What changed in this filing

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Item 1. Financial Statements

2024-05-02 compared with 2023-11-02 · 104 added, 252 removed, 311 unchanged (53% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

September 30, December 31,

March 31, December 31,

Current assets

2 unchanged sentences

Accounts receivable, net 35,717 35,499

Deferred implementation costs, current 9,496 7,855

Deferred costs, current 11,081 10,329

Prepaid expenses and other current assets 11,531 10,634

2 unchanged sentences

Right-of-use assets 15,479 15,754

Deferred implementation costs, net of current portion 27,708 24,783

Deferred costs, net of current portion 31,499 30,734

Intangibles, net 34,111 35,807

4 unchanged sentences

Current liabilities

Current portion of long-term debt $ 6,375 $ 3,188

Accounts payable $ 6,533 $ 7,478

3 unchanged sentences

Total current liabilities 37,174 39,430

Long-term debt, net 76,062 81,392

Deferred revenues, net of current portion 17,525 15,384

4 unchanged sentences

Stockholders’ Equity

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

Preferred stock, $ 0.001 par value, 10,000,000 shares authorized and 0 shares issued and outstanding as of March 31, 2024 and December 31, 2023

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

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

and 97,515,483 and 96,722,098 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

Additional paid-in capital 769,608 760,210

6 unchanged sentences

(in thousands, except share and per share data)

Three months ended September 30,

Nine months ended September 30,

2023 2022 2023 2022

Three months ended March 31,

Revenues $ 76,127 $ 59,996

6 unchanged sentences

General and administrative 19,315 17,111

Acquisition-related expenses, net — 737 220 155

Acquisition-related expenses 60 186

Amortization of acquired intangibles 359 360

5 unchanged sentences

Interest expense ( 73 ) ( 1,757 )

Gain (loss) on financial instruments 201 ( 59 ) 421 ( 446 )

Gain on financial instruments 112 210

Loss before income taxes ( 11,244 ) ( 16,767 )

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

Provision for income taxes 189 196

Net loss $ ( 11,433 ) $ ( 16,963 )

3 unchanged sentences

Basic and diluted 96,945,232 92,397,341

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

(1) Includes amortization of acquired technology of $ 1.3 million for both the three months ended March 31, 2024 and 2023.

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

2 unchanged sentences

(in thousands, except share data)

Three months ended September 30, 2023

Three months ended March 31, 2024

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

Shares Amount

Balance June 30, 2023

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

Stock-based compensation — — 14,326 — 14,326

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

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

Payments for taxes related to net settlement of equity awards — — ( 4,204 ) — ( 4,204 )

Net loss — — — ( 15,476 ) ( 15,476 )

Balance September 30, 2023

Balance January 1, 2024

96,722,098 $ 97 $ 760,210 $ ( 435,366 ) $ 324,941

Three months ended September 30, 2022

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

Shares Amount

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

Stock-based compensation — — 13,906 — 13,906

3 unchanged sentences

Net loss — — — ( 11,433 ) ( 11,433 )

Balance September 30, 2022

Balance March 31, 2024

97,515,483 $ 98 $ 769,608 $ ( 446,799 ) $ 322,907

Nine months ended September 30, 2023

Three months ended March 31, 2023

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

Shares Amount

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

Balance January 1, 2023 92,112,749 $ 92 $ 706,407 $ ( 372,453 ) $ 334,046

Stock-based compensation — — 11,612 — 11,612

Issuance of common stock upon restricted stock unit vesting 292,591 — — — —

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

Exercised stock options 459,401 1 1,415 — 1,416

1 unchanged sentence

Net loss — — — ( 16,963 ) ( 16,963 )

Balance September 30, 2023

Balance March 31, 2023

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

Nine months ended September 30, 2022

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

Shares Amount

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

Stock-based compensation — — 33,596 — 33,596

Issuance of common stock upon restricted stock unit vesting 392,337 — — — —

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

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

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

Net loss — — — ( 53,688 ) ( 53,688 )

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

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

2 unchanged sentences

(in thousands)

Nine months ended September 30,

Three months ended March 31,

Cash flows from operating activities:

$ ( 50,200 ) $ ( 53,688 )

Adjustments to reconcile net loss to net cash used in operating activities:

Net loss $ ( 11,433 ) $ ( 16,963 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization expense 2,562 2,586

2 unchanged sentences

Amortization of debt issuance costs 32 45

Gain on revaluation of contingent consideration — ( 2,700 )

(Gain) loss on financial instruments

Gain on lease modification ( 375 ) —

Gain on financial instruments ( 112 ) ( 210 )

Deferred taxes 25 47

3 unchanged sentences

Accounts payable and accrued liabilities ( 3,873 ) ( 1,290 )

Deferred implementation costs ( 3,959 ) ( 3,339 )

Deferred costs ( 1,311 ) ( 859 )

Deferred revenues 3,654 824

Net cash used in operating activities

( 12,197 ) ( 24,220 )

Net cash provided by (used in) operating activities 951 ( 9,615 )

Cash flows from investing activities:

Purchase of marketable securities ( 7,149 ) ( 20,987 )

Proceeds from maturities and redemptions of marketable securities 97,852 51,500

Proceeds from sales, maturities and redemptions of marketable securities 15,626 38,122

Purchases of property and equipment ( 306 ) ( 229 )

1 unchanged sentence

( 1,363 ) ( 1,141 )

Acquisition of business, net of cash acquired — ( 131,339 )

Net cash used in investing activities

( 16,358 ) ( 247,499 )

Net cash provided by investing activities 6,808 15,765

Cash flows from financing activities:

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

Principal payments on debt ( 2,125 ) ( 24,688 )

Debt issuance costs paid ( 341 ) ( 773 )

Proceeds from ESPP issuance 2,407 1,841

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

Payments for taxes related to net settlement of equity awards ( 5,678 ) ( 1,984 )

Proceeds from stock option exercises 1,171 1,416

Net cash (used in) provided by financing activities

( 4,801 ) 62,893

Net decrease in cash and cash equivalents and restricted cash ( 33,356 ) ( 208,826 )

Net cash used in financing activities ( 4,507 ) ( 568 )

Net increase in cash and cash equivalents and restricted cash 3,252 5,582

Cash and cash equivalents and restricted cash, beginning of period 40,927 112,337

Cash and cash equivalents and restricted cash, end of period $ 44,179 $ 117,919

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

(1) See Note 3 for additional information regarding non-cash investing activities for the three months ended March 31, 2024 and 2023 related to capitalized software development costs.

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

16 unchanged sentences

In the Company's opinion, the accompanying interim unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, consisting of normal, recurring adjustments, necessary to present fairly the financial position, results of operations and cash flows for the periods indicated.

Certain information and disclosures normally included in the notes to the annual consolidated financial statements prepared in accordance with GAAP have been omitted from these interim unaudited condensed consolidated financial statements pursuant to the rules and regulations of the SEC.

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

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

Accordingly, these interim unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the accompanying notes for the fiscal year ended December 31, 2023, which are included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 29, 2024.

Operating results for the three months ended March 31, 2024 are not necessarily indicative of results that may be expected for any other interim period or for the year ending December 31, 2024.

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

Reclassification.

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

Use of Estimates

1 unchanged sentence

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.

Concentration of Credit Risk

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 12, 2023, the U.S.

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

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

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

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

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

Cash and Cash Equivalents

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

At September 30, 2023 and December 31, 2022, $ 64.5 million and $ 28.2 million, respectively, was held in cash equivalent money market and marketable securities accounts.

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

Restricted Cash

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

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

See Note 3 for further information.

September 30, December 31,

(in thousands) 2023 2022

Cash and cash equivalents $ 76,381 $ 108,720

Restricted cash included in Prepaid expenses and other current assets 2,600 3,617

Total cash and cash equivalents and restricted cash $ 78,981 $ 112,337

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 condensed consolidated balance sheets.

The Company had $ 9.3 million and $ 5.7 million in capitalized internal software development costs, net of accumulated amortization, as of September 30, 2023 and December 31, 2022, respectively.

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

For the nine months ended September 30, 2023 and 2022, the Company had non-cash investing activities of $ 0.6 million and $ 0.2 million, respectively, for capitalized stock-based compensation related to capitalized software development costs.

Contract Balances

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 assets totaled $ 1.4 million and $ 0.5 million as of September 30, 2023 and December 31, 2022, respectively, which are included in other assets in the accompanying condensed consolidated balance sheets.

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

Significant estimates and assumptions include determining the timing and amount of revenue recognition and business combinations.

Recent Accounting Pronouncements

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

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

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

Business Combination

MK Decisioning Systems, LLC

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

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

The integrated set of assets and activities acquired from MK through the acquisition met 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 had classified the amounts held in escrow as restricted cash on the condensed consolidated balance sheets.

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

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

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

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

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

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 September 30, 2023.

On April 25, 2022, the Company consummated its previously announced merger with Segmint pursuant to the Agreement and Plan of Merger (the "Merger Agreement"), dated March 25, 2022, with Segmint surviving as a wholly owned subsidiary of the Company.

Segmint operates a marketing analytics and messaging delivery platform with patented software that enables financial institutions and merchants to understand and leverage data, interact with customers and measure results.

The aggregate consideration paid in exchange for all 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:

(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.

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

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

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

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

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

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

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

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

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

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

Early adoption is permitted.

ASU 2023-09 should be applied prospectively;

however, retrospective application is permitted.

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

Property and Equipment, Net

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

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

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

Depreciation and amortization expense was $ 0.9 million for both the three months ended March 31, 2024, and 2023.

Property and equipment, net, includes the following amounts at March 31, 2024 and December 31, 2023:

(in thousands) Useful Life March 31, 2024 December 31, 2023

Software 2 to 5 years

$ 11,904 $ 7,253

Capitalized software development costs 5 years 13,808 12,263

Computers and equipment 3 years 6,584 6,359

5 unchanged sentences

Property and equipment, net $ 18,217 $ 16,946

For both the three months ended March 31, 2024 and 2023 the Company had non-cash investing activities of $ 0.2 million 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 less than $ 0.1 million and none for the three months ended March 31, 2024 and March 31, 2023, respectively.

Revenues and Deferred Costs

4 unchanged sentences

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

Other services include professional services and custom development.

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

Three months ended September 30,

Nine months ended September 30,

Other services includes professional services and custom development.

The following table disaggregates the Company's revenue by major source for the three months ended March 31, 2024 and 2023:

Three months ended March 31,

(in thousands) 2024 2023

3 unchanged sentences

Total revenues $ 76,127 $ 59,996

The Company recognized approximately $ 7.0 million of revenue during the nine months ended September 30, 2023 that was included in deferred revenues in the accompanying condensed consolidated balance sheets as of the beginning of the reporting period.

For those contracts that were wholly or partially unsatisfied as of September 30, 2023, minimum contracted subscription revenues to be recognized in future periods total approximately $ 987.4 million.

The Company recognized approximately $ 2.4 million of revenue during the three months ended March 31, 2024 that was included in deferred revenues in the accompanying condensed consolidated balance sheets as of the beginning of the reporting period.

For those contracts that were wholly or partially unsatisfied as of March 31, 2024, minimum contracted subscription revenues to be recognized in future periods total approximately $ 1.2 billion.

The Company expects to recognize approximately 45.9 % of this amount as subscription services are transferred to customers over the next 24 months, an additional 34.8 % 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 $ 1.4 million and $ 1.5 million as of March 31, 2024 and December 31, 2023, respectively, which are included in other assets in the accompanying condensed consolidated balance sheets.

Deferred Cost Recognition

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

The Company capitalized $ 1.2 million and $ 0.8 million in deferred commissions costs during the three months ended March 31, 2024 and 2023, respectively, and recognized amortization of $ 1.2 million and $ 0.9 million during the three months ended March 31, 2024 and 2023, respectively.

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

Deferred commissions are considered costs to obtain a contract and are included in deferred implementation costs in the accompanying condensed consolidated balance sheets in the amount of $ 18.0 million and $ 16.2 million as of September 30, 2023 and December 31, 2022, respectively.

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

Deferred commissions are considered costs to obtain a contract and are included in deferred costs in the accompanying condensed consolidated balance sheets in the amount of $ 21.2 million as of both March 31, 2024 and December 31, 2023.

The Company capitalized implementation costs of $ 2.9 million and $ 2.1 million during the three months ended March 31, 2024 and 2023 respectively, and recognized amortization of $ 1.4 million and $ 1.1 million during the three months ended March 31, 2024 and 2023, respectively.

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

These deferred costs are considered costs to fulfill client contracts and are included in deferred implementation costs in the accompanying condensed consolidated balance sheets in the amount of $ 19.2 million and $ 16.4 million as of September 30, 2023 and December 31, 2022, respectively.

These deferred costs are considered costs to fulfill client contracts and are included in deferred costs in the accompanying condensed consolidated balance sheets in the amount of $ 21.4 million and $ 19.8 million as of March 31, 2024 and December 31, 2023, 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 material impairment losses were recognized in relation to these capitalized costs for the three and nine months ended September 30, 2023 and 2022.

No material impairment losses were recognized in relation to these capitalized costs for the three months ended March 31, 2024 and 2023.

Accounts Receivable

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

September 30, December 31,

Accounts receivable includes the following amounts at March 31, 2024 and December 31, 2023:

March 31, December 31,

(in thousands) 2024 2023

1 unchanged sentence

Unbilled receivables 7,179 5,975

Other receivables 501 747

Total receivables 36,195 36,086

3 unchanged sentences

Accrued Liabilities

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

September 30, December 31,

Accrued liabilities consisted of the following at March 31, 2024 and December 31, 2023:

March 31, December 31,

(in thousands) 2024 2023

6 unchanged sentences

Accrued tax liabilities 969 1,166

MK and Segmint acquisition holdback provision 2,600 3,618

ESPP liability 2,204 682

1 unchanged sentence

Total accrued liabilities $ 16,902 $ 19,763

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.

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 Silicon Valley Bank (“SVB”), Comerica Bank and Canadian Imperial Bank of Commerce.

The First Amendment provided for Citibank, N.A.

2 unchanged sentences

• Revolving Facility:

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

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

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

• 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 September 30, 2023.

Revolving Facility loans under the Amended Credit Agreement may be voluntarily prepaid and re-borrowed.

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

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

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

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

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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 September 30, 2023.

The Company was in compliance with all covenants as of March 31, 2024.

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

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

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 September 30, 2023 and December 31, 2022 (in thousands):

September 30, 2023 December 31, 2022

Term Debt $ 82,875 $ 85,000

Less unamortized debt issuance costs ( 438 ) ( 420 )

Net amount 82,437 84,580

Less current maturities of long-term debt ( 6,375 ) ( 3,188 )

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

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

Total $ 82,875

Stockholders' Equity

1 unchanged sentence

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

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

(in thousands) 2024 2023

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Total stock-based compensation expenses $ 13,552 $ 11,244

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

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

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

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

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

The Company recorded income tax expense of $ 0.2 million for both the three months ended March 31, 2024 and 2023, resulting in an effective tax rate of ( 1.7 )% and ( 1.2 )%, respectively.

The Company’s effective tax rate for the three months ended March 31, 2024 and March 31, 2023 differs from the statutory tax rate primarily due to the impact of the valuation allowance against its deferred tax assets and state tax expense.

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

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

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

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

The assessment considers, among other matters:

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

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

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

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.

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

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

The following tables summarize the Company’s financial assets measured at fair value as of March 31, 2024 and December 31, 2023 and indicate the fair value hierarchy of the valuation:

Fair Value at Reporting Date Using

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

(in thousands) March 31, 2024 Level 1 Level 2 Level 3

Cash equivalents (1)

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Commercial paper 6,978 — 6,978 —

government-sponsored enterprise securities 15,008 — 15,008 —

Treasury debt securities 22,325 22,325 — —

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Total Assets $ 80,360 $ 59,560 $ 20,800 $ —

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

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

Government Agency debt, U.S.

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Commercial paper 7,279 — 7,279 —

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

Treasury debt securities 22,067 22,067 — —

2 unchanged sentences

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

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

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

Government Agency debt, U.S.

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

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

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

Three months ended September 30,

Nine months ended September 30,

Because the Company has reported a net loss for the three months ended March 31, 2024 and 2023, the number of shares used to calculate diluted net loss per share attributable to common stockholders is the same as the number of shares used to calculate basic net loss per share attributable to common stockholders for the period presented because the potentially dilutive shares would have been anti-dilutive if included in the calculation.

The computation of basic and diluted net loss per share attributable to common stockholders is as follows for the three months ended March 31, 2024 and 2023:

Three months ended March 31,

(in thousands, except shares and per share amounts) 2024 2023

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Net loss per common share - basic and diluted $ ( 0.12 ) $ ( 0.18 )

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

As of September 30,

For the three months ended March 31, 2024 and 2023, the following potential shares of common stock were excluded from diluted EPS as the Company had a net loss in each of the periods presented:

As of March 31,

Stock options 3,589,090 5,781,937

RSUs 8,074,490 7,041,744

8,198,201 9,535,540

ESPP 103,610 190,971

Total anti-dilutive common share equivalents 11,890,901 15,508,448

(1) Revised to reflect an immaterial correction to a previously reported amount.

Commitments and Contingencies

8 unchanged sentences

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

The Company leases office space under non-cancellable operating leases for its corporate headquarters in Plano, Texas pursuant to a 10-year lease agreement under which the Company leases approximately 125,468 square feet of office space with an initial term that expires on August 31, 2028, with the option to extend the lease for either two additional terms of five years each or one additional term of 10 years.

The Company leases office space under non-cancellable operating leases for its corporate headquarters in Plano, Texas pursuant to a ten-year lease agreement under which the Company leases approximately 125,468 square feet of office space with an initial term that expires on August 31, 2028, with the option to extend the lease for either two additional terms of five years each or one additional term of ten years .

Renewal options were not included in the right-of-use (“ROU”) asset and lease liability calculation.

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

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

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

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

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

In addition, the Company recorded a gain on lease modification of $ 0.4 million during the three months ended December 31, 2023, which was included in general and administrative expenses in the consolidated statements of operations.

Operating lease expense consisted of:

(in thousands)

Three months ended September 30,

Nine months ended September 30,

2023 2022 2023 2022

Three months ended March 31,

Operating lease expense

$ 745 $ 785 $ 2,313 $ 2,353

Short-term lease expense and other (1)

( 22 ) 340 611 976

Total lease expense

$ 972 $ 1,102

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

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

Supplemental Cash Flow Information

Nine months ended September 30,

Three months ended March 31,

Cash flow information (in thousands)

Cash paid for operating lease liabilities

$ 2,924 $ 2,877

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

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

The future maturities of operating lease liabilities are as follows:

(in thousands) September 30, 2023

2023 (three months remaining) $ 985

(in thousands) March 31, 2024

2024 (nine months remaining) $ 2,003

Thereafter 14,981

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

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

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

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

As of September 30, 2023

There were no indications of impairment of goodwill noted as of March 31, 2024.

Goodwill had a carrying value of $ 148.1 million as of both March 31, 2024 and December 31, 2023.

Total intangibles, net, consisted of the following as of March 31, 2024 and December 31, 2023:

As of March 31, 2024

(in thousands) Carrying Value Accumulated Amortization Net Carrying Value

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Total intangible assets $ 48,945 $ ( 13,138 ) $ 35,807

Amortization expense recognized on intangible assets was $ 1.7 million and $ 5.1 million for the three and nine months ended September 30, 2023, respectively, and $ 1.7 million and $ 3.4 million for the three and nine months ended September 30, 2022, respectively.

Amortization expense recognized on intangible assets was $ 1.7 million for both the three months ended March 31, 2024 and 2023.

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

2023 (remaining three months)

2024 (remaining nine months)

Thereafter 11,059

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

What changed 10-Q

Item 1. Financial Statements