What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-11-02 compared with 2023-08-03 · 105 added, 96 removed, 458 unchanged (31% of the section changed)

3 unchanged sentences

(In thousands, except share and per share data)

June 30, December 31,

September 30, December 31,

Current assets

27 unchanged sentences

Stockholders’ Equity

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

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

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

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

and 95,361,787 and 92,112,749 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

Additional paid-in capital 744,212 706,407

6 unchanged sentences

(In thousands, except share and per share data)

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

2023 2022 2023 2022

17 unchanged sentences

Loss before income taxes ( 15,437 ) ( 20,212 ) ( 49,877 ) ( 53,608 )

Provision for income taxes 88 156 284 243

Provision (benefit) for income taxes 39 ( 163 ) 323 80

Net loss $ ( 15,476 ) $ ( 20,049 ) $ ( 50,200 ) $ ( 53,688 )

3 unchanged sentences

Basic and diluted 94,675,358 91,182,235 93,477,486 90,703,061

(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.

(1) Includes amortization of acquired technology of $ 1.3 million and $ 1.4 million for the three months ended September 30, 2023 and 2022, respectively, and $ 4.0 million and $ 2.6 million for the nine months ended September 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 June 30, 2023

Three months ended September 30, 2023

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

Shares Amount

Balance March 31, 2023

Balance June 30, 2023

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

1 unchanged sentence

Issuance of common stock upon restricted stock unit vesting 484,736 — ( 1 ) — ( 1 )

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

Exercised stock options 648,175 1 4,484 — 4,485

1 unchanged sentence

Net loss — — — ( 15,476 ) ( 15,476 )

Balance June 30, 2023

Balance September 30, 2023

95,361,787 $ 95 $ 744,212 $ ( 422,653 ) $ 321,654

Three months ended June 30, 2022

Three months ended September 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

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

Stock-based compensation — — 12,147 — 12,147

Issuance of common stock upon restricted stock unit vesting 114,029 — — — —

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

Exercised stock options 327,861 — 827 — 827

Payments for taxes related to net settlement of equity awards — — ( 596 ) ( 596 )

Net loss — — — ( 20,049 ) ( 20,049 )

Balance June 30, 2022

Balance September 30, 2022

91,477,997 $ 91 $ 695,324 $ ( 367,541 ) $ 327,874

Six months ended June 30, 2023

Nine months ended September 30, 2023

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

7 unchanged sentences

Net loss — — — ( 50,200 ) ( 50,200 )

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

Six months ended June 30, 2022

Balance September 30, 2023

95,361,787 $ 95 $ 744,212 $ ( 422,653 ) $ 321,654

Nine months ended September 30, 2022

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

5 unchanged sentences

Exercised stock options 931,116 1 2,109 — 2,110

Payments for taxes related to net settlement of equity awards — — ( 596 ) — ( 596 )

Net loss — — — ( 53,688 ) ( 53,688 )

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

Balance September 30, 2022 91,477,997 $ 91 $ 695,324 $ ( 367,541 ) $ 327,874

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

2 unchanged sentences

(In thousands)

Six months ended June 30,

Nine months ended September 30,

Cash flows from operating activities:

7 unchanged sentences

(Gain) loss on financial instruments

Gain on lease modification ( 375 ) —

Deferred taxes 118 ( 80 )

29 unchanged sentences

Cash and cash equivalents and restricted cash, end of period $ 78,981 $ 104,128

(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.

(1) See Note 2 for additional information regarding non-cash investing activities for the nine months ended September 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.

18 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 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.

Operating results for the three and nine months ended September 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 condensed consolidated statements of operations and condensed consolidated statements of cash flows in the prior periods to conform to current periods presentation.

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

Use of Estimates

8 unchanged sentences

Deposits may exceed federally insured limits, and the Company is exposed to credit risk on deposits in the event of default by the financial institutions to the extent account balances exceed the amount insured by the Federal Deposit Insurance Corporation (“FDIC”).

The Company is closely monitoring ongoing events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions or other companies in the financial services industry or the financial services industry generally, including developments related to Silicon Valley Bank (“SVB”).

The Company continues to monitor ongoing events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions or other companies in the financial services industry or the financial services industry generally, including developments related to Silicon Valley Bank (“SVB”).

On March 10, 2023, SVB was closed by the California Department of Financial Protection and Innovation, and the FDIC was appointed as receiver.

3 unchanged sentences

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.

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.

1 unchanged sentence

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.

At September 30, 2023 and December 31, 2022, $ 64.5 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.

1 unchanged sentence

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

The amounts included in restricted cash on the condensed consolidated balance sheets at June 30, 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 September 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.

June 30, December 31,

September 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 $ 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.

The Company had $ 9.3 million and $ 5.7 million in capitalized internal software development costs, net of accumulated amortization, as of September 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 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.

For the nine months ended September 30, 2023 and 2022, the Company had non-cash investing activities of $ 0.6 million and $ 0.2 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 $ 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 assets totaled $ 1.4 million and $ 0.5 million as of September 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.

Recent Accounting Pronouncements

The Company reviewed recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact to the condensed consolidated financial statements.

On July 26, 2023, the SEC adopted amendments intended to enhance and standardize disclosures related to cybersecurity.

The amendments require timely disclosure of material cybersecurity incidents and annual disclosures related to cybersecurity risk management, strategy, and governance.

The disclosures are effective beginning with annual reports for fiscal years ending on or after December 15, 2023.

Business Combination

5 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.

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

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

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

1 unchanged sentence

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 .

As of September 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 June 30, 2023.

The Company’s determination has not changed as of September 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.

35 unchanged sentences

Property and Equipment, Net

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

Depreciation and amortization expense was $ 1.0 million and $ 2.8 million for the three and nine months ended September 30, 2023, respectively, and $ 0.8 million and $ 2.1 million for the three and nine months ended September 30, 2022, respectively.

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

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

Software 2 to 5 years

14 unchanged sentences

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,

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

Three months ended September 30,

Nine months ended September 30,

(in thousands) 2023 2022 2023 2022

3 unchanged sentences

Total revenues $ 67,703 $ 53,412 $ 193,462 $ 148,732

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 recognized approximately $ 7.0 million of revenue during the nine months ended September 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 September 30, 2023, minimum contracted subscription revenues to be recognized in future periods total approximately $ 987.4 million.

The Company expects to recognize approximately 45.9 % of this amount as subscription services are transferred to customers over the next 24 months, an additional 33.2 % in the next 25 to 48 months, and the balance thereafter.

1 unchanged sentence

Deferred Cost Recognition

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.

The Company capitalized $ 1.6 million and $ 4.4 million in deferred commissions costs during the three and nine months ended September 30, 2023, respectively, and $ 2.3 million and $ 4.0 million for the three and nine months ended September 30, 2022, respectively, and recognized amortization of $ 1.0 million and $ 2.7 million during the three and nine months ended September 30, 2023, respectively, and $ 0.7 million and $ 2.1 million for the three and nine months ended September 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 $ 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.

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 $ 18.0 million and $ 16.2 million as of September 30, 2023 and December 31, 2022, respectively.

The Company capitalized implementation costs of $ 2.3 million and $ 6.4 million during the three and nine months ended September 30, 2023, respectively, and $ 1.9 million and $ 4.8 million for the three and nine months ended September 30, 2022, respectively, and recognized amortization of $ 1.3 million and $ 3.6 million during the three and nine months ended September 30, 2023, respectively, and $ 1.0 million and $ 2.9 million for the three and nine months ended September 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 $ 18.2 million and $ 16.4 million as of June 30, 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 $ 19.2 million and $ 16.4 million as of September 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 and six months ended June 30, 2023 and 2022.

No material impairment losses were recognized in relation to these capitalized costs for the three and nine months ended September 30, 2023 and 2022.

Accounts Receivable

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

June 30, December 31,

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

September 30, December 31,

(in thousands) 2023 2022

7 unchanged sentences

Accrued Liabilities

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

June 30, December 31,

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

September 30, December 31,

(in thousands) 2023 2022

15 unchanged sentences

• Revolving Facility:

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, 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.

Once repaid or prepaid, the 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.

1 unchanged sentence

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.

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 (the “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.

10 unchanged sentences

(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.

and (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 June 30, 2023.

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

2 unchanged sentences

Long-term Debt

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

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

September 30, 2023 December 31, 2022

Term Debt $ 82,875 $ 85,000

3 unchanged sentences

Long-term portion $ 76,062 $ 81,392

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

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

Total $ 82,875

2 unchanged sentences

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

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

(in thousands) 2023 2022 2023 2022

4 unchanged sentences

Total stock-based compensation expenses $ 13,918 $ 11,914 $ 37,914 $ 32,956

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 recorded income tax expense of less than $0.1 million and $ 0.3 million for the three and nine months ended September 30, 2023, respectively.

This resulted in an effective tax rate of ( 0.3 )% and ( 0.6 )%, respectively.

As compared to an income tax benefit of $ 0.2 million and income tax expense of $ 0.1 million for the three and nine months ended September 30, 2022, respectively.

This resulted in an effective tax rate of 0.8 % and ( 0.2 )%, respectively.

The Company’s effective tax rate for the three and nine months ended September 30, 2023 and September 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.

Management reviews deferred tax assets to assess their future realization by considering all available evidence, both positive and negative, to determine whether a valuation allowance is needed for all or some portion of the deferred tax assets, using a “more likely than not” standard.

Management reviews deferred tax assets to assess their future realization by considering all available evidence, both positive and negative, to determine whether a valuation allowance is needed

for all or some portion of the deferred tax assets, using a “more likely than not” standard.

The assessment considers, among other matters:

13 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 June 30, 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 September 30, 2023 and December 31, 2022 and indicate the fair value hierarchy of the valuation:

Fair Value at Reporting Date Using

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

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

Cash equivalents (1)

5 unchanged sentences

Treasury debt securities 53,386 53,386 — —

International debt securities 2,104 — 2,104 —

Total marketable securities 101,865 53,386 48,479 —

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 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,

Because the Company has reported a net loss for the three and nine months ended September 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 nine months ended September 30, 2023 and 2022:

Three months ended September 30,

Nine months ended September 30,

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

2 unchanged sentences

Net loss per common share - basic and diluted $ ( 0.16 ) $ ( 0.22 ) $ ( 0.54 ) $ ( 0.59 )

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,

For the three and nine months ended September 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 September 30,

Stock options 4,688,972 6,675,385

7 unchanged sentences

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.

Companies in its industry are often required to defend against litigation claims based on allegations of infringement or other violations of intellectual property rights.

Companies in our industry are often required to defend against litigation claims based on allegations of infringement or other violations of intellectual property rights.

Furthermore, client agreements typically require the Company to indemnify clients against liabilities incurred in connection with claims alleging its solutions infringe the intellectual property rights of a third party.

3 unchanged sentences

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 125,468 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 10 years.

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

Renewal options were not included in the right-of-use (“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 $ 0.1 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.

On September 5, 2023, the Company entered into an amendment to its office lease which, among other things, reduces the leased space in Plano, Texas from approximately 125,468 square feet to 83,939 square feet, effective December 31, 2023, and also extends the term for the remaining reduced leased space to August 31, 2033.

The Company determined that the amendment would be treated as a lease modification.

The modification resulted in a remeasurement of the operating lease ROU asset and lease liability, and the effect was an increase to the ROU asset and lease liability of $ 3.1 million and $ 2.7 million, respectively.

In addition, the Company recorded a gain on lease modification of $ 0.4 million, which was included in general and administrative expenses in the condensed consolidated statements of operation.

Operating lease expense consisted of:

(in thousands)

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

2023 2022 2023 2022

5 unchanged sentences

$ 723 $ 1,125 $ 2,924 $ 3,329

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

(1) Other lease expense includes variable lease expense, sublease income, and gain on lease modification.

Supplemental Cash Flow Information

Six months ended June 30,

Nine months ended September 30,

Cash flow information (in thousands)

1 unchanged sentence

$ 2,924 $ 2,877

Non-cash adjustment to operating lease right-of-use assets from lease modification (1)

(1) For the nine months ended September 30, 2023, includes increase of $ 8.0 million related to the extension of lease to 2033 for the remaining leased space, net of a $ 4.9 million decrease related to the reduction of the leased space effective December 31, 2023.

The future maturities of operating lease liabilities are as follows:

(in thousands) June 30, 2023

2023 (six months remaining) 1,896

(in thousands) September 30, 2023

2023 (three months remaining) $ 985

Thereafter 17,758

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 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

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

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

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

As of September 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 $ 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.

Amortization expense recognized on intangible assets was $ 1.7 million and $ 5.1 million for the three and nine months ended September 30, 2023, respectively, and $ 1.7 million and $ 3.4 million for the three and nine months ended September 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 six months)

2023 (remaining three 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