What changed in this filing

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Item 1. Financial Statements

2023-08-03 compared with 2023-05-04 · 153 added, 101 removed, 401 unchanged (39% of the section changed)

3 unchanged sentences

(In thousands, except share and per share data)

March 31, December 31,

June 30, December 31,

Current assets

27 unchanged sentences

Stockholders’ Equity

Preferred stock, $ 0.001 par value, 10,000,000 shares authorized and 0 shares issued and outstanding as of March 31, 2023 and December 31, 2022

Preferred stock, $ 0.001 par value, 10,000,000 shares authorized and 0 shares issued and outstanding as of June 30, 2023 and December 31, 2022

Common stock, $ 0.001 par value, 500,000,000 shares authorized;

and 92,864,741 and 92,112,749 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively

and 94,228,876 and 92,112,749 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively

Additional paid-in capital 729,607 706,407

6 unchanged sentences

(In thousands, except share and per share data)

Three months ended March 31,

Three months ended June 30,

Six months ended June 30,

2023 2022 2023 2022

Revenues 65,763 50,530 125,759 95,320

22 unchanged sentences

Basic and diluted 93,334,725 90,707,381 92,868,623 90,459,503

(1) Includes amortization of acquired technology of $ 1.3 million and $ 0.3 million for the three months ended March 31, 2023 and 2022, respectively.

(1) Includes amortization of acquired technology of $ 1.4 million and $ 0.9 million for the three months ended June 30, 2023 and 2022, respectively, and $ 2.7 million and $ 1.2 million for the six months ended June 30, 2023 and 2022, respectively.

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

2 unchanged sentences

(In thousands, except share data)

Three months ended March 31, 2023

Three months ended June 30, 2023

Common Stock Additional Paid-in Capital Accumulated Deficit Total Stockholders’ Equity

Shares Amount

Balance January 1, 2023

Balance March 31, 2023

92,864,741 $ 93 $ 717,450 $ ( 389,416 ) $ 328,127

1 unchanged sentence

Issuance of common stock upon restricted stock unit vesting 710,837 1 — — 1

Common stock issued under Employee Stock Purchase Plan (ESPP) 271,880 — 2,407 — 2,407

Exercised stock options 381,418 — 1,386 — 1,386

1 unchanged sentence

Net loss — — — ( 17,761 ) ( 17,761 )

Balance June 30, 2023

94,228,876 $ 94 $ 729,607 $ ( 407,177 ) $ 322,524

Three months ended June 30, 2022

Common Stock Additional Paid-in Capital Accumulated Deficit Total Stockholders’ Equity

Shares Amount

Balance March 31, 2022 90,469,637 $ 90 $ 669,284 $ ( 327,259 ) $ 342,115

Stock-based compensation — — 11,475 — 11,475

Issuance of common stock upon restricted stock unit vesting 196,258 — — — —

Common stock issued under ESPP 199,887 — 1,841 — 1,841

Exercised stock options 170,325 1 346 — 347

Net loss — — — ( 20,233 ) ( 20,233 )

Balance June 30, 2022

91,036,107 $ 91 $ 682,946 $ ( 347,492 ) $ 335,545

Three months ended March 31, 2022

Six months ended June 30, 2023

Common Stock Additional Paid-in Capital Accumulated Deficit Total Stockholders’ Equity

Shares Amount

Balance January 1, 2022 89,954,657 $ 90 $ 658,374 $ ( 313,853 ) $ 344,611

Balance December 31, 2022 92,112,749 $ 92 $ 706,407 $ ( 372,453 ) $ 334,046

Stock-based compensation — — 24,817 — 24,817

Issuance of common stock upon restricted stock unit vesting 1,003,428 1 — — 1

Common stock issued under ESPP 271,880 — 2,407 — 2,407

Exercised stock options 840,819 1 2,801 — 2,802

Payments for taxes related to net settlement of equity awards — — ( 6,825 ) — ( 6,825 )

Net loss — — — ( 34,724 ) ( 34,724 )

Balance March 31, 2022 90,469,637 $ 90 $ 669,284 $ ( 327,259 ) $ 342,115

Balance June 30, 2023 94,228,876 $ 94 $ 729,607 $ ( 407,177 ) $ 322,524

Six months ended June 30, 2022

Common Stock Additional Paid-in Capital Accumulated Deficit Total Stockholders’ Equity

Shares Amount

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

Stock-based compensation — — 21,449 — 21,449

Issuance of common stock upon restricted stock unit vesting 278,308 — — — —

Common stock issued under ESPP 199,887 — 1,841 — 1,841

Exercised stock options 603,255 1 1,282 — 1,283

Net loss — — — ( 33,639 ) ( 33,639 )

Balance June 30, 2022 91,036,107 $ 91 $ 682,946 $ ( 347,492 ) $ 335,545

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

ALKAMI TECHNOLOGY, INC.

1 unchanged sentence

(In thousands)

Three months ended March 31,

Six months ended June 30,

Cash flows from operating activities:

22 unchanged sentences

( 2,661 ) ( 2,366 )

Net cash provided by (used in) investing activities

Acquisition of business, net of cash acquired — ( 132,031 )

Net cash used in investing activities

( 96 ) ( 259,471 )

Cash flows from financing activities:

Proceeds from issuance of long-term debt — 85,000

Principal payments on debt ( 1,063 ) ( 24,688 )

Debt issuance costs paid ( 341 ) ( 851 )

Proceeds from ESPP issuance 2,407 1,841

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

Payments for taxes related to net settlement of equity awards ( 6,825 ) —

1 unchanged sentence

Net cash (used in) provided by financing activities

Net increase (decrease) in cash and cash equivalents and restricted cash 5,582 ( 121,289 )

( 4,020 ) 62,584

Net decrease in cash and cash equivalents and restricted cash ( 19,441 ) ( 216,361 )

Cash and cash equivalents and restricted cash, beginning of period 112,337 312,954

Cash and cash equivalents and restricted cash, end of period $ 92,896 $ 96,593

(1) See Note 2 for additional information regarding noncash investing activities for the three months ended March 31, 2023 and 2022 related to capitalized software development costs.

(1) See Note 2 for additional information regarding non-cash investing activities for the six months ended June 30, 2023 and 2022 related to capitalized software development costs.

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

6 unchanged sentences

The Company inspires and empowers community, regional and super-regional financial institutions (“FIs”) to compete with large, technologically advanced and well-resourced banks in the United States.

The Company’s solution, the Alkami Platform, allows FIs to onboard and engage new users, accelerate revenues and meaningfully improve operational efficiency, all with the support of a proprietary, true cloud-based, multi-tenant architecture.

The Company’s solution, the Alkami Digital Banking Platform, allows FIs to onboard and engage new users, accelerate revenues and meaningfully improve operational efficiency, all with the support of a proprietary, true cloud-based, multi-tenant architecture.

The Company cultivates deep relationships with its clients through long-term, subscription-based contractual arrangements, aligning its growth with its clients’ success and generating an attractive unit economic model.

1 unchanged sentence

Summary of Significant Accounting Policies

The accompanying financial statements reflect the application of significant accounting policies as described below.

The accompanying condensed consolidated financial statements reflect the application of significant accounting policies as described below.

Basis of Presentation and Consolidation

5 unchanged sentences

Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the accompanying notes for the fiscal year ended December 31, 2022, which are included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on February 24, 2023.

Operating results for the three months ended March 31, 2023 are not necessarily indicative of results that may be expected for any other interim period or for the year ending December 31, 2023.

Operating results for the three and six months ended June 30, 2023 are not necessarily indicative of results that may be expected for any other interim period or for the year ending December 31, 2023.

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

Reclassification.

The Company has reclassified certain amounts on its consolidated statements of operations and consolidated statements of cash flows in the prior period to conform to current period presentation.

The Company has reclassified certain amounts on its condensed consolidated statements of operations and condensed consolidated statements of cash flows in the prior periods to conform to current periods presentation.

Use of Estimates

11 unchanged sentences

On March 12, 2023, the U.S.

Department of the Treasury, Federal Reserve Board, and FDIC released a joint statement announcing that the FDIC would complete its resolution of SVB in a manner that fully protected all depositors at SVB and that depositors would have access to all of their money starting March 13, 2023.

On March 26, 2023, the FDIC announced that First-Citizens Bank & Trust Company would assume all of SVB's deposits and loans as of March 27, 2023.

On March 26, 2023, the FDIC announced that First-Citizens Bank & Trust Company would assume all SVB's deposits and loans as of March 27, 2023.

In light of the foregoing, the Company does not believe that it has exposure to loss as a result of SVB’s receivership.

Additionally, the Company’s overall liquidity and financing has not been impacted.

During the periods presented, the Company has not experienced any losses on its

deposits of cash, cash equivalents or marketable securities.

Additionally, the Company’s

overall liquidity and financing has not been impacted.

During the periods presented, the Company has not experienced any losses on its deposits of cash, cash equivalents or marketable securities.

Cash and Cash Equivalents

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

At June 30, 2023 and December 31, 2022, $ 80.8 million and $ 28.2 million, respectively, was held in cash equivalent money market and marketable securities accounts.

Certain cash equivalents held in marketable securities accounts may have related unrealized gains or losses that are recognized on the condensed consolidated statements of operations.

Restricted Cash

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

The amounts included in restricted cash on the condensed consolidated balance sheets at March 31, 2023 and December 31, 2022, represent the additional cash proceeds in deposit with an escrow agent for satisfaction of holdback provisions related to the acquisitions of MK Decisioning Systems, LLC (“MK”) and Segmint Inc.

The amounts included in restricted cash on the condensed consolidated balance sheets at June 30, 2023 and December 31, 2022, represent the additional cash proceeds in deposit with an escrow agent for satisfaction of holdback provisions related to the acquisitions of MK Decisioning Systems, LLC (“MK”) and Segmint Inc.

See Note 3 for further information.

March 31, December 31,

June 30, December 31,

(in thousands) 2023 2022

7 unchanged sentences

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

The Company had $ 6.8 million and $ 5.7 million in capitalized internal software development costs, net of accumulated amortization as of March 31, 2023 and December 31, 2022, respectively.

The Company had $ 8.3 million and $ 5.7 million in capitalized internal software development costs, net of accumulated amortization as of June 30, 2023 and December 31, 2022, 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.

For the three months ended March 31, 2023 and 2022, the Company had noncash investing activities of $ 0.2 million and $ 0.1 million, respectively, for capitalized stock-based compensation related to capitalized software development costs.

For the six months ended June 30, 2023 and 2022, the Company had non-cash investing activities of $ 0.4 million and $ 0.1 million, respectively, for capitalized stock-based compensation related to capitalized software development costs.

Contract Balances

1 unchanged sentence

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

Contract assets totaled $ 0.7 million and $ 0.5 million as of March 31, 2023 and December 31, 2022, respectively, which are included in other assets in the accompanying condensed consolidated balance sheets.

Contract assets totaled $ 1.2 million and $ 0.5 million as of June 30, 2023 and December 31, 2022, respectively, which are included in other assets in the accompanying condensed consolidated balance sheets.

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

3 unchanged sentences

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

On September 10, 2021, the Company acquired substantially all 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 released at the 18 -month anniversary of close.

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

2 unchanged sentences

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.

In certain circumstances within both Earn-Out Periods, the earn-out amounts are payable in a mix of cash

and shares (based on a reference price of $ 35 and limited to $ 20 million in earn-out shares) of the Company’s common stock, subject to the election of the former owners.

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

2 unchanged sentences

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 condensed consolidated statements of

As of March 31, 2023 and December 31, 2022, the fair value of the contingent earn-out was zero .

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

As of June 30, 2023 and December 31, 2022, the fair value of the contingent earn-out was zero .

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.

1 unchanged sentence

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.

The Company’s determination has not changed as of March 31, 2023.

The Company’s determination has not changed as of June 30, 2023.

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").

The aggregate consideration paid in exchange for all 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 March 31, 2023, the allocation of the purchase price for Segmint has been finalized.

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

As of March 31, 2023, the allocation of the purchase price for Segmint had been finalized.

The preliminary purchase price allocations were 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.

29 unchanged sentences

Property and Equipment, Net

Depreciation and amortization expense was $ 0.9 million and $ 0.6 million for the three months ended March 31, 2023 and 2022, respectively.

Property and equipment, net, includes the following amounts at March 31, 2023 and December 31, 2022:

(in thousands) Useful Life March 31, 2023 December 31, 2022

Depreciation and amortization expense was $ 0.9 million and $ 1.8 million for the three and six months ended June 30, 2023, respectively, and $ 0.6 million and $ 1.2 million for the three and six months ended June 30, 2022, respectively.

Property and equipment, net, includes the following amounts at June 30, 2023 and December 31, 2022:

(in thousands) Useful Life June 30, 2023 December 31, 2022

Software 2 to 5 years

13 unchanged sentences

As these services are not distinct, they are bundled into the SaaS series of services, and the associated fees are recognized on a straight-line basis over the subscription term.

Other services includes professional services and custom development.

The following table disaggregates the Company's revenue by major source for the three months ended March 31, 2023 and 2022:

Three months ended March 31,

Other services include professional services and custom development.

The following table disaggregates the Company's revenue by major source for the three and six months ended June 30, 2023 and 2022:

Three months ended June 30,

Six months ended June 30,

(in thousands) 2023 2022 2023 2022

3 unchanged sentences

Total revenues $ 65,763 $ 50,530 $ 125,759 $ 95,320

The Company recognized approximately $ 2.1 million of revenue during the three months ended March 31, 2023 that was included in deferred revenues in the accompanying condensed consolidated balance sheets as of the beginning of the reporting period.

For those contracts that were wholly or partially unsatisfied as of March 31, 2023, minimum contracted subscription revenues to be recognized in future periods total approximately $ 902.9 million.

The Company recognized approximately $ 5.4 million of revenue during the six months ended June 30, 2023 that was included in deferred revenues in the accompanying condensed consolidated balance sheets as of the beginning of the reporting period.

For those contracts that were wholly or partially unsatisfied as of June 30, 2023, minimum contracted subscription revenues to be recognized in future periods total approximately $ 966.5 million.

The Company expects to recognize approximately 45.2 % of this amount as subscription services are transferred to customers over the next 24 months, an additional 32.8 % in the next 25 to 48 months, and the balance thereafter.

1 unchanged sentence

Deferred Cost Recognition

The Company capitalized $ 0.8 million and $ 0.7 million in deferred commissions costs during the three months ended March 31, 2023 and 2022, respectively, and recognized amortization of $ 0.9 million and $ 0.7 million during the three months ended March 31, 2023 and 2022, respectively.

The Company capitalized $ 2.0 million and $ 2.8 million in deferred commissions costs during the three and six months ended June 30, 2023, respectively, and $ 1.0 million and $ 1.7 million for the three and six months ended June 30, 2022, respectively, and recognized amortization of $ 0.8 million and $ 1.7 million during the three and six months ended June 30, 2023, respectively, and $ 0.7 million and $ 1.4 million for the three and six months ended June 30, 2022, respectively.

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

Deferred commissions are considered costs to obtain a contract and are included in deferred implementation costs in the accompanying condensed consolidated balance sheets in the amount of $ 16.2 million and $ 16.2 million as of March 31, 2023 and December 31, 2022, respectively.

The Company capitalized implementation costs of $ 2.1 million and $ 1.3 million during the three months ended March 31, 2023 and 2022, respectively, and recognized amortization of $ 1.1 million and $ 0.8 million during the three months ended March 31, 2023 and 2022, respectively.

Deferred commissions are considered costs to obtain a contract and are included in deferred implementation costs in the accompanying condensed consolidated balance sheets in the amount of $ 17.3 million and $ 16.2 million as of June 30, 2023 and December 31, 2022, respectively.

The Company capitalized implementation costs of $ 2.0 million and $ 4.1 million during the three and six months ended June 30, 2023, respectively, and $ 1.6 million and $ 2.9 million for the three and six months ended June 30, 2022, respectively, and recognized amortization of $ 1.2 million and $ 2.3 million during the three and six months ended June 30, 2023, respectively, and $ 1.1 million and $ 1.9 million for the three and six months ended June 30, 2022, respectively.

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

These deferred costs are considered costs to fulfill client contracts and are included in deferred implementation costs in the accompanying condensed consolidated balance sheets in the amount of $ 17.3 million and $ 16.4 million as of March 31, 2023 and December 31, 2022, respectively.

These deferred costs are considered costs to fulfill client contracts and are included in deferred implementation costs in the accompanying condensed consolidated balance sheets in the amount of $ 18.2 million and $ 16.4 million as of June 30, 2023 and December 31, 2022, 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 three months ended March 31, 2023 and 2022.

No impairment loss was recognized in relation to these capitalized costs for the three and six months ended June 30, 2023 and 2022.

Accounts Receivable

Accounts receivable includes the following amounts at March 31, 2023 and December 31, 2022:

March 31, December 31,

Accounts receivable includes the following amounts at June 30, 2023 and December 31, 2022:

June 30, December 31,

(in thousands) 2023 2022

7 unchanged sentences

Accrued Liabilities

Accrued liabilities consisted of the following at March 31, 2023 and December 31, 2022:

March 31, December 31,

Accrued liabilities consisted of the following at June 30, 2023 and December 31, 2022:

June 30, December 31,

(in thousands) 2023 2022

10 unchanged sentences

Total accrued liabilities $ 23,262 $ 21,643

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:

On June 27, 2023, the Company entered into a First Amendment (the “First Amendment”) to the Company’s Amended and Restated Credit Agreement dated as of April 29, 2022 (as amended by the First Amendment, the “Amended Credit Agreement”), with SVB, Comerica Bank, and Canadian Imperial Bank of Commerce.

The First Amendment provided for Citibank, N.A.

to join as a new lender, increased the amount of the Revolving Facility (as defined below) commitment by $ 20.0 million and extended the maturity date of the Amended Credit Agreement to April 29, 2026, as well as other changes discussed below.

The Amended Credit Agreement, inclusive of changes established by the First Amendment, includes the following, among other features:

• Revolving Facility:

The Amended Credit Agreement provides $ 40.0 million in aggregate commitments for secured revolving loans (“Amended Revolving Facility”), and there were no outstanding borrowing as of March 31, 2023.

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.

The Amended Credit Agreement provides $ 60.0 million in aggregate commitments for secured revolving loans (“Revolving Facility”), of which there were no outstanding borrowings as of June 30, 2023.

A term loan of $ 85.0 million (the “Term Loan”) was borrowed on April 29, 2022, the proceeds of which were used to replenish cash used to fund the acquisition of Segmint, which closed on April 25, 2022.

• Accordion Feature:

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 March 31, 2023.

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.

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, of which there were no outstanding borrowing as of June 30, 2023.

Revolving Facility loans under the Amended 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 $ 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 condensed 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 %.

Debt issuance costs paid for the execution of the First Amendment were $ 0.3 million, of which $ 0.1 million was included in prepaid expenses and other current assets and $ 0.1 million was included in other assets on the condensed consolidated balance sheets.

The First Amendment added additional covenants that begin each fiscal quarter ending on or after April 29, 2025 (the “Financial Covenant Trigger Date”).

Before the Financial Covenant Trigger Date, 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.

After the Financial Covenant Trigger Date, borrowings under the Amended Credit Agreement bear interest at a variable rate based upon the SOFR plus a margin of 1.50 %, 2.00 %, 2.50 % or 3.00 % per annum depending on the applicable consolidated total leverage ratio.

If the SOFR is ever less than 0 %, then the SOFR 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 is required to pay a commitment fee of 0.25 % per annum on the undrawn portion available under the 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 contains customary affirmative and negative covenants.

Before the Financial Covenant Trigger Date, the following covenants are applicable:

(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 $ 20.0 million or more.

After the Financial Covenant Trigger Date, the existing annual recurring revenue growth and liquidity financial covenants are no longer applicable and the following covenants take effect:

(i) a consolidated total leverage ratio requiring the ratio, as calculated at the last day of such fiscal quarter for the period of 12 consecutive months then ending, to be less than 3.50 :1.00;

(ii) a consolidated fixed charge ratio requiring the ratio, for any fiscal quarter ending as calculated at the last day of such fiscal quarter for the period of 12 consecutive months then ending, to be more than 1.25 :1.00.

The First Amendment also added, applicable beginning June 30, 2023, a free cash flow covenant requiring, as calculated at the last day of such fiscal quarter for the period of 12 consecutive months then ending, free cash flow to be not less than $( 75.0 ) million for the fiscal quarters ended June 30, 2023 and September 30, 2023, respectively, and $( 50.0 ) million for the fiscal quarter ended December 31, 2023 and each fiscal quarter ending thereafter.

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 March 31, 2023.

The Company was in compliance with all covenants as of June 30, 2023.

On March 26, 2023, the FDIC announced that First-Citizens Bank & Trust Company would assume all of SVB’s deposits and loans as of March 27, 2023.

This resulted in no impact to the Company’s condensed consolidated financial statements or changes to the terms of the Amended Credit Agreement.

Concentration of Credit Risk for additional information.

Summary of Significant Accounting Policies - Concentration of Credit Risk for additional information.

Long-term Debt

The following table summarizes long-term debt obligations as of March 31, 2023 and December 31, 2022 (in thousands):

March 31, 2023 December 31, 2022

The following table summarizes long-term debt obligations as of June 30, 2023 and December 31, 2022 (in thousands):

June 30, 2023 December 31, 2022

Term Debt $ 83,938 $ 85,000

3 unchanged sentences

Long-term portion $ 78,157 $ 81,392

Maturities of long-term debt outstanding as of March 31, 2023, are summarized as follows (in thousands):

Maturities of long-term debt outstanding as of June 30, 2023, are summarized as follows (in thousands):

Total $ 83,938

2 unchanged sentences

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

Three months ended March 31,

Three months ended June 30,

Six months ended June 30,

(in thousands) 2023 2022 2023 2022

4 unchanged sentences

Total stock-based compensation expenses $ 12,752 $ 11,268 $ 23,996 $ 21,042

The Company recorded income tax expense of $ 0.2 million and $ 0.1 million for the three months ended March 31, 2023 and March 31, 2022, respectively, resulting in an effective tax rate of ( 1.2 )% and ( 0.7 )%, respectively.

The slight change in the effective tax rate for the three months ended March 31, 2023 as compared to the same period in 2022 is primarily due to a decrease in the valuation allowance recorded in the current period.

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

The Company recorded income tax expense of $ 0.1 million and $ 0.3 million for the three and six months ended June 30, 2023, respectively, resulting in an effective tax rate of ( 0.5 )% and ( 0.8 )%, respectively, compared to income tax expense of $ 0.2 million and $ 0.2 million for the three and six months ended June 30, 2022, respectively, resulting in an effective tax rate of ( 0.8 )% and ( 0.7 )%, respectively.

The Company’s effective tax rate for the three and six months ended June 30, 2023 and June 30, 2022 differs from the statutory tax rate primarily due to the impact of the valuation allowance against its deferred tax assets and state tax expense.

The Company recognizes deferred tax assets and liabilities based on the estimated future tax effects of temporary differences between the financial statement basis and tax basis of assets and liabilities given the provisions of enacted tax law.

2 unchanged sentences

historical losses, a forecast of future taxable income, the duration of statutory carryback and carryforward periods, and ongoing prudent and feasible tax planning strategies.

As a result, the Company has established a valuation allowance against most of its deferred tax assets as realization is not

reasonably assured based upon a “more likely than not” threshold.

As a result, the Company has established a valuation allowance against most of its deferred tax assets as realization is not reasonably assured based upon a “more likely than not” threshold.

The Company reassesses the realizability of deferred tax assets regularly, and it will adjust the valuation allowance as sufficient objective positive evidence becomes available.

10 unchanged sentences

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

The following tables summarize the Company’s financial assets measured at fair value as of March 31, 2023 and December 31, 2022 and indicate the fair value hierarchy of the valuation:

The following tables summarize the Company’s financial assets measured at fair value as of June 30, 2023 and December 31, 2022 and indicate the fair value hierarchy of the valuation:

Fair Value at Reporting Date Using

(In thousands) March 31, 2023 Level 1 Level 2 Level 3

(in thousands) June 30, 2023 Level 1 Level 2 Level 3

Cash equivalents (1)

5 unchanged sentences

Treasury debt securities 31,539 31,539 — —

International debt securities 2,489 2,489 — —

Total marketable securities 86,010 31,539 54,471 —

23 unchanged sentences

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

Because the Company has reported a net loss for the three months ended March 31, 2023 and 2022, the number of shares used to calculate diluted net loss per share attributable to common stockholders is the same as the number of shares used to calculate basic net loss per share attributable to common stockholders for the period presented because the potentially

dilutive shares would have been anti-dilutive if included in the calculation.

The computation of basic and diluted EPS is as follows for the three months ended March 31, 2023 and 2022:

Three months ended March 31,

Because the Company has reported a net loss for the three and six months ended June 30, 2023 and 2022, the number of shares used to calculate diluted net loss per share attributable to common stockholders is the same as the number of shares used to calculate basic net loss per share attributable to common stockholders for the period presented because the potentially dilutive shares would have been anti-dilutive if included in the calculation.

The computation of basic and diluted EPS is as follows for the three and six months ended June 30, 2023 and 2022:

Three months ended June 30,

Six months ended June 30,

(in thousands, except shares and per share amounts) 2023 2022 2023 2022

2 unchanged sentences

Net loss per common share - basic and diluted $ ( 0.19 ) $ ( 0.22 ) $ ( 0.37 ) $ ( 0.37 )

For the three months ended March 31, 2023 and 2022, the following potential shares of common stock were excluded from diluted EPS as the Company had a net loss in each of the periods presented:

Three months ended March 31,

For the three and six months ended June 30, 2023 and 2022, the following potential shares of common stock were excluded from diluted EPS as the Company had a net loss in each of the periods presented:

As of June 30,

Stock options 5,364,567 7,068,202

5 unchanged sentences

The Company may become party to various legal actions during the ordinary course of business.

Defending such proceedings is costly and can impose a significant burden on management and employees, it may receive unfavorable preliminary or interim rulings in the course of litigation, and there can be no assurances that favorable final outcomes will be obtained.

Defending such proceedings is costly and can impose a significant burden on management and employees, it may receive unfavorable preliminary or interim rulings during litigation, and there can be no assurances that favorable final outcomes will be obtained.

In addition, the Company’s industry is characterized by the existence of a large number of patents, copyrights, trademarks, trade secrets and other intellectual property and proprietary rights.

9 unchanged sentences

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

Sublease income was $ 0.1 million and $ 0.1 million for the three months ended March 31, 2023 and 2022, respectively.

Sublease income was $ 0.1 million and $ 0.1 million for the three and six months ended June 30, 2023, respectively, and $ 0.1 million and $ 0.1 million for the three and six months ended June 30, 2022, respectively.

Operating lease expense consisted of:

(in thousands)

Three months ended March 31,

Three months ended June 30,

Six months ended June 30,

2023 2022 2023 2022

Operating lease expense

$ 784 $ 784 $ 1,568 $ 1,568

Short-term lease expense and other (1)

229 224 547 550

Total lease expense

2 unchanged sentences

Supplemental Cash Flow Information

Three months ended March 31,

Six months ended June 30,

Cash flow information (in thousands)

Cash paid for operating lease liabilities

$ 1,877 $ 1,845

The future maturities of operating lease liabilities are as follows:

(in thousands) March 31, 2023

2023 (nine months remaining) 2,835

(in thousands) June 30, 2023

2023 (six months remaining) 1,896

Thereafter 2,712

5 unchanged sentences

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

There were no indications of impairment of goodwill noted for the three months ended March 31, 2023.

Goodwill had a carrying value of $ 148.1 million and $ 148.0 million as of March 31, 2023 and December 31, 2022, respectively.

Total intangibles, net, consisted of the following as of March 31, 2023 and December 31, 2022:

As of March 31, 2023

There were no indications of impairment of goodwill noted as of June 30, 2023.

Goodwill had a carrying value of $ 148.1 million and $ 148.0 million as of June 30, 2023 and December 31, 2022, respectively.

Total intangibles, net, consisted of the following as of June 30, 2023 and December 31, 2022:

As of June 30, 2023

(in thousands) Carrying Value Accumulated Amortization Net Carrying Value

7 unchanged sentences

As of December 31, 2022

(In thousands) Carrying Value Accumulated Amortization Net Carrying Value

(in thousands)

Carrying Value Accumulated Amortization Net Carrying Value

Finite-lived:

5 unchanged sentences

Total intangible assets $ 48,945 $ ( 6,352 ) $ 42,593

Amortization expense recognized on intangible assets was $ 1.7 million and $ 0.4 million for the three months ended March 31, 2023 and 2022, respectively.

Amortization expense recognized on intangible assets was $ 1.7 million and $ 3.4 million for the three and six months ended June 30, 2023, respectively, and $ 1.2 million and $ 1.6 million for the three and six months ended June 30, 2022, 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):

2023 (remaining nine months)

2023 (remaining six months)

Thereafter 12,462

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

What changed 10-Q

Item 1. Financial Statements