for satisfaction of a holdback provision related to the acquisitions of MK Decisioning Systems, LLC (“MK”) and Segmint Inc.

See Note 3 for further information.

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Restricted cash included in Other assets — 1,000

Total cash, cash equivalents, and restricted cash shown in statement of cash flows $ 312,954 $ 171,663

Total cash and cash equivalents and restricted cash $ 112,337 $ 312,954

Marketable Securities

The Company classifies its fixed income marketable securities as trading securities based on its intentions regarding these instruments.

Accordingly, marketable securities are reported at fair value, with all unrealized holding gains and losses reflected in the consolidated statements of operations.

Accounts Receivable

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The accounts receivable allowance reflects a reserve that reduces the Company’s client accounts receivable to the net amount estimated to be collectible.

The valuation of accounts receivable is based upon the credit-worthiness of clients, historical collection experience, and current events.

The valuation of accounts receivable is based upon the credit-worthiness of clients, historical collection experience, an estimate of future collectability, and current events.

Management also analyzes historical trends of credits issued to clients and specific invoices to estimate an allowance for disputed invoices and billing errors.

The Company assesses the collectability of outstanding accounts receivable on an ongoing basis and maintains an allowance for credit losses for accounts receivable deemed uncollectible.

The Company analyzes the accounts receivable portfolio for significant risks and considers prior periods and forecasts future collectability to determine the amount of revenues that will ultimately be collected from its customers.

This estimate is analyzed quarterly and adjusted as necessary.

Identified risks pertaining to the Company's accounts receivable include the delinquency level and customer type.

Future collectability is contingent upon current and anticipated macroeconomic conditions that could impact the Company's customers such as unemployment, inflation and regulation matters.

Due to the short-term nature of such receivables, the estimate of the amount of accounts receivable that may not be collected is based on aging of the accounts receivable balances and the financial condition of customers.

Historically, the Company's collection experience has not varied significantly, and bad debt expenses have been insignificant.

The Company maintains reserves for estimated sales credits issued to customers for billing disputes or other service-related reasons.

These allowances are recorded as a reduction against current period revenues and accounts receivable.

In estimating this allowance, the Company analyzes prior periods to determine the amounts of sales credits issued to customers compared to the revenues in the period that related to the original customer invoice.

This estimate is analyzed quarterly and adjusted as necessary.

The Company also maintains specific reserves for anticipated contract concessions.

Refer to Note 6.

Accounts receivable for additional information.

Property and Equipment

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

The Company had $ 2.6 million in capitalized internal software development costs as of December 31, 2021 and no ne as of December 31, 2020 and 2019.

The Company had $ 5.7 million and $ 2.6 million in capitalized internal software development costs as of December 31, 2022 and December 31, 2021, respectively.

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

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In accordance with current accounting guidance, these capitalized development costs are recorded within prepaid expenses and other current assets and are amortized to software license expense over the remaining fixed, non-cancellable term of the associated hosting arrangement on a straight-line basis beginning on the in-service date.

The Company had $ 0.3 million in qualified development costs incurred in a hosting arrangement as of December 31, 2021 and no ne as of December 31, 2020 and 2019.

As of December 31, 2021, no amounts capitalized have been placed into service.

Refer to Note 2.

Recently Adopted Accounting Pronouncements for additional information.

The Company determines if a contract contains a lease for accounting purposes at the inception of the arrangement.

The Company is primarily a lessee with a lease portfolio comprised mainly of real estate and equipment leases.

As of December 31, 2022, the Company had no finance leases.

The Company has elected to apply the practical expedient which allows the Company to account for lease and non-lease components of a contract as a single leasing arrangement for the real estate asset class.

Additionally, the Company elected the short-term lease exemption, whereby leases with initial terms of one year or less are not capitalized and instead expensed generally on a straight-line basis over the lease term.

Operating lease assets are included on the Company's consolidated balance sheets in non-current assets as a right-of-use (“ROU”) asset, and represent the Company's right to use an underlying asset for the lease term.

Operating lease liabilities are included on the Company's consolidated balance sheets in lease liabilities, current portion, for the portion that is due within 12 months and in lease liabilities, net of current portion, for the portion that is due beyond 12 months of the financial statement date and represent the Company's obligation to make lease payments.

ROU assets and lease liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term using an appropriate discount rate.

If an implicit rate is not readily determined by the Company's leases, the Company utilizes the incremental borrowing rate based on the available information at the commencement date to determine the lease payments.

The depreciable lives of the underlying leased assets are generally limited to the expected lease term inclusive of any optional lease renewals where the Company concludes at the inception of the lease that the Company is reasonably certain of exercising those options.

The ROU asset calculation may also include any initial direct costs paid and is reduced by any lease incentives provided by the lessor.

Lease expense for operating lease payments is recognized on a straight-line basis over the lease term.

Impairment of Long-Lived Assets

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Deferred commissions are amortized over the benefit period of the client contract.

Determining the expected benefit period over which to amortize deferred commissions requires significant judgment.

The Company determines the expected benefit period based upon initial contract lengths, expected renewals and the expected benefit of the underlying technology.

Determining the expected benefit period over which to amortize deferred commissions requires judgment.

Company determines the expected benefit period based upon initial contract lengths, expected renewals and the expected benefit of the underlying technology.

Deferred implementation costs

The Company capitalizes certain costs to fulfill client contracts such as employee salaries, benefits, stock-based compensation and associated payroll taxes that are directly related to the implementation of its solutions and some third-party costs, such as third-party licenses and maintenance.

The Company only capitalizes implementation costs that it anticipates will be recoverable under the contract.

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

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

service providers to perform significant portions of the services.

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

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This includes the costs of the implementation, client support and client success teams, development personnel responsible for maintaining and releasing updates to the 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 the Company’s solutions, the amortization of deferred implementation costs and acquired technology and depreciation.

Cost of revenues also includes the direct costs of bill-pay services and other third-party intellectual property included in the Company’s solutions, the amortization of acquired technology, the amortization of capitalized internal use software, and depreciation.

Stock-Based Compensation

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Under this method, stock-based compensation expense is measured by the estimated fair value of the granted stock options at the date of grant using the Black-Scholes option pricing model and recognized over the vesting period with a corresponding increase to additional paid-in capital.

The determination of the grant date fair value of stock-based awards using the Black-Scholes option-pricing model is affected, for periods prior to the Company’s IPO, by the Company’s estimated common stock fair value as well as other subjective assumptions including the volatility, risk-free interest rate, dividends, and weighted average expected life.

The determination of the grant date fair value of stock-based awards using the Black-Scholes option-pricing model is affected, for periods prior to the Company’s initial public offering ("IPO"), by the Company’s estimated common stock fair value as well as other subjective assumptions including the volatility, risk-free interest rate, dividends, and weighted average expected life.

The assumptions used in the Company’s option-pricing model represent management’s best estimates.

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The Company bases the risk-free interest rate on the rate for a U.S.

Treasury zero-coupon issue with a term that

closely approximates the expected life of the option grant at the date nearest the option grant date.

Treasury zero-coupon issue with a term that closely approximates the expected life of the option grant at the date nearest the option grant date.

The Company has never declared or paid any cash dividends and does not presently intend to pay cash dividends in the foreseeable future, other than the aggregate accumulated dividends paid to holders of the Company’s Series B redeemable convertible preferred stock upon the effectiveness of the Company’s IPO.

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The Company will continue to evaluate the appropriateness of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover and other factors.

Restricted Stock Units

Restricted Stock Units (“RSUs”)

RSUs issued upon and subsequent to the Company’s IPO vest upon the satisfaction of a time-based condition only.

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The offering periods begin each May 16 and November 16, or such other period determined by the compensation committee.

In accordance with the guidance in ASC 718-50 - Compensation - Stock Compensation, the ability to purchase shares of the Company’s common stock for 85% of the lower of the price on the first day of the offering period or the last day of the offering period (i.e.

the purchase date) represents an option and, therefore, the ESPP is a compensatory plan.

In accordance with the guidance in ASC 718-50 - Compensation - Stock Compensation, the ability to purchase shares of the Company’s common stock for 85 % of the lower of the price on the first day of the offering period or the last day of the offering period (i.e., the purchase date) represents an option and, therefore, the ESPP is a compensatory plan.

Accordingly, stock-based compensation expense is determined based on the grant-date fair value as estimated by applying the Black-Scholes option-pricing model and is recognized over the withholding period.

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

Diluted loss per share is calculated by giving effect to all potentially dilutive common stock, which is comprised of redeemable convertible preferred stock, stock options, restricted stock units (“RSUs”), ESPP obligations, and warrants, when determining the weighted-average number of shares of common stock outstanding.

Diluted loss per share is calculated by giving effect to all potentially dilutive common stock, which is comprised of redeemable convertible preferred stock, stock options, RSUs, ESPP obligations, and warrants, when determining the weighted-average number of shares of common stock outstanding.

Redeemable Convertible Preferred Stock Warrants

The Company’s warrants issued in connection with financing and other arrangements were classified as liabilities.

The warrants issued by the Company do not require net cash settlement, however, as the warrants were for the purchase of conditionally redeemable convertible preferred stock, which could have required the Company to transfer assets to the holder upon redemption, the Company recorded the warrants as liabilities on the accompanying consolidated balance sheets.

The warrants issued by the Company do not require net cash settlement, however, as the warrants were for the purchase of conditionally redeemable convertible preferred

stock, which could have required the Company to transfer assets to the holder upon redemption, the Company recorded the warrants as liabilities on the accompanying consolidated balance sheets.

The fair value of these warrants were recorded on the consolidated balance sheets at issuance and marked to market at each reporting period.

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Research and Development

Research and development costs include salaries and other personnel-related costs, including employee benefits, bonuses, third-party contractor expenses, software development tools, allocated corporate expenses and other related expenses incurred in product strategy, developing new solutions and upgrading and enhancing existing solutions.

Research and development costs are expensed as incurred.

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

In addition, the Company also includes 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.

Sales and Marketing

Sales and marketing expenses consist primarily of personnel costs of the Company’s sales, marketing and a portion of account management employees, including salaries, sales commissions (net of capitalization) and other incentive compensation, benefits and stock-based compensation expense, travel and related costs.

Sales and marketing expenses also include outside consulting fees, marketing programs, including lead generation, costs of the Company’s annual client conference, advertising, trade shows, allocated corporate expenses, other event expenses, amortization of deferred commission costs and amortization of acquired client relationships.

Sales and marketing expenses consist primarily of personnel-related costs of 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 the Company’s annual client conference, advertising, trade shows, other event expenses and amortization of acquired client relationships.

Advertising costs are expensed when incurred and were not significant for the years ended December 31, 2022, 2021, and 2020.

General and Administrative

General and administrative expenses consist primarily of salaries, benefits and stock-based compensation associated with executive, finance, legal, human resources, information technology, security and compliance as well as other 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 the Company’s facilities, employee relations, corporate telecommunication and software.

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

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 facilities, employee relations, corporate telecommunication and software.

Acquisition-Related Expenses, Net

Acquisition-related expenses, net, include acquisition-related expenses primarily related to accrual of deferred compensation, legal, consulting, and professional fees.

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

Amortization of Acquired Intangibles

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

Concentrations of Credit Risk

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The Company’s acquisitions are accounted for using the acquisition method of business combinations accounting.

The Company recognizes the consideration transferred (i.e.

purchase price) in a business combination as well as the acquired business’ identifiable assets, liabilities, and any non-controlling interests at their acquisition date fair value.

recognizes the consideration transferred (i.e., purchase price) in a business combination as well as the acquired business’ identifiable assets, liabilities, and any non-controlling interests at their acquisition date fair value.

The excess of the consideration transferred over the fair value of the identifiable assets, liabilities, and non-controlling interest, is recorded as goodwill in the consolidated financial statements.

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Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the Company’s consolidated statements of operations.

For acquisitions involving additional consideration to be transferred to the selling parties in the event certain future events occur or conditions are met (“contingent consideration”), we recognize the acquisition date fair value of contingent consideration as part of the consideration transferred in exchange for the business combination.

For acquisitions involving additional consideration to be transferred to the selling parties in the event certain future events occur or conditions are met (“contingent consideration”), the Company recognizes the acquisition date fair value of contingent consideration as part of the consideration transferred in exchange for the business combination.

Contingent consideration meeting the criteria to be classified as equity in the consolidated balance sheets is not remeasured, and its subsequent settlement is recorded within stockholders’ equity (deficit).

Contingent consideration classified as a liability is remeasured to fair value at each reporting date until the contingency is resolved, with any changes in fair value recognized in our consolidated statements of operations.

Intangible Assets

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Developed technology - 5 or 7 years

Trade name - 2 years

Amortization of acquired developed technologies is included in Cost of revenue, and amortization of acquired customer relationships and trade names is included in Sales & marketing expenses in the accompanying consolidated statements of operations.

Trade name - 2 or 10 years

Amortization of acquired developed technologies is included in Cost of revenues, and amortization of acquired customer relationships and trade names is included in Sales & marketing expenses in the accompanying consolidated statements of operations.

Management tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets.

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The Company performs a quantitative goodwill assessment and determines the fair value of the reporting unit using a combination of an income approach, employing a discounted cash flow model, and a market approach.

As the Company operates in a single reporting unit, the impairment test is performed at the consolidated entity level by comparing the estimated fair value of the Company to the carrying value of the Company.

Goodwill impairment, if any, is evaluated by comparing the reporting unit’s fair value to its carrying value.

There was no goodwill impairment for the years ended December 31, 2022, 2021, and 2020 .

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

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

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

The Company expects to adopt the standard in fiscal year 2022 using the modified retrospective transition approach and interim periods beginning 2023.

The Company continues to evaluate quantitative impacts that the adoption of this standard will have.

The Company expects total assets and liabilities reported will increase relative to such amounts prior to adoption.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued Accounting Standards Update (“ASU”) No.

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

In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842 (Leases), which provides narrow amendments to clarify how to apply certain aspects of the new lease standard.

In July 2018, the FASB also issued ASU 2018-11, Targeted Improvements, which provides the option to adopt ASU No.

2016-02 retrospectively for each prior period presented or as of the adoption date with a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

In January 2019, the FASB issued ASU No.

2019-01, “Leases (Topic 842):

Codification Improvements” to clarify the required disclosures of ASU No 2016-02 and explicitly exempt entities from disclosing the effect of the change for the interim period.

The Company adopted the standard effective January 1, 2022 and elected the package of practical expedients permitted under the transition guidance with Topic 842, which among other things, allows us to carry forward the historical lease classification.

Adoption of the new standard resulted in the recording of ROU assets and lease liabilities of approximately $ 16.9 million and $ 22.4 million, respectively, as of January 1, 2022.

The difference between the ROU asset and lease liabilities is related to deferred rent and tenant improvement allowances at the date of adoption.

The standard had no impact on our consolidated statements of operations.

In June 2016, the FASB issued ASU No.

2016-13, “Financial Instruments—Credit Losses (Topic 326),” which modifies the measurement of expected credit losses of certain financial instruments with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

In November 2019, the FASB issued ASU No.

2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842).

The ASU clarifies that operating lease receivables are not within the scope of ASC 326-20 and should instead be accounted for under the new leasing standard, ASC 842.

The effective date for adoption of the new standard was delayed until calendar years beginning after December 15, 2022, with early adoption permitted.

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

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

Recently Adopted Accounting Pronouncements

In August 2018, the FASB issued ASU No.

2018-15, “Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract,” which aligns the requirements for capitalizing development costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing development costs incurred to develop or obtain internal-use software.

The new standard requires capitalized costs to be amortized on a straight-line basis generally over the term of the arrangement, and the financial statement presentation for these capitalized costs would be the same as that of the fees related to the hosting arrangements.

The Company adopted this standard effective December 31, 2021, using a prospective approach.

The adoption of this new standard did not have a material impact on our consolidated financial statements.

Subsequent impacts on our consolidated financial statements will depend on the magnitude of implementation costs to be incurred.

Development costs capitalized subsequent to adoption are recognized in operating expenses on the consolidated statements of operations over the noncancelable period of the hosting arrangement plus any renewal periods reasonably certain to be taken.

The Company adopted the standard effective January 1, 2022.

The impact of adopting this standard was not material to the consolidated financial statements.

In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions to U.S.

GAAP on contract modifications, hedging relationships, and other transactions affected by reference rate reform to ease entities' financial reporting burdens as the market transitions from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates.

The guidance was effective upon issuance and may be applied prospectively to contract modifications made, hedging relationships entered into, and other transactions affected by reference rate reform, evaluated on or before December 31, 2022, beginning during the reporting period in which the guidance has been elected.

In December 2022, the FASB issued ASU No.

2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset Date of Topic 848, which extended the date to December 31, 2024.

The Company does not have any receivables, hedging relationships, lease agreements, or debt agreements that reference LIBOR or another reference rate expected to be discontinued.

On April 29, 2022, the Company amended and restated our credit agreement.

At the same time, the Company also amended its master note agreement.

As a result of those amendments, the Company’s floating rate debt no longer references a LIBOR based benchmark rate.

Therefore, the Company will not be electing the optional practical expedients associated with this ASU.

In October 2021, the FASB issued ASU No.

2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires entities to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606, as if the acquiring entity had originated the related revenue contracts.

This standard is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

Early adoption is permitted, including interim periods within those fiscal years.

An entity that early adopts this guidance in an interim period should apply the amendments (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application and (2) prospectively to all business combinations that occur on or after the date of initial application.

The Company early adopted the standard during the second quarter of 2022, has applied the related accounting to the business combination completed in the current fiscal year and will apply the standard to all business combinations completed prospectively.

The adoption of ASU 2021-08 did not have a material impact on the consolidated financial statements.

On May 3, 2021, the FASB issued ASU No.

2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40):

Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options.

This new standard provides clarification and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (such as warrants) that remain equity classified after modification or exchange.

This standard was effective for fiscal years beginning after December 15, 2021, and the standard was adopted and applied prospectively by the Company as of January 1, 2022, but the adoption and application did not have a significant impact on the Company's financial statements and disclosures, including interim periods.

Business Combination

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

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

A term loan of $ 25.0 million (“Term Loan”) was borrowed on October 16, 2020 to partially fund the acquisition of ACH Alert (see Note 8).

The ACH Alert acquisition also involved $ 4.9 million of additional cash consideration that the Company placed on deposit with an escrow agent to be paid upon the continued employment of one of the owners of ACH Alert, of which $ 2.5 million was paid in October 2021 and $ 2.4 million is to be paid in October 2022.

Since the payouts are contingent upon the continued and future employment of the former owner, these amounts have been excluded from the purchase price.

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

For the years ended December 31, 2021 and 2020, the Company recognized compensation expense of $ 2.5 million and $ 0.6 million, respectively, related to this agreement.

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

The following table summarizes the fair value amounts recognized as of the acquisition date for each major class of asset acquired or liability assumed, as well as adjustments made during the measurement period:

(in thousands) Preliminary Fair Value as of October 4, 2020 Measurement Period Adjustments Adjusted Fair Value as of March 31, 2021

Trade accounts receivables $ 915 $ — $ 915

Other current assets 47 ( 14 ) 33

Property and equipment 20 — 20

Goodwill 16,218 324 16,542

Intangible assets 8,450 — 8,450

Total assets acquired $ 25,650 $ 310 $ 25,960

Accounts payable $ 61 $ 5 $ 66

Accrued liabilities — 4 4

Deferred revenues, current 170 — 170

Deferred revenues, net of current 346 ( 25 ) 321

Total liabilities assumed 577 ( 16 ) 561

Net assets acquired $ 25,073 $ 326 $ 25,399

As of March 31, 2021, the allocation of the purchase price for ACH Alert was finalized.

The table below outlines the purchased identifiable intangible assets:

Weighted Average Amortization Period Total

(in years) (in thousands)

Identifiable intangible assets acquired:

Customer relationships 15 $ 5,100

Developed technology 7 3,300

Trade name 2 50

Total identifiable intangible assets $ 8,450

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

It is also expected to position the Company to better penetrate the banking market.

This goodwill is expected to be deductible for tax purposes.

No material transaction costs are included within the consolidated statements of operations for the year ended December 31, 2021.

Included within the consolidated statements of operations are transaction expenses of approximately $ 0.2 million for the year ended December 31, 2020.

For the years ended December 31, 2022, 2021, and 2020, the Company recognized compensation expense of $ 1.7 million, $ 2.5 million, and $ 0.6 million, respectively, related to this agreement.

MK Decisioning Systems, LLC

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

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 released at the 12 -month anniversary of close and the remainder to be released at the 18 -month anniversary of close.

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

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

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

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

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

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

of the former owners.

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

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

The fair value of the contingent earn-out as of December 31, 2021 is $ 15.5 million for which the balance is included in Other non-current liabilities on the consolidated balance sheets.

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

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

The fair value of the contingent earn-out both upon acquisition and as of December 31, 2021 was $ 15.5 million, for which the balance was included in Other non-current liabilities on the consolidated balance sheets.

This initial estimated fair value was included as contingent consideration in the total purchase price.

The Company remeasures the fair value of the contingent consideration on an ongoing basis and records the adjustment to the consolidated statements of operations.

For the year ended December 31, 2022, the Company reduced the fair value of the contingent earn-out to zero and recorded a gain of $ 15.5 million.

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

Based on the final purchase accounting, the Company determined that approximately 62 % of the maximum $ 25 million contingent consideration would be paid to the seller in accordance with the terms of the purchase agreement.

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

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

(in thousands) Preliminary Fair Value as of September 10, 2021 Measurement Period Adjustments Adjusted Fair Value as of December 31, 2021

Based on the final purchase accounting, the Company estimated that approximately 62 % of the maximum $ 25 million contingent consideration would be paid to the seller in accordance with the terms of the purchase agreement.

As of December 31, 2022, the Company determined that 0 % of the maximum $ 25 million contingent consideration would be paid to the seller in accordance with the terms of the purchase agreement as a result of changes in the expected timing of new customer sales and implementations.

Transaction costs included in the consolidated statements of operations for the year ended December 31, 2021 were $ 0.5 million.

For the year ended December 31, 2021, the Company had noncash investing activities of $ 17.5 million related to unpaid consideration and holdback for the acquisition of MK.

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.

The aggregate consideration paid in exchange for all of the outstanding equity interests of Segmint was approximately $ 135.0 million (the "Merger Consideration").

A portion of the Merger Consideration of approximately $ 2.6 million was placed into escrow to secure certain post-closing indemnification obligations in the Merger Agreement.

As of December 31, 2022, the allocation of the purchase price for Segmint has not been finalized.

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

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

(in thousands) Preliminary Fair Value as of April 25, 2022 Measurement Period Adjustments Adjusted Fair Value as of December 31, 2022

Cash $ — $ 601 $ 601

Trade accounts receivables 1,788 7 1,795

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Total assets acquired $ 136,856 $ 2,316 $ 139,172

Accounts payable and other current liabilities $ 43 $ — $ 43

Deferred revenues, net of current 510 — 510

Accounts payable $ 768 $ ( 282 ) $ 486

Accrued liabilities 188 371 559

Deferred revenues, current 145 — 145

Deferred tax liability — 2,317 2,317

Other non-current liabilities 625 — 625

Total liabilities assumed 1,726 2,406 4,132

Net assets acquired $ 135,130 $ ( 90 ) $ 135,040

As of December 31, 2021, the allocation of the purchase price for MK was finalized.

Less cash acquired — ( 601 ) ( 601 )

Total cash consideration for acquisition, less cash acquired $ 135,130 $ ( 691 ) $ 134,439

The measurement period adjustments recorded during the year ended December 31, 2022 are related to post-closing working capital adjustments, cash account amounts received as part of assets, revised estimates for intangible assets, and assumption of deferred tax liabilities.

The table below outlines the purchased identifiable intangible assets:

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Developed technology 5 20,600

Trade names 10 700

Total identifiable intangible assets $ 36,500

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

This goodwill is expected to be deductible for tax purposes.

Transaction costs were $ 0.5 million for the year ended December 31, 2021 and were included in the consolidated statements of operations.

For the year ended December 31, 2021, the Company had noncash investing activities of $ 17.5 million related to unpaid consideration for the acquisition of MK.

Goodwill resulted from the acquisition as it is intended to augment and diversify the Company’s single reportable segment and provide a complimentary solution to its existing platform offering.

The Company accounted for the acquisition as a business combination.

As a result of the acquisition of the stock of Segmint, the goodwill is not deductible for tax purposes.

The Company estimated and recorded a net deferred tax liability of $ 2.3 million after offsetting the acquired available tax attributes with the intangible assets shown in the table above.

Refer to Note 10 for discussion of the partial release of the Company’s pre-existing valuation allowance relating to the net deferred tax liability.

For the year ended December 31, 2022, the Company recognized acquisition-related expenses of $ 1.2 million related to the acquisition of Segmint.

For the year ended December 31, 2022, the Company had noncash investing activities of $ 2.6 million related to funds held in escrow for the acquisition of Segmint.

Property and Equipment, Net

Depreciation expense, including amortization of assets held under capital leases, was $ 2.4 million, $ 2.6 million, and $ 2.2 million for the years ended December 31, 2021, 2020, and 2019, respectively.

Property and equipment include $ 0.1 million of assets subject to a capital lease as of December 31, 2020.

The Company had no financing leases as of December 31, 2021.

Depreciation and amortization expense was $ 3.0 million, $ 2.4 million, and $ 2.6 million for the years ended December 31, 2022, 2021, and 2020, respectively.

(in thousands) Useful Life December 31, 2022 December 31, 2021

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$ 28,560 $ 23,845

accumulated depreciation ( 12,017 ) ( 9,662 )

accumulated depreciation and amortization ( 14,999 ) ( 12,017 )

Property and Equipment, net $ 13,561 $ 11,828

Revenue and Deferred Costs

The Company derives the majority of its revenues from recurring monthly subscription fees charged for the use of its SaaS subscription services.

Revenues and Deferred Costs

The Company derives the majority of its revenues from recurring monthly subscription fees charged for the use of its software-as-a-service (“SaaS”) subscription services.

Subscription revenues are generally recognized as revenue over the term of the contract as a series of distinct SaaS services bundled into a single performance obligation.

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Total revenues $ 204,270 $ 152,159 $ 112,142

The Company recognized approximately $ 6.4 million, $ 5.7 million, and $ 4.3 million of revenue during the years ended December 31, 2021, 2020, and 2019, respectively, that was included in deferred revenue in the accompanying balance sheets as of the beginning of each reporting period.

The Company recognized approximately $ 14.8 million of revenue during the year ended December 31, 2022 that was included in deferred revenue in the accompanying balance sheets as of the beginning of the reporting period.

For those contracts that were wholly or partially unsatisfied as of December 31, 2022, minimum contracted subscription revenues to be recognized in future periods total approximately $ 893.4 million.

The Company expects to recognize approximately 44.6 % percent of this amount as subscription services are transferred to customers over the next 24 months, an additional 32.6 % percent in the next 25 to 48 months, and the balance thereafter.

This estimate does not include estimated consideration for excess user and transaction processing fees that the Company expects to earn under its subscription contracts.

This estimate does not include estimated consideration

for excess user and transaction processing fees that the Company expects to earn under its subscription contracts.

Deferred Cost Recognition

The Company capitalized $ 8.3 million, $ 4.0 million, and $ 3.0 million in deferred commissions costs during the years ended December 31, 2022, 2021, and 2020, respectively, and recognized amortization of $ 2.9 million, $ 2.1 million, and $ 1.6 million during the years ended December 31, 2022, 2021, and 2020, respectively.

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

Deferred commissions are included in deferred implementation costs in the accompanying consolidated balance sheets in the amount of $ 10.8 million and $ 9.0 million as of December 31, 2021 and December 31, 2020, respectively.

A portion of the increase in deferred commissions was driven by a change in the Company’s commission plan in 2022 which eliminated a requisite service period condition and resulted in an increase in the portion of commissions that were capitalized.Amortization expense is included in sales and marketing expenses in the accompanying statements of operations.

Deferred commissions are considered costs to obtain a contract and are included in deferred implementation costs in the accompanying consolidated balance sheets in the amount of $ 16.2 million and $ 10.8 million as of December 31, 2022 and 2021, respectively.

The Company capitalized implementation costs of $ 6.9 million, $ 6.1 million, and $ 4.5 million during the years ended December 31, 2022, 2021, and 2020, respectively, and recognized amortization of $ 3.9 million, $ 3.0 million, and $ 2.2 million during the years ended December 31, 2022, 2021, and 2020, respectively.

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

Deferred cost assets are reviewed for impairment annually or more frequently if circumstances indicate there may be an impairment.

These deferred costs are considered costs to fulfill client contracts and are included in deferred implementation costs in the accompanying consolidated balance sheets in the amount of $ 16.4 million and $ 13.5 million as of December 31, 2022 and 2021, respectively.

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

No impairment loss was recognized in relation to these capitalized costs for the years ended December 31, 2022, 2021, and 2020.

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Total receivables 27,033 21,023

Allowance for doubtful accounts ( 39 ) ( 323 )

Allowance for credit losses ( 467 ) ( 39 )

Reserve for estimated credits ( 320 ) ( 163 )

$ 26,246 $ 20,821

The Company charged $ 0.1 million to bad debt expense and relieved the allowance for doubtful accounts balance in the amount of $ 0.4 million for the year ended December 31, 2021 for a total allowance for doubtful accounts balance of less than $ 0.1 million as of December 31, 2021.

The Company charged $ 0.3 million to bad debt expense for a total allowance for doubtful accounts balance of $ 0.3 million as of December 31, 2020.

The Company charged $ 0.1 million to credit loss expense for the year ended December 31, 2022.

The Company charged $ 0.1 million to credit loss expense and relieved the allowance for credit losses balance in the amount of $ 0.4 million for the year ended December 31, 2021 for a total allowance for credit losses balance of less than $ 0.1 million as of December 31, 2021.

Accrued Liabilities

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Accrued tax liabilities 1,147 3,724

MK acquisition holdback provision 1,000 —

MK and Segmint acquisition holdback provision 3,618 1,000

ESPP liability 717 821

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Total accrued liabilities $ 21,643 $ 19,083

On October 16, 2020, the Company entered into a credit agreement with Silicon Valley Bank and KeyBank (“Credit Agreement”).

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

The Credit Agreement matures on October 16, 2023.

In addition, the Credit Agreement includes the following:

On April 29, 2022, 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 Original Credit Agreement”).

The Amended Credit Agreement matures on April 29, 2025.

The Amended Credit Agreement includes the following among other features:

• 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 was borrowed on the closing date of the Credit Agreement.

The proceeds of the Term Loan were used to fund the acquisition of ACH Alert which closed on October 4, 2020.

The Amended Credit Agreement provides $ 40.0 million in aggregate commitments for secured revolving loans (“Amended Revolving Facility”) and there were no outstanding borrowing as of December 31, 2022.

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, which closed on April 25, 2022.

• Accordion Feature:

The Credit Agreement also allows the Company, 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 began December 31, 2021 and continue through September 30, 2022 and increases to approximately $ 0.6 million beginning on December 31, 2022 through the Credit Agreement maturity date.

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

Borrowings under the Credit Agreement bear interest at a variable rate based upon, at the Company’s 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.

The Company’s minimum interest rate applied to term debt was 4.00 % as of December 31, 2020.

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

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

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

The Company may prepay the Term Loans 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 Revolving Facility covenant, requiring the loan parties to have liquidity, tested on the last day of each calendar month, of $ 10.0 million or more.

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

The Amended Credit Agreement also permits the Company, subject to certain conditions, to request additional revolving loan commitments in an aggregate principal amount of up to $ 50.0 million and there were no outstanding borrowing as of December 31, 2022.

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.

Debt issuance costs paid for the execution of the Amended Credit Facility were $ 0.9 million, of which $ 0.1 million was included in prepaid expenses and other current assets and $ 0.2 million was included in other assets on the consolidated balance sheets.

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.

The Company is required to pay a commitment fee of 0.25 % per annum on the undrawn portion available under the Amended Revolving Facility, and variable fees on outstanding letters of credit.

The Company has a standby letter of credit in the amount of $ 0.3 million, which serves as security under the lease relating to the Company’s office space that expires in 2028.

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.

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.

The Company was in compliance with all covenants as of December 31, 2022.

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Total $ 85,000

Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit)

Stockholders' Equity (Deficit)

In connection with its IPO, the Company's certificate of incorporation was amended and restated such that the total number of shares of common stock authorized to be issued was increased to 500,000,000 shares and the total number of shares of preferred stock authorized to be issued was reduced to 10,000,000 shares.

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

As of December 31, 2021, there was no preferred stock issued or outstanding.

As of December 31, 2022 and 2021, there was no preferred stock issued or outstanding.

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

1 unchanged sentence

All warrants were exercised for aggregate proceeds of $ 0.6 million during the year ended December 31, 2021.

Equity Compensation

Equity Compensation Plans

On February 25, 2021, the Board approved, subject to stockholder approval, which was obtained on March 23, 2021, the ESPP, pursuant to which employees would be able to purchase shares of the Company’s common stock at a 15 % discount.

1 unchanged sentence

The Board further provided that the share reserve will be refreshed by an evergreen provision of 1 % of the Company’s outstanding common stock at the end of the prior year, or such lesser amount as the Board or its Compensation Committee may determine.

The Company reserved 2,205,790 shares of common stock for future issuance under the ESPP and 2,083,476 shares remain available for future issuance.

The Company has reserved 2,705,790 shares of common stock for issuance under the ESPP and 2,259,571 shares remain available for future issuance.

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

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

The Company reserved 12,131,846 shares of common stock for issuance pursuant to future awards under the 2021 Plan and 9,905,967 shares remain available for future issuance.

The Company has reserved 16,629,578 shares of common stock for issuance pursuant to awards under the 2021 Plan, and 10,018,849 shares remain available for future issuance.

Stock Options

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Balance, January 1, 2021 11,603,131 $ 2.14 7.2 154,581

11,603,131 $ 2.14 7.2 $ 154,581

Granted 2,811,098 16.38

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Balance, December 31, 2021 8,148,853 $ 7.14 7.4 $ 105,260

Exercised ( 1,135,346 ) 2.11 14,169

Forfeited ( 745,022 ) 10.91 3,176

Balance, December 31, 2022

6,268,485 $ 7.61 5.9 $ 48,141

1 unchanged sentence

4,777,675 $ 6.02 5.3 $ 43,051

The fair value of options granted was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions for the years ended December 31, 2021, 2020 and 2019 (i) expected term of 5.5 years, 5.9 years and 6.1 years, (ii) expected volatility of 36.3 %, 34.8 % and 32.3 %, (iii) risk-free interest rate 0.67 %, 0.97 % and 2.0 %, (iv) expected dividend yield of 0 % for all periods.

No options were granted for the year ended December 31, 2022.

The fair value of options granted was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions for the years ended December 31, 2021 and 2020 (i) expected term of 5.5 years and 5.9 years, (ii) expected volatility of 36.3 % and 34.8 %, (iii) risk-free interest rate 0.67 % and 0.97 %, (iv) expected dividend yield of 0 % for all periods.

The total fair value of stock options vested during the years ended December 31, 2022, 2021, and 2020 was $ 15.8 million, $ 6.4 million, and $ 2.0 million, respectively.

1 unchanged sentence

Certain stock option grants provide the option holder the right to exercise their stock options before they vest.

As of December 31, 2021 2020, and 2019, 0.7 million, 1.0 million, and $ 1.1 million, respectively, were exercisable that were not yet vested by the option holder at a weighted average exercise price of $ 3.37 , $ 1.34 , and $ 0.82 per share, respectively.

As of December 31, 2022 2021, and 2020, 0.3 million, 0.7 million, and 1.0 million options, respectively, were exercisable that were not yet vested by the option holder at a weighted average exercise price of $ 2.46 , $ 3.37 , and $ 1.34 per share, respectively.

A summary of the status of non-vested options is as follows:

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4,787,787 6.10

Granted 2,811,098 8.53

Forfeited ( 675,375 ) 5.36

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The agreement resulted in a modification of the former employee's 438,783 outstanding stock options and 50,000 RSUs, which accelerated certain vesting, resulting in the recognition of $ 1.9 million of incremental stock-based compensation expense for the year ended December 31, 2021.

An additional $ 8.2 million of expense will be recognized ratably over the remaining requisite service period, through December 31, 2022.

An additional $ 8.2 million of expense was recognized ratably over the remaining requisite service period, through December 31, 2022.

Restricted Stock Units

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The service condition for the awards is satisfied over generally three to four years .

The total fair value of restricted stock units vested during the year ended December 31, 2022 was $ 23.3 million.

Restricted stock unit activity was as follows:

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Nonvested as of December 31, 2021 2,867,799 $ 28.48

Granted 5,771,008 14.06

Vested ( 896,575 ) 25.88

Forfeited ( 641,136 ) 24.27

Nonvested as of December 31, 2022 7,101,096 $ 17.45

As of December 31, 2022, the total unrecognized stock-based compensation expense related to RSUs was $ 91.0 million, net of forfeitures, which the Company expects to recognize over the next 3.2 years.

Employee Stock Purchase Plan

The first offering period commenced on May 15, 2021, and as of December 31, 2021, 112,314 shares have been issued under the ESPP.

Stock-based compensation expense was included as follows:

The first offering period commenced on May 15, 2021, and as of December 31, 2022, 446,219 shares have been issued under the ESPP with 323,905 shares issued during the year ended December 31, 2022.

Stock-based compensation expense was included in the consolidated statements of operations as follows:

Year ended December 31,

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Total stock-based compensation expenses $ 44,592 $ 14,535 $ 1,954

The amount of stock-based compensation capitalized as part of deferred implementation costs was insignificant in 2021, 2020 and 2019.

The components of the provision for income taxes are as follows:

The amount of stock-based compensation capitalized as part of deferred implementation costs was $ 0.6 million for the year ended December 31, 2022 and insignificant for the years ended December 31, 2021 and 2020.

The components of the provision (benefit) for income taxes are as follows:

Year ended December 31,

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Federal $ — $ — $ —

State 229 87 —

Total current $ 229 $ 87 $ —

Federal ( 213 ) 42 —

State ( 477 ) 43 —

Total deferred ( 690 ) 85 —

Total provision for income taxes $ 172 $ — $ —

The provision for income taxes results in effective rates that differ from the statutory rates.

Total provision (benefit) for income taxes

$ ( 461 ) $ 172 $ —

The provision (benefit) for income taxes results in effective rates that differ from the statutory rates.

The following is a reconciliation of income tax expense (benefit) computed at the statutory federal income tax rate to the total tax expense (benefit) computed at the effective tax rate:

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Intangible assets — 247

Warrant liability — 616

Capitalized research and development costs 14,312 —

Lease liabilities 4,872 —

Other 328 339

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Fixed assets ( 459 ) ( 637 )

Right of use assets ( 3,670 ) —

Goodwill ( 3,702 ) —

Intangible assets ( 7,850 ) —

Deferred implementation costs ( 1,286 ) ( 705 )

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Deferred income tax liabilities, net of deferred tax assets $ ( 1,712 ) $ ( 85 )

At December 31, 2021 and 2020, the Company had federal net operating loss carryforwards of $ 290.2 million and $ 187.1 million, respectively, of which $ 92.6 million for both periods is subject to limited carryforward periods and begin to expire in 2031.

At December 31, 2022 and 2021, the Company had federal net operating loss carryforwards of $ 316.9 million and $ 290.2 million, respectively, of which $ 92.3 million and $ 92.6 million, respectively, is subject to limited carryforward periods and begin to expire in 2033.

At December 31, 2022 and 2021, the Company had various apportioned state net operating loss carryforwards of $ 220.3 million and $ 180.0 million, respectively, which are subject to varying carryforward periods that begin to expire in 2024.

The Company’s ability to utilize net operating loss carry forwards and other tax attributes to reduce future federal taxable income is subject to potential limitations under Internal Revenue Code Section 382 (“Section 382”) and its related tax regulations.

The utilization of these attributes may be limited if certain ownership changes by 5% stockholders (as defined in Treasury regulations pursuant to Section 382) and the effects of stock issuances by the Company during any three-year period result in a cumulative change or more than 50% in the beneficial ownership of the Company.

At December 31, 2021, $ 16.1 million of our federal net operating loss carryforwards, which expire between 2031 and 2034, are subject to the annual utilization limitation.

Additionally, the Company had $ 0.3 million of federal general business credit carryforwards as of December 31, 2022, which begin to expire in 2035.

The Company’s ability to utilize net operating loss carryforwards and other tax attributes to reduce future federal taxable income is subject to potential limitations under Internal Revenue Code Section 382 (“Section 382”) and Section 383 and its related tax regulations.

The utilization of these attributes may be limited if certain ownership changes by 5% shareholders (as defined in Treasury regulations pursuant to Section 382) and the effects of stock issuances by the Company during any three-year period result in a cumulative change of more than 50% in the beneficial ownership of the Company.

In connection with the acquisition of Segmint, the Company acquired tax attributes that are subject to annual utilization limitations.

We are in the process of conducting a Section 382 analysis and expect a portion of the acquired tax attributes to expire unutilized.

Therefore, we have preliminarily recorded a valuation allowance of $ 12.8 million, gross, against these acquired NOLs.

At December 31, 2022, $ 41.7 million of our combined federal net operating loss carryforwards, which begin to expire in 2033, remain subject to the annual Section 382 utilization limitation.

Subsequent ownership changes may further impact the limitation in future years.

At December 31, 2022, $ 0.1 million of the Company’s federal general business credit carryforwards are subject to limitation under Section 383 and are expected to expire unutilized.

The Company assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit the use of existing deferred tax assets.

1 unchanged sentence

As a result, at December 31, 2022 and 2021, the Company established a valuation allowance of $ 96.3 million and $ 81.6 million, respectively, for its net deferred tax assets as realization of the net deferred tax assets is not reasonably assured based upon a “more likely than not” threshold.

We excluded the deferred tax liabilities related to certain indefinite-lived intangibles when calculating the valuation allowance, as these liabilities cannot be considered as a source of income when determining the realizability of the net definite-lived deferred tax assets.

The Company excluded the deferred tax liabilities related to certain indefinite-lived intangibles when calculating the valuation allowance, as these liabilities cannot be considered as a source of income when determining the realizability of the net definite-lived deferred tax assets.

In addition to these indefinite-lived deferred tax liabilities, the Company also has indefinite-lived deferred tax assets which were considered as part of the Company’s net deferred tax position.

The valuation allowance increased by $ 27.4 million and $ 10.3 million during the years ended December 31, 2021 and 2020, respectively.

Due to the Segmint acquisition, the Company had deferred tax liabilities in excess of deferred tax assets related to separate state filings for which a valuation allowance was not recorded.

The valuation allowance increased by $ 14.6 million, of which $ 11.3 million was recorded through current year earnings and $ 3.3 million was recorded as part of the Segmint business combination, and $ 27.4 million during the years ended December 31, 2022 and 2021, respectively.

During the year ended December 31, 2022, the acquisition of Segmint resulted in the recognition of a net deferred tax liability of

$ 2.3 million.

See Note 3 for further information.

Prior to the business combination, the Company had a full valuation allowance on its net deferred tax assets.

The net deferred tax liability generated from the business combination is considered an additional source of income to support the realizability of the Company’s pre-existing deferred tax assets.

As a result, the Company released a portion of the pre-existing valuation allowance against the deferred tax assets and recorded a provisional deferred tax benefit of $ 2.1 million.

The Company files income tax returns in the U.S.

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The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carry back periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.

The Company elected to defer the employer side of social security payments resulting in a deferred tax asset for the years ended December 31, 2021 and 2020.

The Company does not expect there to be a material impact on its financial statements, and will continue to assess the effect of the CARES Act and ongoing government guidance related to COVID-19 as it is issued.

The Company elected to defer the employer side of social security payments resulting in a deferred tax asset for the year ended December 31, 2021.

On August 17, 2022, President Biden signed into law the Inflation Reduction Act of 2022.

The Inflation Reduction Act, among other things, includes provisions relating to the corporate alternative minimum tax and an excise tax on corporate stock buybacks.

The Company does not expect there to be a material impact on its financial statements and will continue to assess in future periods.

Fair Value of Financial Instruments

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

1 unchanged sentence

Cash equivalents include amounts held in money market accounts that are measured at fair value using observable market prices.

Warrant liabilities are valued using the Black-Scholes option pricing method and are presented at estimated fair value at the end of the reporting period.

Changes in the fair value of warrant liabilities are recognized as a gain or loss within non-operating income (expense).

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

Marketable securities include debt securities that are measured at fair value using observable inputs.

11 unchanged sentences

$ 28,173 $ 28,173 $ — $ —

Marketable securities:

Corporate bonds 26,037 — 26,037 —

Commercial paper 36,407 — 36,407 —

Treasury debt securities 22,731 22,731 — —

International debt securities 2,460 2,460 — —

Total marketable securities 87,635 25,191 62,444 —

Total Assets $ 115,808 $ 53,364 $ 62,444 $ —

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

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

(1) Includes cash sweep account, money market account, and money market funds that have investments in primarily U.S.

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(In thousands) December 31, 2021 Level 1 Level 2 Level 3

Money Market Accounts $ 143,277 $ 143,277 $ — $ —

Cash equivalents (1)

$ 308,128 $ 308,128 $ — $ —

Total Assets $ 308,128 $ 308,128 $ — $ —

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

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

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

The reconciliations of the beginning and ending balances during the year ended December 31, 2021 for Level 3 assets and liabilities are as follows (in thousands):

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

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

Ending Level 3 Fair Value at December 31, 2021

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

(1) Includes cash sweep account, money market account, and money market funds that have investments primarily in U.S.

Government Agency debt, U.S.

Treasury debt, U.S.

Treasury Repurchase Agreements, U.S.

Government Agency Repurchase Agreements, and corporate bonds that have a maturity of three months or less from the original acquisition date.

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

Balance at January 1, 2021 $ —

Business Combination

Balance at December 31, 2021

Total fair value adjustments reported in earnings (Acquisition-related expenses, net) ( 15,500 )

Balance at December 31, 2022

Earnings Per Share

Net loss attributable to common stockholders used in computing basic and diluted earnings per share (“EPS”) has been calculated as the net loss less Series B cumulative dividends and other adjustments to redeemable convertible preferred stock of $ 0.3 million and $ 5.3 million for the years ended December 31, 2021 and 2020, respectively.

Net loss attributable to common stockholders used in computing basic and diluted earnings per share (“EPS”) has been calculated as the net loss less Series B cumulative dividends and other adjustments to redeemable convertible preferred stock of $ 0 , $ 0.3 million, and $ 5.3 million for the years ended December 31, 2022, 2021, 2020, respectively.

All of the Company’s outstanding series of redeemable convertible preferred stock are considered to be participating securities.

22 unchanged sentences

Commitments and Contingencies

Operating and Capital Lease Commitments

The Company leases office space under non-cancellable operating leases for its corporate headquarters in Plano, Texas pursuant to a 10 year lease agreement under which the Company leases approximately 125,000 square feet of office space with an initial term that expires on August 31, 2028, with the option to extend the lease for either two additional terms of five years each or one additional term of ten years .

Rent expense under operating leases was $ 4.6 million, $ 4.7 million, and $ 3.8 million for the years ended December 31, 2021, 2020, and 2019, respectively.

The Company entered into a capital lease arrangement to obtain equipment for its corporate operations.

This agreement expired in February 2020, and the lease was secured by the underlying leased equipment.

In August 2021, the Company entered into an agreement to sublease certain premises of its offices in Plano, Texas.

The sublease is classified as an operating lease and has a term of less than three years .

The Company has sublease income of $ 0.1 million for the year ended December 31, 2021.

Future minimum payments required under operating and capital leases that have initial or remaining non-cancelable lease terms in excess of one year at December 31, 2021 were as follows (in thousands):

Operating Leases

Thereafter 6,736

Total minimum lease payments $ 25,913

Deferred Rent and Tenant Allowances

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

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

Year ended December 31,

(in thousands) 2021 2020

Deferred rent and tenant allowance $ 5,895 $ 6,463

current portion ( 705 ) ( 596 )

Deferred rent and tenant allowance, net of current portion $ 5,190 $ 5,867

Contractual Commitments

1 unchanged sentence

The Company is party to several purchase commitments for third-party services that contain both a contractual minimum obligation and a variable obligation based upon usage or other factors which can change on a monthly basis.

At December 31, 2021, the Company had approximately $ 18.0 million of purchase obligations in the next twelve months.

At December 31, 2022, the Company had approximately $ 22.3 million of purchase obligations in the next 12 months.

Legal Proceedings

7 unchanged sentences

Based upon present information, the Company believes that its liability, if any, arising from such pending legal proceedings, asserted legal claims and known potential legal claims which are likely to be asserted, is not reasonably likely to be material to the Company’s financial position, results of operations, or cash flows, taking into account established accruals for estimated liabilities.

Related Party Transactions

For the years ended December 31, 2021, 2020, and 2019, CU Cooperative Systems, Inc.

(“CU Cooperative”), an investor who is also a vendor, was paid fees of $ 4.4 million in all three periods, which relates to services resold to the Company’s clients.

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

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

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

For the year ended December 31, 2021 and 2020, the Company employed a former owner of acquired business ACH Alert.

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

The Company had no significant receivable balance from the former owner as of December 31, 2021.

The Company adopted ASC Topic 842, Leases on January 1, 2022.

Renewal options were not included in the ROU asset and lease liability calculation.

The Company elected the practical expedient to not provide comparable presentation for periods prior to adoption.

In August 2021, the Company entered into an agreement to sublease certain premises of its offices in Plano, Texas.

The sublease is classified as an operating lease and has a term of less than three years .

Sublease income was $ 0.3 million and $ 0.1 million for the years ended December 31, 2022 and 2021, respectively.

Operating lease expense consisted of:

(in thousands)

Year ended December 31, 2022

Operating lease expense

Short term lease expense and other (1)

Total lease expense

(1) Other lease expense includes variable lease expense and sublease income.

Operating rent expense was $ 4.6 million and $ 4.7 million for the years ended December 31, 2021 and 2020, respectively.

We elected the practical expedient to not provide comparable presentation for periods prior to adoption.

Supplemental lease information

Cash flow information (in thousands)

Year ended December 31, 2022

Cash paid for operating lease liabilities

Right-of-use assets obtained in exchange for operating lease obligations

Operating lease information

Year ended December 31, 2022

Weighted-average remaining lease term

Weighted-average discount rate

The future maturities of operating lease liabilities are as follows:

(in thousands) December 31, 2022

Thereafter 2,712

Total minimum lease payments $ 22,203

present value discount ( 2,729 )

Total lease liability balance $ 19,474

Employee Benefit Plan

2 unchanged sentences

The Company currently matches employee contributions at 25 % of employee contributions up to 8 % of salary.

Matching contributions vest 20 % annually.

Matching contributions vest based on the employees tenure with the Company.

Prior to this change, the plan provided for employer contributions to be made only at the Company’s discretion.

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There were no indications of impairment of goodwill noted for the years ended December 31, 2022 and 2021.

For the year ended December 31, 2022, the Company recorded $ 99.9 million to goodwill related to the acquisition of Segmint.

See Note 3 for further information.

Goodwill has a carrying value of $ 148.0 million and $ 48.1 million as of December 31, 2022 and 2021, respectively.

18 unchanged sentences

Total intangible assets $ 12,445 $ ( 1,281 ) $ 11,164

Amortization expense recognized on intangible assets was $ 1.1 million, $ 0.2 million, and $ 0 for the years ended December 31, 2021, 2020, 2019, respectively.

Amortization expense recognized on intangible assets was $ 5.1 million, $ 1.1 million, and $ 0.2 million for the years ended December 31, 2022, 2021, and 2020, respectively.

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

Thereafter 12,462

Related Party Transactions

For the years ended December 31, 2022, 2021, and 2020, CU Cooperative Systems, Inc.

(“CU Cooperative”), a vendor, was paid fees of $ 4.4 million in all three periods, which relates to services resold to the Company’s clients.

As of December 31, 2022 the Company had $ 0.3 million due to CU Cooperative included in accounts payable, and as of December 31, 2021, accounts payable had no amounts due to CU Cooperative.

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

Subsequent Events

Pursuant to the terms of the annual evergreen provision in the 2021 Plan, effective January 1, 2023, the number of shares issuable thereunder automatically increased by 4,605,637 shares for a new total of 14,624,486 shares available for issuance.

The Board of Directors limited the effect of the evergreen provision in the ESPP, and, effective January 1, 2022, the number of shares issuable thereunder increased by 500,000 shares for a new total of 2,583,476 shares available for issuance.

The Board limited the effect of the evergreen provision in the ESPP, and, effective January 1, 2023, the number of shares issuable thereunder increased by 500,000 shares for a new total of 2,759,571 shares available for issuance.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

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-K

Item 8. Financial Statements and Supplementary Data