ALKAMI TECHNOLOGY, INC. 10-K

Item 8. Financial Statements and Supplementary Data. Alkami Technology, Inc. Index to Consolidated Financial Statements Page Financial Statements 44 Report of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) 45 Consolidated Balance Sheets 46 Consolidated Statements of Operations 47 Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) 48 Consolidated Statements of Cash Flows 49 Notes to the Consolidated Financial Statements 50 44 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Alkami Technology, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Alkami Technology, Inc. (the Company) as of December 31, 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, 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. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2017. Dallas, Texas February 29, 2024  45 Table of Contents ALKAMI TECHNOLOGY, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) December 31, 2023 2022 Assets Current assets Cash and cash equivalents $ 40,927 $ 108,720 Marketable securities 51,196 87,635 Accounts receivable, net 35,499 26,246 Deferred implementation costs, current 10,329 7,855 Prepaid expenses and other current assets 10,634 11,709 Total current assets 148,585 242,165 Property and equipment, net 16,946 13,561 Right-of-use assets 15,754 14,670 Deferred implementation costs, net of current portion 30,734 24,783 Intangibles, net 35,807 42,593 Goodwill 148,050 148,017 Other assets 3,949 3,096 Total assets $ 399,825 $ 488,885 Liabilities and Stockholders' Equity Current liabilities Current portion of long-term debt $ — $ 3,188 Accounts payable (1) 7,478 4,291 Accrued liabilities 19,763 21,643 Deferred revenues, current portion 10,984 8,835 Lease liabilities, current portion 1,205 3,657 Total current liabilities 39,430 41,614 Long-term debt, net — 81,392 Deferred revenues, net of current portion 15,384 13,904 Deferred income taxes 1,713 1,712 Lease liabilities, net of current portion 18,052 15,817 Other non-current liabilities 305 400 Total liabilities 74,884 154,839 Commitments and contingencies (Note 13) Stockholders’ Equity Preferred stock, $ 0.001 par value, 10,000,000 shares authorized and 0 shares issued and outstanding as of December 31, 2023 and 2022 — — Common stock, $ 0.001 par value, 500,000,000 shares authorized and 96,722,098 and 92,112,749 shares issued and outstanding as of December 31, 2023 and 2022, respectively 97 92 Additional paid-in capital 760,210 706,407 Accumulated deficit ( 435,366 ) ( 372,453 ) Total stockholders’ equity 324,941 334,046 Total liabilities and stockholders' equity $ 399,825 $ 488,885 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 $ 0.3 million as of December 31, 2023 and December 31, 2022, respectively. See Note 17. 46 Table of Contents ALKAMI TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share data) Year ended December 31, 2023 2022 2021 Revenues $ 264,831 $ 204,270 $ 152,159 Cost of revenues (1)(2) 120,720 95,946 68,352 Gross profit 144,111 108,324 83,807 Operating expenses: Research and development 84,661 69,329 48,800 Sales and marketing 48,557 36,811 24,174 General and administrative 72,900 71,247 50,398 Acquisition-related expenses, net 263 ( 12,529 ) 2,983 Amortization of acquired intangibles 1,435 1,155 368 Total operating expenses 207,816 166,013 126,723 Loss from operations ( 63,705 ) ( 57,689 ) ( 42,916 ) Non-operating income (expense): Interest income 8,095 2,696 487 Interest expense ( 7,384 ) ( 3,850 ) ( 1,186 ) Gain (loss) on financial instruments 534 ( 200 ) ( 3,035 ) Loss on extinguishment of debt ( 409 ) ( 18 ) — Loss before income taxes ( 62,869 ) ( 59,061 ) ( 46,650 ) Provision (benefit) for income taxes 44 ( 461 ) 172 Net loss $ ( 62,913 ) $ ( 58,600 ) $ ( 46,822 ) Less: cumulative dividends and adjustments to redeemable convertible preferred stock — — ( 277 ) Net loss attributable to common stockholders $ ( 62,913 ) $ ( 58,600 ) $ ( 47,099 ) Net loss per share attributable to common stockholders: Basic and diluted $ ( 0.67 ) $ ( 0.64 ) $ ( 0.73 ) Weighted average number of shares of common stock outstanding: Basic and diluted 94,080,797 90,956,521 64,510,456 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 $ 6.2 million, $ 4.4 million, and $ 4.4 million for the years ended December 31, 2023, 2022, and 2021, respectively. See Note 17. 47 Table of Contents ALKAMI TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (in thousands, except share data) Redeemable Convertible Preferred Stock Common Stock Additional Paid-in Capital Accumulated Deficit Total Stockholders’ Equity (Deficit) Shares Amount Shares Amount Balance January 1, 2021 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 — — — — Common stock issued under Employee Stock Purchase Plan (ESPP) 122,314 — 3,005 — 3,005 Exercised warrants — — 211,323 — 645 — 645 Payment of Series B Dividend upon initial public offering — ( 4,969 ) — — — — — Cumulative dividends and adjustments to redeemable convertible preferred stock — 277 — — ( 277 ) — ( 277 ) Issuance of common stock upon initial public offering, net of underwriting discounts and commissions and other offerings costs — — 6,900,000 7 192,803 — 192,810 Conversion of redeemable convertible preferred stock to common stock upon initial public offering ( 72,225,916 ) ( 438,571 ) 72,225,916 72 438,498 — 438,570 Conversion of redeemable convertible preferred stock warrants to common stock warrants upon initial public offering — — — — 5,727 — 5,727 Cost in connection with initial public offering — — — — ( 5,674 ) — ( 5,674 ) Repurchase of common stock — — ( 218,917 ) — 6 ( 3,503 ) ( 3,497 ) Net loss — — — — — ( 46,822 ) ( 46,822 ) Balance December 31, 2021 — — 89,954,657 90 658,374 ( 313,853 ) 344,611 Stock-based compensation — — — — 45,395 — 45,395 Issuance of common stock upon restricted stock unit vesting — — 698,841 1 ( 1 ) — — Common stock issued under 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 ) Net loss — — — — — ( 62,913 ) ( 62,913 ) Balance December 31, 2023 — — 96,722,098 $ 97 $ 760,210 $ ( 435,366 ) $ 324,941 The above financial statements should be read in conjunction with the Notes to the Consolidated Financial Statements. 48 Table of Contents ALKAMI TECHNOLOGY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year ended December 31, 2023 2022 2021 Cash flows from operating activities: Net loss $ ( 62,913 ) $ ( 58,600 ) $ ( 46,822 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization expense 10,631 8,075 3,443 Accrued interest on marketable securities, net ( 3,231 ) ( 369 ) — Stock-based compensation expense 51,231 44,592 14,535 Amortization of debt issuance costs 138 134 50 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 Changes in operating assets and liabilities: Accounts receivable ( 9,253 ) ( 4,013 ) ( 6,281 ) Prepaid expenses and other assets 425 ( 3,194 ) 352 Accounts payable and accrued liabilities 91 ( 1,374 ) 6,825 Deferred implementation costs ( 7,720 ) ( 7,846 ) ( 4,659 ) Deferred rent and tenant allowances — — ( 568 ) Deferred revenues 3,629 522 1,046 Net cash used in operating activities ( 17,502 ) ( 38,045 ) ( 28,959 ) Cash flows from investing activities: Purchase of marketable securities ( 140,816 ) ( 187,217 ) — 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 provided by (used in) investing activities 33,911 ( 223,751 ) ( 22,023 ) Cash flows from financing activities: Proceeds from issuance of long-term debt — 85,000 — Principal payments on debt ( 85,000 ) ( 24,688 ) ( 313 ) Payment of holdback funds from acquisition ( 3,600 ) ( 1,000 ) — Payments for taxes related to net settlement of equity awards ( 15,985 ) ( 2,665 ) — Proceeds from stock option exercises 12,983 2,399 9,112 Proceeds from exercise of warrants — — 645 Proceeds from ESPP issuance 4,124 2,906 3,005 Deferred IPO issuance costs paid — — ( 4,520 ) Debt issuance costs paid ( 341 ) ( 773 ) — Repurchase of common stock — — ( 3,497 ) Proceeds from issuance of common stock upon initial public offering, net of underwriting discounts and commissions — — 192,810 Payment of Series B dividend — — ( 4,969 ) Net cash (used in) provided by financing activities ( 87,819 ) 61,179 192,273 Net (decrease) increase in cash and cash equivalents and restricted cash ( 71,410 ) ( 200,617 ) 141,291 Cash and cash equivalents and restricted cash, beginning of period 112,337 312,954 171,663 Cash and cash equivalents and restricted cash, end of period $ 40,927 $ 112,337 $ 312,954 Supplemental disclosure of cash flow information: Cash paid for interest $ 7,056 $ 3,612 $ 1,100 Cash paid for taxes $ 332 $ 249 $ 32 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. 49 Table of Contents ALKAMI TECHNOLOGY, INC. Notes to the Consolidated Financial Statements (in thousands, except per share data) Note 1. Organization Description of Business Alkami Technology, Inc. (the “Company”) is a cloud-based digital banking solutions provider. 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 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. The Company was incorporated in Delaware in August 2011, and its principal offices are located in Plano, Texas. Note 2. Summary of Significant Accounting Policies The accompanying financial statements reflect the application of significant accounting policies as described below. Basis of Presentation and Consolidation The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) set by the Financial Accounting Standards Board (“FASB”). References to U.S. GAAP issued by the FASB in these notes are to the FASB Accounting Standards Codification (“ASC”). The consolidated financial statements include accounts of the Company’s wholly owned subsidiaries. All intercompany accounts and transactions are eliminated. The Company has no sources of other comprehensive income, and accordingly, net loss presented each period is the same as comprehensive loss. Reclassification. The Company has reclassified certain amounts on its consolidated statements of operations in the prior periods to conform to current periods presentation. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates and assumptions include determining the timing and amount of revenue recognition, recoverability and amortization period related to costs to obtain and fulfill contracts, deferred implementation costs, revaluation of contingent consideration, and business combinations. Operating Segments The Company operates as one operating segment. Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the chief operating decision maker, which is the Company’s chief executive officer, in deciding how to make operating decisions, allocate resources and assess performance. The Company’s chief operating decision maker allocates resources and assesses performance at the consolidated level. Fair Value of Financial Instruments The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources, while unobservable inputs reflect a reporting entity’s pricing based upon their own market assumptions. The fair value hierarchy consists of the following three levels: The Company uses a three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value: Level 1. Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2. Significant other inputs that are directly or indirectly observable in the marketplace. Level 3. 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 50 Table of Contents 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. Cash equivalents include amounts held in money market accounts that are measured at fair value using observable market prices. Marketable securities include debt securities that are measured at fair value using observable inputs. The Company values contingent consideration related to business combinations using a weighted probability calculation of potential payment scenarios discounted at rates reflective of the risks associated with the expected future cash flows. See Note 11 for additional information regarding fair value measurements. Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. 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 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. (“Segmint”). See Note 3 for further information. December 31, (in thousands) 2023 2022 Cash and cash equivalents $ 40,927 $ 108,720 Restricted cash included in Prepaid Expenses and other current assets — 3,617 Total cash and cash equivalents and restricted cash $ 40,927 $ 112,337 Marketable Securities The Company classifies its fixed income marketable securities as trading securities based on its intentions regarding these instruments. Accordingly, marketable securities are reported at fair value, with all realized gains and losses from sales of marketable securities and unrealized holding gains and losses reflected in the consolidated statements of operations. Accounts Receivable Accounts receivable represents the trade receivables billed to clients and includes unbilled amounts earned and recognized as revenues prior to period end. The accounts receivable allowance reflects a reserve that reduces the Company’s client accounts receivable to the net amount estimated to be collectible. The valuation of accounts receivable is based upon the credit-worthiness of clients, historical collection experience, an estimate of future collectability, and current events. Management also analyzes historical trends of credits issued to clients and specific invoices to estimate an allowance for disputed invoices and billing errors. The Company assesses the collectability of outstanding accounts receivable on an ongoing basis and maintains an allowance for credit losses for accounts receivable deemed uncollectible. The Company analyzes the accounts receivable portfolio for significant risks and considers prior periods and forecasts future collectability to determine the amount of revenues that will ultimately be collected from its customers. This estimate is analyzed quarterly and adjusted as necessary. Identified risks pertaining to the Company’s accounts receivable include the delinquency level and customer type. Future collectability is contingent upon current and anticipated macroeconomic conditions that could impact the Company’s customers such as unemployment, inflation and regulation matters. Due to the short-term nature of such receivables, the estimate of the amount of accounts receivable that may not be collected is based on aging of the accounts receivable balances and the financial condition of customers. Historically, the Company's collection experience has not varied significantly, and bad debt expenses have been insignificant. The Company maintains reserves for estimated sales credits issued to customers for billing disputes or other service-related reasons. These allowances are recorded as a reduction against current period revenues and accounts receivable. In estimating this allowance, the Company analyzes prior periods to determine the amounts of sales credits issued to customers compared to the revenues in the period that related to the original customer invoice. This estimate is analyzed quarterly and adjusted as necessary. The Company also maintains specific reserves for anticipated contract concessions. Refer to Note 6. Accounts Receivable for additional information. Property and Equipment Property and equipment are stated at cost, less accumulated depreciation and amortization, using the straight-line method based on estimated useful lives of the related assets. Leasehold improvements are stated at cost, less accumulated depreciation and amortization, using the straight-line method over the shorter of the lease term or the estimated useful lives of the related assets. Repairs and maintenance are charged to expense as incurred. Expenditures that increase the value or productive capacity of assets are capitalized. When property and equipment are retired, sold, or otherwise disposed of, the asset’s carrying amount and related accumulated depreciation are removed from the accounts and any gain or loss is reflected in the consolidated statements of operations. 51 Table of Contents Capitalized Software Development Costs Software development costs relate primarily to software coding, systems interfaces, and testing of the Company’s proprietary systems and are accounted for in accordance with ASC 350-40, Internal Use Software. Internal software development costs are capitalized from the time the internal use software is in the application development stage until the software is ready for use. Business analysis, system evaluation, and software maintenance costs are expensed as incurred. The capitalized software development costs are reported in property and equipment, net, in the consolidated balance sheets. 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 The Company capitalizes qualified development costs incurred when modifying certain internal use systems held through hosting arrangements. 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 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. Leases The Company determines if a contract contains a lease for accounting purposes at the inception of the arrangement. The Company is primarily a lessee with a lease portfolio comprised mainly of real estate and equipment leases. As of December 31, 2023, the Company had no finance leases. The Company has elected to apply the practical expedient which allows the Company to account for lease and non-lease components of a contract as a single leasing arrangement for the real estate asset class. Additionally, the Company elected the short-term lease exemption, whereby leases with initial terms of one year or less are not capitalized and instead expensed generally on a straight-line basis over the lease term. Operating lease assets are included on the Company's consolidated balance sheets in non-current assets as a right-of-use (“ROU”) asset, and represent the Company's right to use an underlying asset for the lease term. Operating lease liabilities are included on the Company's consolidated balance sheets in lease liabilities, current portion, for the portion that is due within 12 months and in lease liabilities, net of current portion, for the portion that is due beyond 12 months of the financial statement date and represent the Company's obligation to make lease payments. ROU assets and lease liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term using an appropriate discount rate. If an implicit rate is not readily determined by the Company's leases, the Company utilizes the incremental borrowing rate based on the available information at the commencement date to determine the lease payments. The depreciable lives of the underlying leased assets are generally limited to the expected lease term inclusive of any optional lease renewals where the Company concludes at the inception of the lease that the Company is reasonably certain of exercising those options. The ROU asset calculation may also include any initial direct costs paid and is reduced by any lease incentives provided by the lessor. Lease expense for operating lease payments is recognized on a straight-line basis over the lease term. 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 The Company reviews long-lived assets, including property and equipment, for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Impairment would be recognized if the estimated undiscounted future cash flows were less than the carrying value of the related assets. Therefore, the carrying amount of such assets would be reduced to fair value. There were no impairment charges for the years ended December 31, 2023, 2022, and 2021. Contract Balances Client contracts under which revenues have been recognized while the Company is not yet able to invoice results in contract assets. 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 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. Deferred costs to obtain client contracts The Company capitalizes certain incremental costs of obtaining a client contract if the costs are deemed recoverable. Costs include commissions and bonuses earned by sales teams and leaders due to the execution of client contracts along with associated employer taxes. Capitalized amounts do not include commissions that are contingent on continued employment over a substantive service period. Contingent 52 Table of Contents 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. 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 The Company capitalizes certain costs to fulfill client contracts such as employee salaries, benefits, stock-based compensation and associated payroll taxes that are directly related to the implementation of its solutions and some third-party costs. The Company only capitalizes implementation costs that it anticipates will be recoverable under the contract. The Company begins amortizing deferred implementation costs ratably over the expected period of client benefit once access to the software-as-a-service (“SaaS”) solution is transferred to the client. Deferred implementation costs are amortized over the benefit period of the client contract. Revenue Recognition The Company derives primarily all of its revenues from SaaS subscription services charged for the use of its digital banking solutions. Revenues are recognized net of the most likely amount of sales credits and allowances and presented net of sales and usage-based taxes collected from clients on behalf of governmental authorities. SaaS subscription services are generally recognized as revenue over the term of the contract as a series of distinct SaaS services bundled into a single performance obligation. Clients are typically charged a one-time, upfront implementation fee and recurring annual and monthly access fees for the use of the Company’s digital banking solution. Implementation and integration of the digital banking platform is complex, and the Company has determined that the one-time, upfront services are not distinct. In determining whether implementation services are distinct from subscription services, the Company considered various factors including the significant level of integration, interdependency, and interrelation between the implementation and subscription service, as well as the inability of the clients’ personnel or other service providers to perform significant portions of the services. As a result, the Company defers any arrangement fees for implementation services and recognizes such amounts over time on a ratable basis as one performance obligation with the underlying subscription revenue commencing when the client goes live on the platform, which corresponds with the date the client obtains access to the Company’s digital banking solution and begins to benefit from the service. The Company’s performance obligation for the SaaS series of services includes standing ready over the term of the contract to provide access to all of the clients’ users and process any transactions initiated by those users. The Company invoices clients each month for the contracted minimum number of registered users with an additional amount for users in excess of those minimums. The Company recognizes variable consideration related to registered user counts in excess of the contractual minimum amounts each month. SaaS subscription revenues also includes annual and monthly charges for maintenance and support services which are recognized over the subscription term. As mentioned above, SaaS contracts include a single performance obligation that consists of a series of distinct SaaS services transferred over time that are substantially the same each month. Standalone selling prices (“SSP”) is not required to allocate revenue amongst the distinct services within the series. 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-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. For those services that are processed by third-party applications, management evaluates whether the Company is acting as a principal or an agent based upon the transfer of control of the services to the customer. The Company first obtains control of the inputs to the specific application and directs their use to create the combined output. 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, 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. During the term of the contract, clients may purchase additional professional services to modify or enhance their licensed SaaS solutions. These services are distinct performance obligations recognized when control of the enhancement is transferred to the client. Cost of Revenues 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. Stock-Based Compensation Stock Options Stock options are accounted for using the grant date fair value method. 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 53 Table of Contents 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. These assumptions and estimates are as follows: Fair Value of Common Stock. Given the absence of an active market for the Company’s shares of common stock prior to its IPO, the fair value of the shares of common stock underlying the Company’s stock options was determined by the Company’s board of directors (the “Board”). • Preliminary Offering Price and Options Granted Subsequent to December 31, 2020. During February 2021, the Company granted stock options to purchase shares of its common stock. The Company established the fair value of these grants based on a straight-line interpolation from its December 31, 2020 valuation and the mid-point of its initial price range in order to determine the appropriate stock-based compensation expense for financial reporting purposes. • Initial Public Offering Price and Options Granted Subsequent to April 13, 2021. The Company’s stock became actively traded upon the completion of its IPO in April 2021. For grants issued upon or subsequent to its IPO, the Company establishes fair value based on the Company’s stock price. Volatility: 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: The Company bases the risk-free interest rate on the rate for a U.S. Treasury zero-coupon issue with a term that closely approximates the expected life of the option grant at the date nearest the option grant date. Dividends. The Company has never declared or paid any cash dividends and does not presently intend to pay cash dividends in the foreseeable future, other than the aggregate accumulated dividends paid to holders of the Company’s Series B redeemable convertible preferred stock upon the effectiveness of the Company’s IPO. As a result, the Company used a dividends assumption of zero. Weighted Average Expected Life in Years: The expected term of employee stock options reflects the period for which the Company believes the option will remain outstanding. To determine the expected term, the Company applies the simplified approach in which the expected term of an award is presumed to be the mid-point between the vesting date and the expiration date of the award. In addition to assumptions used in the Black-Scholes option-pricing model, the Company estimates a forfeiture rate to calculate the stock-based compensation expense for its option awards. The Company’s forfeiture rate is based on an analysis of its actual forfeitures. The Company will continue to evaluate the appropriateness of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover and other factors. Restricted Stock Units (“RSUs”) RSUs issued upon and subsequent to the Company’s IPO vest upon the satisfaction of a time-based condition only. These RSUs are generally earned over a service period of three to four years and the compensation expense related to these awards is based on the grant date fair value of the RSUs and is recognized on a ratable basis over the applicable service period. The Company estimates a forfeiture rate to calculate the stock-based compensation expense for its RSU awards. The Company’s forfeiture rate is based on an analysis of its actual forfeitures. The Company will continue to evaluate the appropriateness of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover and other factors. Employee Stock Purchase Plan The Company’s 2021 Employee Stock Purchase Plan (the “ESPP”) permits employees to purchase the Company's common stock through payroll deductions during six month offerings. The offering periods begin each May 16 and November 16, or such other period determined by the compensation committee. In accordance with the guidance in ASC 718-50 - Compensation - Stock Compensation, the ability to purchase shares of the Company’s common stock for 85 % of the lower of the price on the first day of the offering period or the last day of the offering period (i.e., the purchase date) represents an option and, therefore, the ESPP is a compensatory plan. Accordingly, stock-based compensation expense is determined based on the grant-date fair value as estimated by applying the Black-Scholes option-pricing model and is recognized over the withholding period. Basic and Diluted Loss per Common Share 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 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 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 54 Table of Contents 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. Research and Development Research and development costs consist primarily of personnel-related costs for engineering, information technology and product employees, including salaries, bonuses, other incentive-related compensation, employee benefits and stock-based compensation. In addition, the Company also includes third-party contractor expenses, software development and testing tools, allocated corporate expenses, and other expenses related to developing new solutions and upgrading and enhancing existing solutions. Sales and Marketing Sales and marketing expenses consist primarily of personnel-related costs of sales, marketing and client success 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, and other event expenses. Advertising costs are expensed when incurred and were not significant for the years ended December 31, 2023, 2022, and 2021. General and Administrative General and administrative expenses consist primarily of personnel-related costs for executive, finance, legal, human resources, information technology, security and compliance and other administrative employees, including salaries, bonuses, commissions, other incentive-related compensation, employee benefits and stock-based compensation. General and administrative expenses also include accounting, auditing and legal professional services fees, travel and other unallocated corporate-related expenses such as the cost of facilities, employee relations, corporate telecommunication and software. Acquisition-Related Expenses, Net Acquisition-related expenses, net, include acquisition-related expenses primarily related to accrual of deferred compensation, legal, consulting, and professional fees. In addition, these expenses are inclusive of any gain or loss on revaluation of contingent consideration. Amortization of Acquired Intangibles Amortization of acquired intangibles represents the amortization of intangible assets recorded in connection with business acquisitions, which are amortized on a straight-line basis over the estimated useful lives of the related assets. Concentrations of Credit Risk Significant concentrations of credit risk arise from the Company’s revenues and accounts receivable. Management believes that its contract acceptance, billing, and collection policies are adequate to minimize potential credit risk. As of December 31, 2023 and 2022, no client represented more than 10% of accounts receivable. For the years ended December 31, 2023, 2022, and 2021, no client represented more than 10% of revenues. At times, cash held in financial institutions may exceed Federal Deposit Insurance Corporation (“FDIC”) limits. Management periodically assesses the financial condition of the institutions to assess credit risk. To date, the Company has not experienced such losses and believes it is not exposed to significant credit risk. 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. Income Taxes 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. The assessment considers, among other matters: historical losses, a forecast of future taxable income, the duration of statutory carryback and carryforward periods, and ongoing prudent and feasible tax planning strategies. The Company reassesses the realizability of deferred tax assets regularly, and it will adjust the valuation allowance as sufficient objective positive evidence becomes available. 55 Table of Contents The Company evaluates uncertain tax positions with the presumption of audit detection and applies a “more likely than not” standard to determine the recognition of any tax benefits derived from positions taken in various federal and state filings. The Company recognizes liabilities when it believes that an uncertain tax position may not be sustained upon examination by the tax authorities. The Company’s policy is to accrue interest and penalties related to uncertain tax positions as a component of income tax expense. Because of the complexity of some of these uncertainties, the ultimate resolution may differ from the amounts recognized. Business Combinations The Company’s acquisitions are accounted for using the acquisition method of business combinations accounting. The Company recognizes the consideration transferred (i.e., purchase price) in a business combination as well as the acquired business’ identifiable assets, liabilities, and any non-controlling interests at their acquisition date fair value. 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. Several valuation methods may be used to determine the fair value of assets acquired and liabilities assumed. The Company uses its best estimates and assumptions to assign fair value to the tangible and intangible assets acquired and liabilities assumed at the acquisition date. The Company’s estimates are inherently uncertain and subject to refinement. Determining the useful life of an intangible asset also requires judgment as different types of intangible assets will have different useful lives and certain assets may even be considered to have indefinite useful lives. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill. In addition, uncertain tax positions and tax-related valuation allowances are initially recorded in connection with a business combination as of the acquisition date. The Company continues to collect information and reevaluate these estimates and assumptions quarterly and record any adjustments to its preliminary estimates to goodwill, provided that the Company is within the measurement period. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the Company’s consolidated statements of operations. For acquisitions involving additional consideration to be transferred to the selling parties in the event certain future events occur or conditions are met (“contingent consideration”), the Company recognizes the acquisition date fair value of contingent consideration as part of the consideration transferred in exchange for the business combination. Contingent consideration meeting the criteria to be classified as equity in the consolidated balance sheets is not remeasured, and its subsequent settlement is recorded within stockholders’ equity (deficit). Contingent consideration classified as a liability is remeasured to fair value at each reporting date until the contingency is resolved, with any changes in fair value recognized in the consolidated statements of operations. Intangible Assets Intangible assets with determinable economic lives are carried at cost, less accumulated amortization. The Company’s intangible assets are largely acquired in business combinations and include customer relationships, developed technology, and trade names. Intangible assets are amortized over the shorter of the contractual life or the estimated useful life. Intangible assets are amortized on a straight-line basis. Estimated useful lives for intangible assets primarily consist of the following: Customer relationships - 15 years Developed technology - 5 or 7 years 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 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. This includes, but is not limited to, significant adverse changes in business climate, market conditions, or other events that indicate an asset’s carrying amount may not be recoverable. Recoverability of these assets is measured by comparing the carrying amount of each asset to the future undiscounted cash flows the asset is expected to generate. If the undiscounted cash flows used in the test for recoverability are less than the carrying amount of these assets, the carrying amount of such assets is reduced to fair value. There were no impairments of intangible assets during the years ended December 31, 2023, 2022, and 2021 . Goodwill Goodwill represents the excess of the purchase price in a business combination over the fair value of net assets acquired. Goodwill is not amortized, but rather the carrying amounts of these assets are assessed for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. The Company performs a quantitative goodwill assessment and determines the fair value of the reporting unit using a combination of an income approach, employing a discounted cash flow model, and a market approach. As the Company operates in a single reporting unit, the impairment test is performed at the consolidated entity level by comparing the estimated fair value of the Company to the carrying value of the Company. Goodwill impairment, if any, is evaluated by comparing the reporting unit’s fair value to its carrying value. There was no goodwill impairment for the years ended December 31, 2023, 2022, and 2021 . 56 Table of Contents 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. ASU No. 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. ASU No. 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. Note 3. Business Combination MK Decisioning Systems, LLC On September 10, 2021, the Company acquired substantially all of the assets of MK for approximately $ 20 million in cash consideration due at closing subject to a $ 2 million holdback provision held in escrow with $ 1 million released at the 12 -month anniversary of close and the remainder to be released at the 18 -month anniversary of close. The Company also agreed to assume certain liabilities associated with MK’s business. The integrated set of assets and activities acquired from MK through the acquisition meets the definition of a business under ASC 805, as updated by ASU 2017-01. In addition to the base purchase price, the MK acquisition also included a potential earn-out that is tied to revenue of MK from sales of its products and services within two 12 -month periods (the “First Earn-Out Period” and “Second Earn-Out Period”), with the First Earn-Out Period beginning on January 1, 2022 and ending on December 31, 2022 and the Second Earn-Out Period beginning on January 1, 2023 and ending on December 31, 2023. Pursuant to the terms and conditions set forth in the purchase agreement, the earn-out amount payable, if any, to the former owners, will be a maximum of $ 7.5 million and $ 17.5 million for the First Earn-Out Period and Second Earn-Out Period, respectively, contingent on achievement of certain revenue milestones. In certain circumstances within both Earn-Out Periods, the earn-out amounts are payable in a mix of cash and shares (based on a reference price of $ 35 and limited to $ 20 million in earn-out shares) of the Company’s common stock, subject to the election of the former owners. Earn-out amounts, if any, would be payable no later than 170 days after the end of each Earn-Out Period. 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. This initial estimated fair value was included as contingent consideration in the total purchase price. The Company remeasures the fair value of the contingent consideration on an ongoing basis and records the adjustment to the consolidated statements of operations. 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. Based on the final purchase accounting, the Company estimated that approximately 62 % of the maximum $ 25 million contingent consideration would be paid to the seller in accordance with the terms of the purchase agreement. As of December 31, 2022, the Company determined that 0 % of the maximum $ 25 million contingent consideration would be paid to the seller in accordance with the terms of the purchase agreement, as a result of changes in the expected timing of new customer sales and implementations. 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. For the year ended December 31, 2021, the Company had noncash investing activities of $ 17.5 million related to unpaid consideration and holdback for the acquisition of MK. Segmint Inc. 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 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 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: 57 Table of Contents (in thousands) Preliminary Fair Value as of April 25, 2022 Measurement Period Adjustments Adjusted Fair Value as of March 31, 2023 Cash $ — $ 601 $ 601 Trade accounts receivables 1,788 7 1,795 Other current assets 323 ( 8 ) 315 Property and equipment 35 — 35 Goodwill 99,310 649 99,959 Intangible assets 35,400 1,100 36,500 Total assets acquired $ 136,856 $ 2,349 $ 139,205 Accounts payable $ 768 $ ( 282 ) $ 486 Accrued liabilities 188 371 559 Deferred revenues, current 145 — 145 Deferred tax liability — 2,350 2,350 Other non-current liabilities 625 — 625 Total liabilities assumed 1,726 2,439 4,165 Net assets acquired $ 135,130 $ ( 90 ) $ 135,040 Less cash acquired — ( 601 ) ( 601 ) Total cash consideration for acquisition, less cash acquired $ 135,130 $ ( 691 ) $ 134,439 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: Weighted Average Amortization Period Total (in years) (in thousands) Customer relationships 15 $ 15,200 Developed technology 5 20,600 Trade names 10 700 Total identifiable intangible assets $ 36,500 Goodwill resulted from the acquisition as it is intended to augment and diversify the Company’s single reportable segment and provide a complimentary solution to its existing platform offering. The Company accounted for the acquisition as a business combination. As a result of the acquisition of the stock of Segmint, the goodwill is not deductible for tax purposes. 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. Note 4. Property and Equipment, Net 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 Software 2 to 5 years $ 920 $ 1,031 Capitalized software development costs 5 years 12,263 6,222 Computers and equipment 3 years 6,359 5,606 Furniture and fixtures 5 years 3,988 3,986 Leasehold improvements 3 to 10 years 12,312 11,715 $ 35,842 $ 28,560 Less: accumulated depreciation and amortization ( 18,896 ) ( 14,999 ) 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. 58 Table of Contents Note 5. Revenues and Deferred Costs The Company derives the majority of its revenues from recurring monthly subscription fees charged for the use of its software-as-a-service (“SaaS”) subscription services. Subscription revenues are generally recognized as revenue over the term of the contract as a series of distinct SaaS services bundled into a single performance obligation. Clients are usually charged a one-time, upfront implementation fee and recurring annual and monthly access fees for the use of the online digital relationship banking solution. Implementation and integration of the digital banking platform is complex, and the Company has determined that the one-time, upfront services do not transfer a promised service to the client. As these services are not distinct, they are bundled into the SaaS series of services, and the associated fees are recognized on a straight-line basis over the subscription term. Other services includes professional services and custom development. The following table disaggregates the Company's revenue by major source for the years ended December 31, 2023, 2022, and 2021: Year ended December 31, (in thousands) 2023 2022 2021 SaaS subscription services $ 252,348 $ 194,387 $ 143,575 Implementation services 8,488 6,941 6,291 Other services 3,995 2,942 2,293 Total revenues $ 264,831 $ 204,270 $ 152,159 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 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. The Company capitalized implementation costs of $ 8.4 million, $ 6.9 million, and $ 6.1 million during the years ended December 31, 2023, 2022, and 2021, respectively, and recognized amortization of $ 4.9 million, $ 3.9 million, and $ 3.0 million during the years ended December 31, 2023, 2022, and 2021, respectively. Amortization expense is included in cost of revenues in the accompanying consolidated statements of operations. These deferred costs are considered costs to fulfill client contracts and are included in deferred implementation costs in the accompanying consolidated balance sheets in the amount of $ 19.8 million and $ 16.4 million as of December 31, 2023 and 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 years ended December 31, 2023, 2022, and 2021. Note 6. Accounts Receivable Accounts receivable includes the following amount at December 31, 2023 and 2022: December 31, (in thousands) 2023 2022 Trade accounts receivable $ 30,111 $ 21,665 Unbilled receivables 5,975 4,621 Other receivables — 747 Total receivables 36,086 27,033 Allowance for credit losses ( 59 ) ( 467 ) Reserve for estimated credits ( 528 ) ( 320 ) $ 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 59 Table of Contents 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. Note 7. Accrued Liabilities Accrued liabilities consisted of the following at December 31, 2023 and 2022: December 31, (in thousands) 2023 2022 Bonus accrual $ 7,798 $ 6,199 Accrued vendor purchases 174 1,496 Commissions accrual 2,026 2,280 Accrued hosting services 428 930 Client refund liability 660 279 Accrued consulting and professional fees 713 187 Accrued tax liabilities 1,166 1,147 MK and Segmint acquisition holdback provision — 3,618 ESPP liability 682 717 Other accrued liabilities 6,116 4,790 Total accrued liabilities $ 19,763 $ 21,643 Note 8. Debt 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 $ 60.0 million in aggregate commitments for secured revolving loans (“Revolving Facility”), of which there were no outstanding borrowings as of December 31, 2023. • Term Loan: 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, 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. 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 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. 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 60 Table of Contents 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. See Note 2. Summary of Significant Accounting Policies - Concentration of Credit Risk for additional information. Long-term Debt The following table summarizes long-term debt obligations as of December 31, 2023 and 2022 (in thousands): December 31, 2023 December 31, 2022 Term Debt $ — $ 85,000 Less unamortized debt issuance costs — ( 420 ) Net amount — 84,580 Less current maturities of long-term debt — ( 3,188 ) Long-term portion $ — $ 81,392 Note 9. 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 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 As of December 31, 2020, the Company was authorized to issue seven classes of stock: common stock, Series A redeemable convertible preferred stock, Series B redeemable convertible preferred stock, Series C redeemable convertible preferred stock, Series D redeemable convertible preferred stock, Series E redeemable convertible preferred stock and Series F redeemable convertible preferred stock. These preferred shares were classified as temporary equity within the Company’s consolidated balance sheet as of December 31, 2020. Immediately prior to the effectiveness of the Company’s registration statement relating to its IPO, the Company’s outstanding shares of redeemable convertible preferred stock converted into an aggregate of 72,225,916 shares of common stock. With the proceeds from its IPO, the Company paid in full accumulated dividends on its previously outstanding shares of Series B redeemable convertible preferred stock, which totaled approximately $ 5.0 million. As of December 31, 2023, 2022, and 2021, there was no preferred stock issued or outstanding. Warrants In conjunction with financing arrangements with prior lenders, the Company issued warrants for the purchase of shares of the Company’s redeemable convertible preferred stock. All of the Company’s outstanding warrants exercisable for shares of redeemable convertible preferred stock converted into warrants exercisable for 212,408 shares of common stock and were classified as equity immediately prior to the effectiveness of the Company’s registration statement relating to its IPO. All warrants were exercised for aggregate proceeds of $ 0.6 million during the year ended December 31, 2021. 61 Table of Contents Equity Compensation Plans On February 25, 2021, the Board approved, subject to stockholder approval, which was obtained on March 23, 2021, the ESPP, pursuant to which employees would be able to purchase shares of the Company’s common stock at a 15 % discount. 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 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 A summary of option activity is as follows: 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 Balance, January 1, 2022 8,148,853 $ 7.14 7.4 $ 105,260 Granted — Exercised ( 1,135,346 ) 2.11 14,169 Forfeited ( 745,022 ) 10.91 3,176 Balance, December 31, 2022 6,268,485 $ 7.61 5.9 $ 48,141 Granted — Exercised ( 2,244,170 ) 5.79 26,752 Forfeited ( 109,904 ) 13.80 309 Balance, December 31, 2023 3,914,411 $ 8.48 6.0 $ 62,295 Exercisable at, December 31, 2023 3,359,257 $ 7.26 5.9 $ 57,449 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. As of December 31, 2023, the total unrecognized stock-based compensation expense related to stock options was $ 3.8 million, net of forfeitures, which the Company expects to recognize over the next 1.1 years. Certain stock option grants provide the option holder the right to exercise their stock options before they vest. As of December 31, 2023 2022 and 2021, 0.2 million, 0.3 million, and 0.7 million options, respectively, were exercisable that were not yet vested by the option holder at a weighted average exercise price of $ 2.35 , $ 2.46 , and $ 3.37 per share, respectively. 62 Table of Contents A summary of the status of non-vested options is as follows: Number of shares Weighted Average Grant Date Fair Value Per Share Balance, January 1, 2021 4,972,755 $ 1.22 Granted 2,811,098 8.53 Forfeited ( 452,738 ) 3.76 Vested ( 2,543,328 ) 2.50 Balance, December 31, 2021 4,787,787 6.10 Granted — Forfeited ( 675,375 ) 5.36 Vested ( 2,281,344 ) 6.89 Balance, December 31, 2022 1,831,068 5.36 Granted — Forfeited ( 80,864 ) 7.16 Vested ( 956,667 ) 4.67 Balance, December 31, 2023 793,537 $ 6.04 All non-vested stock options issued as of the date of the option holder’s termination will be forfeited, except for certain non-vested stock options granted to executive management that have special vesting provisions upon involuntary termination or resignation. The special provisions call for the accelerated vesting of a portion of the options granted to the employee under certain circumstances. On November 5, 2021, the Company entered into a separation agreement with the former Chief Executive Officer of the Company. The agreement resulted in a modification of the former employee's 438,783 outstanding stock options and 50,000 RSUs, which accelerated certain vesting, resulting in the recognition of $ 1.9 million of incremental stock-based compensation expense for the year ended December 31, 2021. An additional $ 8.2 million of expense was recognized ratably over the remaining requisite service period, through December 31, 2022. Restricted Stock Units The Company's restricted stock units vest and settle upon the satisfaction of a service condition. The service condition for the awards is satisfied over generally three to four years . The total fair value of restricted stock units vested during the year ended December 31, 2023 was $ 49.9 million. Restricted stock unit activity was as follows: Number of Units Weighted Average Grant Date Fair Value Per Share Nonvested as of January 1, 2022 2,867,799 $ 28.48 Granted 5,771,008 14.06 Vested ( 896,575 ) 25.88 Forfeited ( 641,136 ) 24.27 Nonvested as of December 31, 2022 7,101,096 $ 17.45 Granted 3,676,190 16.12 Vested ( 2,832,027 ) 17.29 Forfeited ( 639,816 ) 17.33 Nonvested as of December 31, 2023 7,305,443 $ 16.85 As of December 31, 2023, the total unrecognized stock-based compensation expense related to RSUs was $ 95.3 million, net of forfeitures, which the Company expects to recognize over the next 2.5 years. Employee Stock Purchase Plan The first offering period commenced on May 15, 2021, and as of December 31, 2023, 867,909 shares have been issued under the ESPP with 421,690 shares issued during the year ended December 31, 2023. 63 Table of Contents Stock-based compensation expense was included in the consolidated statements of operations as follows: Year ended December 31, (in thousands) 2023 2022 2021 Cost of revenues $ 5,584 $ 4,389 $ 1,973 Research and development 15,995 11,398 2,915 Sales and marketing 7,220 4,042 1,028 General and administrative 22,432 24,763 8,619 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 $ 0.7 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. Note 10. Income Taxes The components of the provision (benefit) for income taxes are as follows: Year ended December 31, (in thousands) 2023 2022 2021 Current: Federal $ — $ — $ — State 76 229 87 Total current 76 229 87 Deferred: Federal 145 ( 213 ) 42 State ( 177 ) ( 477 ) 43 Total deferred ( 32 ) ( 690 ) 85 Total provision (benefit) for income taxes $ 44 $ ( 461 ) $ 172 The provision (benefit) for income taxes results in effective rates that differ from the statutory rates. The following is a reconciliation of income tax expense (benefit) computed at the statutory federal income tax rate to the total tax expense (benefit) computed at the effective tax rate: Year ended December 31, (in thousands) 2023 2022 2021 Computed tax at federal statutory rate applied to pre-tax loss $ ( 13,203 ) 21.0 % $ ( 12,403 ) 21.0 % $ ( 9,797 ) 21.0 % State income tax, net of federal tax benefit ( 2,567 ) 4.1 % ( 2,437 ) 4.1 % ( 3,927 ) 8.4 % Stock-based compensation ( 1,539 ) 2.4 % 1,815 ( 3.1 ) % ( 14,905 ) 31.9 % Other permanent differences, net 469 ( 0.7 ) % 279 ( 0.5 ) % 388 ( 0.8 ) % Executive compensation 2,970 ( 4.7 ) % 1,008 ( 1.7 ) % 578 ( 1.2 ) % Exercise of warrants — — % — — % 1,162 ( 2.5 ) % Return to provision adjustments ( 187 ) 0.3 % ( 54 ) 0.1 % ( 645 ) 1.4 % Other ( 41 ) — % 42 ( 0.1 ) % ( 111 ) 0.2 % Change in valuation allowance 14,142 ( 22.5 ) % 11,289 ( 19.1 ) % 27,429 ( 58.8 ) % Total $ 44 ( 0.1 ) % $ ( 461 ) 0.7 % $ 172 ( 0.4 ) % 64 Table of Contents Significant components of the Company’s net deferred tax assets and liabilities were as follows as of December 31, 2023 and 2022: December 31, (in thousands) 2023 2022 Deferred tax assets: Deferred revenue $ 6,412 $ 5,631 Accrued expenses 2,122 1,816 Stock-based compensation 3,404 6,233 Net operating loss carryforward (federal and state) 76,267 78,073 Reserve for customer credits 310 246 Capitalized research and development costs 30,109 14,312 Lease liabilities 4,828 4,872 Other 250 328 Total deferred tax assets 123,702 111,511 Valuation allowance for deferred tax assets ( 109,173 ) ( 96,256 ) Deferred tax assets, net of valuation allowance 14,529 15,255 Deferred tax liabilities: Fixed assets ( 213 ) ( 459 ) Right-of-use assets ( 3,949 ) ( 3,670 ) Goodwill ( 4,347 ) ( 3,702 ) Intangible assets ( 6,183 ) ( 7,850 ) Deferred implementation costs ( 1,550 ) ( 1,286 ) Total deferred tax liabilities ( 16,242 ) ( 16,967 ) Deferred income tax liabilities, net of deferred tax assets $ ( 1,713 ) $ ( 1,712 ) At December 31, 2023 and 2022, the Company had federal net operating loss carryforwards of $ 303.6 million and $ 316.9 million, respectively, of which $ 75.6 million and $ 92.3 million, respectively, is subject to limited carryforward periods and begin to expire in 2034. 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, 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. 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. 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. As part of the evaluation, the Company considered historical losses, future reversals of taxable temporary differences, the duration of statutory carryback and carryforward periods, and ongoing prudent and feasible tax planning strategies. As a result, at December 31, 2023 and 2022, the Company established a valuation allowance of $ 109.2 million and $ 96.3 million, respectively, for its net deferred tax assets as realization of the net deferred tax assets is not reasonably assured based upon a “more likely than not” threshold. The Company excluded the deferred tax liabilities related to certain indefinite-lived intangibles when calculating the valuation allowance, as these liabilities cannot be considered as a source of income when determining the realizability of the net definite-lived deferred tax assets. In addition to these indefinite-lived deferred tax liabilities, the Company also has indefinite-lived deferred tax assets which were considered as part of the Company’s net deferred tax position. The valuation allowance increased by $ 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. Prior to the business combination, the Company had a full valuation allowance on its net deferred tax assets. The net deferred tax liability generated from the business combination is considered an additional source of income to support the realizability of the Company’s pre-existing deferred tax assets. As a result, the Company released a portion of the pre-existing valuation allowance against the deferred tax assets and recorded a provisional deferred tax benefit of $ 2.1 million 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. 65 Table of Contents The Company files income tax returns in the U.S. federal jurisdiction and several state jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state or local income tax examinations by tax authorities for tax years before 2019. Operating losses generated in years prior to 2019 remain open to adjustment until the statute of limitations closes for the tax year in which the net operating losses are utilized. The tax years 2019 and forward remain open to examination by all the major taxing jurisdictions to which the Company is subject, though the Company is not currently under examination by any major taxing jurisdiction. The Company did not have any uncertain tax positions as of December 31, 2023 and 2022. The Company’s policy is to accrue interest and penalties related to uncertain tax positions as a component of income tax expense. For the years ended December 31, 2023 and 2022, the Company did not recognize any interest or penalties. On August 17, 2022, President Biden signed into law the Inflation Reduction Act of 2022. The Inflation Reduction Act, among other things, includes provisions relating to the corporate alternative minimum tax and an excise tax on corporate stock buybacks. The Company does not expect there to be a material impact on its financial statements and will continue to assess in future periods. Note 11. Fair Value of Financial Instruments The Company’s financial instruments consist primarily of cash, restricted cash and cash equivalents, marketable securities, accounts receivable, accounts payable, long-term debt, and contingent consideration. 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. Cash equivalents include amounts held in money market accounts that are measured at fair value using observable market prices. Marketable securities include debt securities that are measured at fair value using observable inputs. The Company values contingent consideration related to business combinations using a weighted probability calculation of potential payment scenarios discounted at rates reflective of the risks associated with the expected future cash flows. The significant unobservable inputs used in the fair value measurement of contingent consideration related to business acquisitions are forecasts of expected future annual revenues as developed by the Company's management and the probability of achievement of those revenue forecast. Significant increases (decreases) in these unobservable inputs in isolation would likely result in a significantly (lower) higher fair value measurement. The Company uses a three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value: Level 1. Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2. Significant other inputs that are directly or indirectly observable in the marketplace. Level 3. Significant unobservable inputs which are supported by little or no market activity. 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 table summarizes the Company’s financial assets measured at fair value as of December 31, 2023 and 2022 and indicates the fair value hierarchy of the valuation: Fair Value at Reporting Date Using (in thousands) December 31, 2023 Level 1 Level 2 Level 3 Assets: Cash equivalents (1) $ 34,463 $ 34,463 $ — $ — Marketable securities: Corporate bonds 16,206 — 16,206 — Commercial paper 7,279 — 7,279 — U.S. government-sponsored enterprise securities 3,500 — 3,500 U.S. Treasury debt securities 22,067 22,067 — — International debt securities 2,144 — 2,144 — Total marketable securities 51,196 22,067 29,129 — Total Assets $ 85,659 $ 56,530 $ 29,129 $ — (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. Treasury debt, U.S. Treasury Repurchase Agreements, U.S. Government Agency Repurchase Agreements, and corporate bonds that have a maturity of three months or less from the original acquisition date. 66 Table of Contents Fair Value at Reporting Date Using (in thousands) December 31, 2022 Level 1 Level 2 Level 3 Assets: Cash equivalents (1) $ 28,173 $ 28,173 $ — $ — Marketable securities: Corporate bonds 26,037 — 26,037 — Commercial paper 36,407 — 36,407 — U.S. 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 $ — (1) Includes cash sweep account, money market account, and money market funds that have investments primarily in U.S. Government Agency debt, U.S. Treasury debt, U.S. Treasury Repurchase Agreements, U.S. Government Agency Repurchase Agreements, and corporate bonds that have a maturity of three months or less from the original acquisition date. Note 12. 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 , 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. The holders of the Company’s redeemable convertible preferred stock do not have a contractual obligation to share in the Company’s losses; therefore, no amount of total undistributed loss is allocated to redeemable convertible preferred stock. 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 2023, 2022, and 2021, the number of shares used to calculate diluted net loss per share of common stock attributable to common stockholders is the same as the number of shares used to calculate basic net loss per share of common stock attributable to common stockholders for the period presented because the potentially dilutive shares would have been antidilutive if included in the calculation. The computation of basic and diluted EPS is as follows for the years ended December 31, 2023, 2022, and 2021: Year ended December 31, (in thousands, except shares and per share amounts) 2023 2022 2021 Net loss $ ( 62,913 ) $ ( 58,600 ) $ ( 46,822 ) Less: cumulative dividends and adjustments to redeemable convertible preferred stock — — ( 277 ) Net loss attributable to common stockholders $ ( 62,913 ) $ ( 58,600 ) $ ( 47,099 ) Weighted average shares of common stock outstanding - basic and diluted 94,080,797 90,956,521 64,510,456 Loss per common share - basic and diluted $ ( 0.67 ) $ ( 0.64 ) $ ( 0.73 ) For the years ended December 31, 2023, 2022, and 2021, the following potential shares were excluded from diluted EPS as the Company had a net loss in each period presented: Year ended December 31, 2023 2022 2021 Stock options 3,914,768 6,268,485 8,148,853 RSUs 7,305,443 7,101,096 2,867,799 ESPP 31,240 48,923 44,169 Total anti-dilutive common share equivalents 11,251,451 13,418,504 11,060,821 Note 13. Commitments and Contingencies Contractual Commitments The Company has non-cancelable contractual commitments related to third-party products, hosting services and other service costs. The Company is party to several purchase commitments for third-party services that contain both a contractual minimum obligation and a variable obligation based upon usage or other factors which can change on a monthly basis. At December 31, 2023, the Company had approximately $ 23.8 million of purchase obligations in the next 12 months. 67 Table of Contents Legal Proceedings 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 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 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. From time to time, the Company has been involved in disputes related to patent and other intellectual property rights of third parties, none of which has resulted in material liabilities. The Company expects these types of disputes may continue to arise in the future. 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. Note 14. Leases 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. 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: Year ended December 31, (in thousands) 2023 2022 Operating lease expense $ 2,984 $ 3,137 Short term lease expense and other (1) 960 1,165 Total lease expense $ 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 Year ended December 31, Cash flow information (in thousands) 2023 2022 Cash paid for operating lease liabilities $ 3,907 $ 3,710 Right-of-use assets obtained in exchange for operating lease obligations (1) $ — $ 16,918 Non-cash adjustment to operating lease right-of-use assets from lease modification (2) $ 3,108 $ — (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 Year ended December 31, 2023 Weighted-average remaining lease term 9.5 years Weighted-average discount rate 7.6 % 68 Table of Contents The future maturities of operating lease liabilities are as follows: (in thousands) December 31, 2023 2024 $ 2,659 2025 2,701 2026 2,614 2027 2,613 2028 2,776 Thereafter 14,981 Total minimum lease payments 28,344 Less: present value discount ( 9,087 ) Total lease liability balance $ 19,257 Note 15. Employee Benefit Plan The Company sponsors a 401(k) savings plan that covers substantially all employees who have attained 21 years of age. Employees can defer a portion of their annual gross compensation up to limits established by the Internal Revenue Code. The Company currently matches employee contributions at 25 % of employee contributions up to 8 % of salary. Matching contributions vest based on the employees tenure with the Company. Contributions for the years ended December 31, 2023, 2022, and 2021 were $ 1.9 million, $ 1.5 million, and $ 1.2 million, respectively. Note 16. Goodwill and Other Intangibles Goodwill and intangible assets deemed to have an indefinite life are not amortized, but are reviewed annually for impairment of value or when indicators of a potential impairment are present. 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 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. Total intangibles, net, consisted of the following as of December 31, 2023 and 2022: As of December 31, 2023 (in thousands) Carrying Value Accumulated Amortization Net Carrying Value Finite-lived: Customer Relationships $ 20,470 $ ( 2,820 ) $ 17,650 Developed Technology 27,700 ( 10,151 ) 17,549 Tradenames 750 ( 167 ) 583 Subtotal amortizable intangible assets 48,920 ( 13,138 ) 35,782 Website domain name 25 — 25 Total intangible assets $ 48,945 $ ( 13,138 ) $ 35,807 As of December 31, 2022 (in thousands) Carrying Value Accumulated Amortization Net Carrying Value Finite-lived: Customer Relationships $ 20,470 $ ( 1,455 ) $ 19,015 Developed Technology 27,700 ( 4,800 ) 22,900 Tradenames 750 ( 97 ) 653 Subtotal amortizable intangible assets 48,920 ( 6,352 ) 42,568 Website domain name 25 — 25 Total intangible assets $ 48,945 $ ( 6,352 ) $ 42,593 Amortization expense recognized on intangible assets was $ 6.8 million, $ 5.1 million, and $ 1.1 million for the years ended December 31, 2023, 2022, and 2021, respectively. 69 Table of Contents The following table shows the estimated annual amortization expense of the definite-lived intangible assets for the next five years and thereafter (in thousands): 2024 6,786 2025 6,786 2026 6,554 2027 3,162 2028 1,435 Thereafter 11,059 $ 35,782 Note 17. Related Party Transactions For the years ended December 31, 2023, 2022, and 2021, CU Cooperative Systems, Inc. (“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. Mr. 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. Note 18. Subsequent Events Pursuant to the terms of the annual evergreen provision in the 2021 Plan, effective January 1, 2024, the number of shares issuable thereunder automatically increased by 4,836,105 shares for a new total of 17,620,036 shares available for issuance. The Board limited the effect of the evergreen provision in the ESPP, and, effective January 1, 2024, the number of shares issuable thereunder increased by 500,000 shares for a new total of 2,837,881 shares available for issuance. 70 Table of Contents Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. None.