What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-29 compared with 2023-02-24 · 199 added, 229 removed, 840 unchanged (34% of the section changed)

14 unchanged sentences

(the Company) as of December 31, 2023 and 2022, 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, 2023, 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.

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S.

generally accepted accounting principles.

34 unchanged sentences

Total assets $ 399,825 $ 488,885

Liabilities, Preferred Stock, and Stockholders' Equity

Liabilities and Stockholders' Equity

Current liabilities

2 unchanged sentences

Accrued liabilities 19,763 21,643

Deferred rent and tenant allowance, current portion — 705

Deferred revenues, current portion 10,984 8,835

3 unchanged sentences

Deferred revenues, net of current portion 15,384 13,904

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

Deferred income taxes 1,713 1,712

2 unchanged sentences

Total liabilities 74,884 154,839

Commitments and contingencies (Note 11 and 13)

Commitments and contingencies (Note 13)

Stockholders’ Equity

6 unchanged sentences

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

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

(1) Includes related party accounts payable of $ 0.3 million and $ 0.3 million as of December 31, 2023 and December 31, 2022, respectively.

ALKAMI TECHNOLOGY, INC.

19 unchanged sentences

Interest expense ( 7,384 ) ( 3,850 ) ( 1,186 )

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

Gain (loss) on financial instruments 534 ( 200 ) ( 3,035 )

Loss on extinguishment of debt ( 409 ) ( 18 ) —

Loss before income taxes

9 unchanged sentences

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

______________

(1) Includes amortization of acquired technology of $ 5.4 million, $ 3.9 million, and $ 0.7 million for the years ended December 31, 2023, 2022, and 2021, 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.

(2) Includes fees paid to a related party of $ 6.2 million, $ 4.4 million, and $ 4.4 million for the years ended December 31, 2023, 2022, and 2021, respectively.

ALKAMI TECHNOLOGY, INC.

5 unchanged sentences

Balance January 1, 2021 72,225,916 $ 443,263 4,909,529 $ 5 $ — $ ( 263,528 ) $ ( 263,523 )

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

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

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

Exercised stock options — — 5,801,124 6 9,106 — 9,112

Cumulative dividends and adjustments to redeemable convertible preferred stock — 5,290 — — ( 3,381 ) ( 1,909 ) ( 5,290 )

Repurchase of common stock in tender offer — — ( 1,099,373 ) ( 2 ) — ( 11,327 ) ( 11,329 )

Repurchase of common stock — — ( 235,833 ) — — ( 3,207 ) ( 3,207 )

Net loss — — — — — ( 51,355 ) ( 51,355 )

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

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

Exercised stock options — — 5,801,124 6 9,106 — 9,112

Issuance of common stock upon restricted stock unit vesting — — 3,368 — — — —

12 unchanged sentences

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

Common stock issued under 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

Stock-based compensation — — — — 52,686 — 52,686

Issuance of common stock upon restricted stock unit vesting — — 1,943,846 2 ( 2 ) — —

Common stock issued under ESPP — — 421,690 — 4,124 — 4,124

Exercised stock options — — 2,243,813 3 12,980 — 12,983

Payments for taxes related to net settlement of equity awards

— — — — ( 15,985 ) — ( 15,985 )

15 unchanged sentences

Amortization of debt issuance costs 138 134 50

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

Loss on financial instruments

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

(Gain) loss on financial instruments

( 532 ) 200 3,035

Loss on extinguishment of debt 409 18 —

Gain on lease modification ( 375 ) — —

Deferred taxes ( 32 ) ( 690 ) 85

10 unchanged sentences

Purchase of marketable securities ( 140,816 ) ( 187,217 ) —

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

Proceeds from sales, maturities, and redemptions of marketable securities 181,019 99,750 —

Purchases of property and equipment ( 1,058 ) ( 1,057 ) ( 1,120 )

Capitalized software development costs (1)

( 5,234 ) ( 3,388 ) ( 2,577 )

Acquisition of business, net of cash acquired (2)

— ( 131,839 ) ( 18,326 )

Net cash used in investing activities

Net cash provided by (used in) investing activities

33,911 ( 223,751 ) ( 22,023 )

2 unchanged sentences

Principal payments on debt ( 85,000 ) ( 24,688 ) ( 313 )

Borrowings on line of credit — — 13,000

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

Payment of holdback funds from acquisition ( 3,600 ) ( 1,000 ) —

3 unchanged sentences

Proceeds from ESPP issuance 4,124 2,906 3,005

Proceeds on sales of preferred stock, net of issuance costs — — 213,896

Deferred IPO issuance costs paid — — ( 4,520 )

Debt issuance costs paid ( 341 ) ( 773 ) —

Payments on capital lease obligations — — ( 11 )

Repurchase of common stock — — ( 3,497 )

Proceeds from issuance of common stock upon initial public offering, net of underwriting discounts and commissions — — 192,810

Purchase of common stock in tender offer — — ( 11,329 )

Payment of Series B dividend — — ( 4,969 )

Net cash provided by financing activities

Net cash (used in) provided by financing activities

( 87,819 ) 61,179 192,273

6 unchanged sentences

Cash paid for taxes $ 332 $ 249 $ 32

Supplemental disclosure of noncash investing and financing activities:

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

(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.

(1) See Note 4 for additional information regarding noncash investing activities for the years ended December 31, 2023 and 2022 related to capitalized software development costs.

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

ALKAMI TECHNOLOGY, INC.

5 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.

11 unchanged sentences

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.

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

Use of Estimates

14 unchanged sentences

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, 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.

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.

The carrying value of long-term debt approximates its fair value due to the variable interest rate.

5 unchanged sentences

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

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.

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

See Note 11 for additional information regarding cash equivalent money market and marketable securities accounts.

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 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.

The amounts included in restricted cash on the consolidated balance sheets at December 31, 2022 represents 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.

2 unchanged sentences

Restricted cash included in Prepaid Expenses and other current assets — 3,617

Restricted cash included in Other assets — 1,000

Total cash and cash equivalents and restricted cash $ 40,927 $ 112,337

1 unchanged sentence

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.

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

Accounts Receivable

28 unchanged sentences

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

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.

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

Development Costs in a Cloud Computing Arrangement

1 unchanged sentence

This is done in accordance with the requirements for capitalizing costs incurred to develop internal-use software.

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.

Refer to Note 2.

Recently Adopted Accounting Pronouncements for additional information.

In accordance with current accounting guidance, these capitalized development costs are recorded within prepaid expenses and other current assets and other 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 determines if a contract contains a lease for accounting purposes at the inception of the arrangement.

10 unchanged sentences

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

After the lease commencement date, the Company evaluates lease modifications, if any, that could result in a change in the accounting for leases.

For a lease modification, an evaluation is performed to determine if it should be treated as either a separate lease or a change in the accounting of an existing lease.

If determined to be a change in the accounting for an existing lease, the Company will remeasure the ROU asset and lease liability as of the modification date.

If a lease modification includes a partial termination, the difference between any reduction in the ROU asset and lease liability is recorded to the consolidated statements of operations within general and administrative expenses.

Impairment of Long-Lived Assets

6 unchanged sentences

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 $ 0.5 million and $ 0.7 million as of December 31, 2022 and 2021, respectively, which are included in other assets in the accompanying 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 consolidated balance sheets.

3 unchanged sentences

Capitalized amounts do not include commissions that are contingent on continued employment over a substantive service period.

Contingent commissions are accrued as liabilities and expensed over the requisite employment service period.

commissions are accrued as liabilities and expensed over the requisite employment service period.

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

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.

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

Deferred implementation costs

3 unchanged sentences

Deferred implementation costs are amortized over the benefit period of the client contract.

The Company determines the period of benefit by considering factors such as the length of the initial SaaS contract, the likelihood of renewal and the estimated useful life of the underlying technology.

Revenue Recognition

12 unchanged sentences

Standalone selling prices (“SSP”) is not required to allocate revenue amongst the distinct services within the series.

The Company uses an analysis of pricing and discounting objectives, expected volume of users above contracted minimums and transactions, and client characteristics to ensure the revenue standards’ allocation objectives have been met.

In limited circumstances when a contract calls for certain discounting to be triggered by volumes above contracted minimums, the Company is required to estimate these volumes in order to calculate revenue recognition in line with the standard’s allocation objectives.

As a part of its SaaS subscription services, the Company provides certain services within the SaaS platform using third-party applications.

Contracts include monthly fees based on a minimum number of transactions and additional fees for transactions in excess of those minimums.

Generally, minimum transaction fees are recognized on a straight-lined basis over the contract term.

Generally, minimum transaction fees are recognized on a straight-line basis over the contract term.

Variable consideration earned for transactions in excess of contractual minimums is recognized as revenue in the month the actual transactions are processed.

2 unchanged sentences

The Company’s control is evidenced by its involvement in the integration of the application on its platform before it is transferred to the client and is further supported by the Company being primarily responsible to the clients and having discretion in establishing pricing.

After evaluating each of the applications used to provide SaaS services, the Company has determined that it is acting as the principal in these transactions.

After evaluating each of the applications used to provide SaaS services, the Company has determined that, generally, it is acting as the principal in these transactions.

Accordingly, the Company records the revenue on a gross basis and the related expenses are recorded as a component of cost of revenues.

2 unchanged sentences

Cost of Revenues

The Company’s cost of revenues is comprised primarily of salaries and other personnel-related costs, including employee benefits, bonuses, stock-based compensation, travel and related costs for employees supporting SaaS subscription, implementation and other services.

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 is comprised primarily of salaries and other personnel-related costs, including employee benefits, bonuses, stock-based compensation, travel, and related costs for employees supporting SaaS subscription, implementation and other services.

This includes the costs of the implementation, client support, 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 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.

3 unchanged sentences

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 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.

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.

8 unchanged sentences

For grants issued upon or subsequent to its IPO, the Company establishes fair value based on the Company’s stock price.

As the Company does not have the necessary trading history for its common stock, the selected volatility used is representative of expected future volatility.

The Company bases expected future volatility on the historical and implied volatility of comparable publicly traded companies over a similar expected term.

Prior to the IPO, the Company did not have the necessary trading history for its common stock, the selected volatility used was representative of expected future volatility.

The Company based expected future volatility on the historical and implied volatility of comparable publicly traded companies over a similar expected term.

Risk-Free Interest Rate:

22 unchanged sentences

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, 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 stock options, RSUs, and ESPP obligations, 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 fair value of these warrants were recorded on the consolidated balance sheets at issuance and marked to market at each reporting period.

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 was recorded on the consolidated balance sheets at issuance and marked to market at each reporting period.

The change in the fair value of the warrants was recorded in the consolidated statements of operations as a non-cash gain (loss) and was estimated based on the fair value of the redeemable convertible preferred stock to which the warrants related.

In connection with the Company’s IPO in 2021, warrants converted from a liability instrument to an equity instrument resulting in a reduction of the warrant liability to $0.

connection with the Company’s IPO in 2021, warrants converted from a liability instrument to an equity instrument resulting in a reduction of the warrant liability to $ 0 .

All warrants were subsequently exercised into the Company’s common stock as of December 31, 2021.

3 unchanged sentences

Sales and Marketing

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.

Sales and marketing expenses consist primarily of personnel-related costs of sales, marketing and client success employees, including salaries, bonuses, commissions, other incentive-related compensation, employee benefits and stock-based compensation.

Advertising costs are expensed when incurred and were not significant for the years ended December 31, 2023, 2022, and 2021.

16 unchanged sentences

As of December 31, 2023 and 2022, cash exceeded FDIC limits by $ 39.0 million and $ 107.4 million, respectively.

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash, cash equivalents and marketable securities.

The Company invests its cash equivalents in highly rated money market funds.

The Company’s marketable securities consist of debt securities issued by highly rated corporate entities, foreign governments, and the U.S.

federal government.

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 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.

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 did not experience any losses on its deposits of cash, cash equivalents or marketable securities.

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.

9 unchanged sentences

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

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 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.

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.

19 unchanged sentences

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.

Amortization of acquired developed technologies is included in cost of revenues, and amortization of acquired customer relationships and trade names is included in amortization of acquired intangibles 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.

9 unchanged sentences

There was no goodwill impairment for the years ended December 31, 2023, 2022, and 2021 .

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 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.

Recent Accounting Pronouncements

In November 2023, the FASB issued Accounting Standards Update (“ASU”) No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

2023-07 amended the existing segment reporting requirements by requiring disclosure of the significant segment expenses based on how management internally views segment information and by allowing the disclosure of more than one measure of segment profit or loss, as well as by expanding the interim period segment requirements.

The ASU also requires single-reportable segment entities to report the disclosures required under ASC Topic 280, Segment Reporting.

2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

The Company is currently evaluating the impact the updated standard will have on its financial statement disclosures.

In December 2023, the FASB issued ASU No 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures” (“ASU 2023-09”).

ASU 2023-09 expands disclosures in the rate reconciliation and requires disclosure of income taxes paid by jurisdiction.

ASU 2023-09 is effective for fiscal years beginning after December 15, 2024.

Early adoption is permitted.

ASU 2023-09 should be applied prospectively;

however, retrospective application is permitted.

The Company is currently evaluating the impact the updated standard will have on its financial statement disclosures.

Business Combination

ACH Alert, LLC

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 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 was 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, 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

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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.

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

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.

1 unchanged sentence

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.

As of December 31, 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 December 31, 2023.

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

1 unchanged sentence

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.

Segmint operates a marketing analytics and messaging delivery platform with patented software that enables FIs 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.

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.

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 April 25, 2022 Measurement Period Adjustments Adjusted Fair Value as of December 31, 2022

(in thousands) Preliminary Fair Value as of April 25, 2022 Measurement Period Adjustments Adjusted Fair Value as of March 31, 2023

Cash $ — $ 601 $ 601

14 unchanged sentences

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 measurement period adjustments were 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:

8 unchanged sentences

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 recognized $ 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.

1 unchanged sentence

Depreciation and amortization expense was $ 3.8 million, $ 3.0 million, and $ 2.4 million for the years ended December 31, 2023, 2022, and 2021, respectively.

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

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

1 unchanged sentence

$ 920 $ 1,031

Capitalized software development costs 5 years

Computers and equipment 3 years 6,359 5,606

5 unchanged sentences

Property and Equipment, net $ 16,946 $ 13,561

For the years ended December 31, 2023 and 2022, the Company had non-cash investing activities of $ 0.8 million and $ 0.3 million, respectively, and none for the year ended December 31, 2021 for capitalized stock-based compensation related to capitalized software development costs.

Additionally, the Company recognized stock-based compensation expense on the amortization of capitalized stock-based compensation associated with capitalized software development costs of $ 0.1 million for the year ended December 31, 2023 and none for the years ended December 31, 2022 and 2021, respectively.

Revenues and Deferred Costs

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Total revenues $ 264,831 $ 204,270 $ 152,159

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.

The Company recognized approximately $ 8.3 million of revenue during the year ended December 31, 2023 that was included in deferred revenue in the accompanying consolidated balance sheets as of the beginning of the reporting period.

For those contracts that were wholly or partially unsatisfied as of December 31, 2023, minimum contracted subscription revenues to be recognized in future periods total approximately $ 1.1 billion.

The Company expects to recognize approximately 46.2 % of this amount as subscription services are transferred to customers over the next 24 months, an additional 34.6 % 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.

Contract assets totaled $ 1.5 million and $ 0.5 million as of December 31, 2023 and 2022, respectively, which are included in other assets in the accompanying consolidated balance sheets.

Deferred Cost Recognition

The Company capitalized $ 8.7 million, $ 8.3 million, and $ 4.0 million in deferred commissions costs during the years ended December 31, 2023, 2022, and 2021, respectively, and recognized amortization of $ 3.8 million, $ 2.9 million, and $ 2.1 million during the years ended December 31, 2023, 2022, and 2021, 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.

A portion of the increase in deferred commissions from 2021 to 2022 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 $ 21.2 million and $ 16.2 million as of December 31, 2023 and 2022, respectively.

14 unchanged sentences

$ 35,499 $ 26,246

The Company charged less than $ 0.1 million to credit loss expense for the year ended December 31, 2023 and relieved the allowance for

credit losses balance in the amount of $ 0.4 million.

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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Client refund liability 660 279

Deferred compensation payable — 625

Accrued consulting and professional fees 713 187

4 unchanged sentences

Total accrued liabilities $ 19,763 $ 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 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.

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 December 31, 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.

On December 29, 2023, the Company paid the remaining outstanding principal balance of its term loan of $ 82.9 million.

The Company recorded a loss on extinguishment of debt of $ 0.4 million related to the payoff of the term loan, which was included in non-operating income (expense) within the consolidated statements of operations.

• 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 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.

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 borrowings as of December 31, 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 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 %.

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 consolidated balance sheets.

Upon the payoff of the Term Loan on December 29, 2023, debt issuance costs of $ 0.4 million were written off and recorded as a loss on extinguishment of debt which was included in non-operating income (expense) within the consolidated statements of operations.

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 (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.

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 2033.

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;

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 December 31, 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 consolidated financial statements or changes to the terms of the Amended Credit Agreement.

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

Long-term Debt

6 unchanged sentences

Long-term portion $ — $ 81,392

Maturities of long-term debt outstanding as of December 31, 2022, are summarized as follows (in thousands):

Total $ 85,000

Stockholders' Equity (Deficit)

Stockholders' Equity

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.

Repurchase of Common Stock

For the years ended December 31, 2021 and 2020, former employees obtained a third-party offer for the purchase of shares of common stock held in the Company of 0.2 million and 0.2 million, respectively.

As the Company had the right of first refusal for the sale of these shares, the Company repurchased the shares for $ 3.5 million and $ 3.2 million in 2021 and 2020, respectively, from the former employees at the price offered.

Repurchase of Common Stock in Tender Offer

On October 15, 2020, the Company offered to purchase for cash of $ 15.74 per share of vested stock options or common stock representing up to 20 % of each employee’s holdings from employees employed on September 30, 2020.

The expiration date of the tender offer was November 12, 2020, and 1.1 million of vested stock options and common stock were tendered resulting in total payments of $ 17.4 million, which included a $ 6.1 million non-recurring payment for the excess of the repurchase price over the fair value of the stock on the date of repurchase, recognized as additional compensation expense in the consolidated statements of operations.

For the year ended December 31, 2021, former employees obtained a third-party offer for the purchase of shares of common stock held in the Company of 0.2 million.

As the Company had the right of first refusal for the sale of these shares, the Company repurchased the shares for $ 3.5 million from the former employees at the price offered.

Redeemable Convertible Preferred Stock

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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.

The Board provided for a share reserve with respect to the ESPP of 2 % of the total number of shares outstanding after the Company’s IPO.

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

The Board provided that the share reserve will be refreshed by an evergreen provision of 1 % of the Company’s outstanding common stock on the last day of the prior year, or such lesser amount as the Board or its Compensation Committee may determine, which is effective the first day of the following fiscal year.

As of December 31, 2023, the Company has reserved 3,205,790 shares of common stock for issuance under the ESPP and 2,337,881 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.

The Board provided that the maximum number of shares of common stock (subject to stock splits, dividends, recapitalizations and the like) issuable under the 2021 Plan is equal to a number of shares equal to (i) 11.0 % of the shares of common stock outstanding immediately prior to the effectiveness of its IPO after giving effect to the number of shares being sold in its IPO (including shares subject to outstanding equity awards, and the 2021 share reserve and the ESPP share reserve (as described above)) and assuming no exercise of the underwriters’ option to purchase additional shares, plus (ii) an annual increase on the first day of each year beginning in 2022 and ending in 2031, equal to the lesser of:

(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 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.

The 2021 Plan includes any shares underlying awards outstanding under the 2011 Long-Term Incentive Plan, as amended (the “2011 Plan”).

The Board provided that the share reserve will be refreshed by an evergreen provision of 5.0 % of the shares outstanding on the last day of the prior fiscal year or such lesser amount as determined by the Board, which is effective the first day of the following fiscal year.

As of December 31, 2023, the Company has reserved 21,235,215 shares of common stock for issuance pursuant to awards under the 2021 Plan, and 12,783,931 shares remain available for future issuance.

Stock Options

1 unchanged sentence

Options Outstanding

(in thousands except share

and per share amounts) Number of shares Weighted average exercise price Weighted Average Remaining Contractual Life Aggregate Intrinsic Value

(in thousands except share and per share amounts) Number of shares Weighted average exercise price Weighted Average Remaining Contractual Life Aggregate Intrinsic Value

Balance, January 1, 2022 8,148,853 $ 7.14 7.4 $ 105,260

Granted 2,811,098 16.38

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

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3,359,257 $ 7.26 5.9 $ 57,449

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.

No options were granted for the years ended December 31, 2023 and 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 year ended December 31, 2021:

(i) expected term of 5.5 years, (ii) expected volatility of 36.3 %, (iii) risk-free interest rate 0.67 %, (iv) expected dividend yield of 0 % for all periods.

The total fair value of stock options vested during the years ended December 31, 2023, 2022, and 2021 was $ 4.5 million, $ 15.8 million, and $ 6.4 million, respectively.

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4,787,787 6.10

Granted 2,811,098 8.53

Forfeited ( 675,375 ) 5.36

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Total stock-based compensation expenses $ 51,231 $ 44,592 $ 14,535

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 amount of stock-based compensation capitalized as part of deferred implementation costs was $ 0.7 million and $ 0.6 million for the years ended December 31, 2023 and December 31, 2022, respectively, and insignificant for the year ended December 31, 2021.

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

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State income tax, net of federal tax benefit ( 2,567 ) 4.1 % ( 2,437 ) 4.1 % ( 3,927 ) 8.4 %

Unrealized loss (gain) on tranche liability — — % — — % 2,825 ( 5.5 ) %

Stock-based compensation ( 1,539 ) 2.4 % 1,815 ( 3.1 ) % ( 14,905 ) 31.9 %

10 unchanged sentences

Deferred revenue $ 6,412 $ 5,631

Deferred rent — 1,453

Accrued expenses 2,122 1,816

2 unchanged sentences

Reserve for customer credits 310 246

Goodwill — 334

Intangible assets — 247

Capitalized research and development costs 30,109 14,312

14 unchanged sentences

At December 31, 2023 and 2022, the Company had various apportioned state net operating loss carryforwards of $ 211.3 million and $ 220.3 million, respectively, which are subject to varying carryforward periods that begin to expire in 2024.

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

Additionally, the Company had $ 0.3 million of federal general business credit carryforwards as of December 31, 2023 and 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.

Upon completion of the 382 analysis related to the Segmint acquisition, the Company waived $ 8.9 million of time-constrained net operating loss carryforwards unutilizable due to Section 382 limitation in order to preserve stock basis in Segmint, pursuant to Treasury Regulation 1.1502-32(b)(4).

At December 31, 2022, these net operating loss carryforwards were fully reserved with a valuation allowance.

At December 31, 2023, $ 25.2 million of the Company’s combined federal net operating loss carryforwards remain subject to the annual Section 382 utilization limitation, of which $ 10.5 million begin to expire in 2034.

At December 31, 2023, $ 0.3 million of the Company’s federal general business credit carryforwards are subject to Section 382 limitation, of which $ 0.2 million are expected to expire unutilized.

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.

3 unchanged sentences

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.

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.

The valuation allowance increased by $ 12.9 million and $ 14.6 million during the years ended December 31, 2023 and 2022, respectively.

The change in valuation allowance during the year ended December 31, 2023 includes a decrease of $ 1.9 million resulting from the waived time-constrained net operating loss carryforwards

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.

1 unchanged sentence

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.

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 during the year ended December 31, 2022.

A deferred tax expense of less than $ 0.1 million was recognized during the year ended December 31, 2023 to reflect the final allocation of the purchase price.

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

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For the years ended December 31, 2023 and 2022, the Company did not recognize any interest or penalties.

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security (“CARES”) Act.

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 year ended December 31, 2021.

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

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Commercial paper 7,279 — 7,279 —

government-sponsored enterprise securities 3,500 — 3,500

Treasury debt securities 22,067 22,067 — —

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Total Assets $ 85,659 $ 56,530 $ 29,129 $ —

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

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

Government Agency debt, U.S.

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$ 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 primarily in U.S.

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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 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 , $ 0.3 million, and $ 5.3 million for the years ended December 31, 2022, 2021, 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 , and $ 0.3 million for the years ended December 31, 2023, 2022, 2021, respectively.

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

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cumulative dividends and adjustments to redeemable convertible preferred stock

— ( 277 ) ( 5,290 )

Net loss attributable to common stockholders $ ( 62,913 ) $ ( 58,600 ) $ ( 47,099 )

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Stock options 3,914,768 6,268,485 8,148,853

Redeemable convertible preferred stock — — 72,225,916

Warrants — — 212,408

RSUs 7,305,443 7,101,096 2,867,799

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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.

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.

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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.

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

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 .

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 expired 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.

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.

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 consolidated statements of operation.

Operating lease expense consisted of:

(in thousands)

Year ended December 31,

(in thousands)

Operating lease expense

$ 2,984 $ 3,137

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.

$ 3,944 $ 4,302

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

Operating rent expense was $ 4.6 million for the year ended December 31, 2021.

The Company 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,

Cash flow information (in thousands)

Cash paid for operating lease liabilities

$ 3,907 $ 3,710

Right-of-use assets obtained in exchange for operating lease obligations (1)

Non-cash adjustment to operating lease right-of-use assets from lease modification (2)

(1) For the year ended December 31, 2022, right-of-use assets obtained in exchange for operating lease obligations is related to the Company’s adoption of ASU No.

2016-02, Leases (Topic 842).

(2) For the year ended December 31, 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.

Operating lease information

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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.

Contributions for the years ended December 31, 2023, 2022, and 2021 were $ 1.9 million, $ 1.5 million, and $ 1.2 million, respectively.

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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 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.

There were no indications of impairment of goodwill or intangibles noted for the years ended December 31, 2023 and 2022.

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

1 unchanged sentence

As of December 31, 2023

(In thousands) Carrying Value Accumulated Amortization Net Carrying Value

(in thousands)

Carrying Value Accumulated Amortization Net Carrying Value

Finite-lived:

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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:

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For the years ended December 31, 2023, 2022, and 2021, 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.

(“CU Cooperative”), a vendor, was paid fees of $ 6.2 million, $ 4.4 million, and $ 4.4 million, respectively, which relates to services resold to the Company’s clients.

As of December 31, 2023 and December 31, 2022 the Company had $ 0.3 million due to CU Cooperative included in accounts payable.

Todd Clark, who served as President and Chief Executive Officer of CU Cooperative from 2016 to 2023, is a member of the Board and was designated to serve as a member of the Board by CU Cooperative.

Subsequent Events

3 unchanged sentences

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