ALKAMI TECHNOLOGY, INC. 10-Q

Item 1. Financial Statements ALKAMI TECHNOLOGY, INC. C ONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) (UNAUDITED) March 31, December 31, 2024 2023 Assets Current assets Cash and cash equivalents $ 44,179 $ 40,927 Marketable securities 43,125 51,196 Accounts receivable, net 35,717 35,499 Deferred costs, current 11,081 10,329 Prepaid expenses and other current assets 11,531 10,634 Total current assets 145,633 148,585 Property and equipment, net 18,217 16,946 Right-of-use assets 15,479 15,754 Deferred costs, net of current portion 31,499 30,734 Intangibles, net 34,111 35,807 Goodwill 148,050 148,050 Other assets 4,653 3,949 Total assets $ 397,642 $ 399,825 Liabilities and Stockholders' Equity Current liabilities Accounts payable $ 6,533 $ 7,478 Accrued liabilities 16,902 19,763 Deferred revenues, current portion 12,497 10,984 Lease liabilities, current portion 1,242 1,205 Total current liabilities 37,174 39,430 Deferred revenues, net of current portion 17,525 15,384 Deferred income taxes 1,738 1,713 Lease liabilities, net of current portion 18,065 18,052 Other non-current liabilities 233 305 Total liabilities 74,735 74,884 Stockholders’ Equity 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 97,515,483 and 96,722,098 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively 98 97 Additional paid-in capital 769,608 760,210 Accumulated deficit ( 446,799 ) ( 435,366 ) Total stockholders’ equity 322,907 324,941 Total liabilities and stockholders' equity $ 397,642 $ 399,825 The above financial statements should be read in conjunction with the Notes to the Unaudited Condensed Consolidated Financial Statements. 1 ALKAMI TECHNOLOGY, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share data) (UNAUDITED) Three months ended March 31, 2024 2023 Revenues $ 76,127 $ 59,996 Cost of revenues (1) 32,095 27,858 Gross profit 44,032 32,138 Operating expenses: Research and development 22,820 20,549 Sales and marketing 13,843 10,878 General and administrative 19,315 17,111 Acquisition-related expenses 60 186 Amortization of acquired intangibles 359 360 Total operating expenses 56,397 49,084 Loss from operations ( 12,365 ) ( 16,946 ) Non-operating income (expense): Interest income 1,082 1,726 Interest expense ( 73 ) ( 1,757 ) Gain on financial instruments 112 210 Loss before income taxes ( 11,244 ) ( 16,767 ) Provision for income taxes 189 196 Net loss $ ( 11,433 ) $ ( 16,963 ) Net loss per share attributable to common stockholders: Basic and diluted $ ( 0.12 ) $ ( 0.18 ) Weighted-average number of shares of common stock outstanding: Basic and diluted 96,945,232 92,397,341 (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 ALKAMI TECHNOLOGY, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (in thousands, except share data) (UNAUDITED) Three months ended March 31, 2024 Common Stock Additional Paid-in Capital Accumulated Deficit Total Stockholders’ Equity Shares Amount Balance January 1, 2024 96,722,098 $ 97 $ 760,210 $ ( 435,366 ) $ 324,941 Stock-based compensation — — 13,906 — 13,906 Issuance of common stock upon restricted stock unit vesting 483,517 1 ( 1 ) — — Exercised stock options 309,868 — 1,171 — 1,171 Payments for taxes related to net settlement of equity awards — — ( 5,678 ) — ( 5,678 ) Net loss — — — ( 11,433 ) ( 11,433 ) Balance March 31, 2024 97,515,483 $ 98 $ 769,608 $ ( 446,799 ) $ 322,907 Three months ended March 31, 2023 Common Stock Additional Paid-in Capital Accumulated Deficit Total Stockholders’ Equity Shares Amount 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 — — — — Exercised stock options 459,401 1 1,415 — 1,416 Payments for taxes related to net settlement of equity awards — — ( 1,984 ) — ( 1,984 ) Net loss — — — ( 16,963 ) ( 16,963 ) Balance March 31, 2023 92,864,741 $ 93 $ 717,450 $ ( 389,416 ) $ 328,127 The above financial statements should be read in conjunction with the Notes to the Unaudited Condensed Consolidated Financial Statements. 3 ALKAMI TECHNOLOGY, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (UNAUDITED) Three months ended March 31, 2024 2023 Cash flows from 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 Accrued interest on marketable securities, net ( 294 ) ( 398 ) Stock-based compensation expense 13,552 11,440 Amortization of debt issuance costs 32 45 Gain on financial instruments ( 112 ) ( 210 ) Deferred taxes 25 47 Changes in operating assets and liabilities: Accounts receivable ( 218 ) ( 2,183 ) Prepaid expenses and other current assets ( 1,633 ) ( 2,654 ) Accounts payable and accrued liabilities ( 3,873 ) ( 1,290 ) Deferred costs ( 1,311 ) ( 859 ) Deferred revenues 3,654 824 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 sales, maturities and redemptions of marketable securities 15,626 38,122 Purchases of property and equipment ( 306 ) ( 229 ) Capitalized software development costs (1) ( 1,363 ) ( 1,141 ) Net cash provided by investing activities 6,808 15,765 Cash flows from financing activities: 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 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 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. ALKAMI TECHNOLOGY, INC. Notes to the Unaudited Condensed Consolidated Financial Statements (in thousands, except share and per share data) (Unaudited) 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 condensed consolidated financial statements reflect the application of significant accounting policies as described below. Basis of Presentation and Consolidation The interim unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. All intercompany accounts and transactions are eliminated. 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 Securities and Exchange Commission (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, 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. 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 and business combinations. 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. Property and Equipment, Net 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 $ 920 $ 920 Capitalized software development costs 5 years 13,808 12,263 Computers and equipment 3 years 6,584 6,359 Furniture and fixtures 5 years 3,988 3,988 Leasehold improvements 3 to 10 years 12,697 12,312 $ 37,997 $ 35,842 Less: accumulated depreciation and amortization ( 19,780 ) ( 18,896 ) 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. Note 4. 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 three months ended March 31, 2024 and 2023: Three months ended March 31, (in thousands) 2024 2023 SaaS subscription services $ 73,012 $ 57,519 Implementation services 1,848 1,670 Other services 1,267 807 Total revenues $ 76,127 $ 59,996 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 $ 1.2 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 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 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 months ended March 31, 2024 and 2023. Note 5. Accounts Receivable Accounts receivable includes the following amounts at March 31, 2024 and December 31, 2023: March 31, December 31, (in thousands) 2024 2023 Trade accounts receivable $ 29,016 $ 30,111 Unbilled receivables 7,179 5,975 Total receivables 36,195 36,086 Allowance for credit losses ( 53 ) ( 59 ) Reserve for estimated credits ( 425 ) ( 528 ) $ 35,717 $ 35,499 Note 6. Accrued Liabilities Accrued liabilities consisted of the following at March 31, 2024 and December 31, 2023: March 31, December 31, (in thousands) 2024 2023 Bonus accrual $ 3,388 $ 7,798 Accrued vendor purchases 94 174 Commissions accrual 423 2,026 Accrued hosting services 397 428 Client refund liability 512 660 Accrued consulting and professional fees 571 713 Accrued tax liabilities 969 1,166 ESPP liability 2,204 682 Other accrued liabilities 8,344 6,116 Total accrued liabilities $ 16,902 $ 19,763 Note 7. 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 Silicon Valley Bank (“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 March 31, 2024. • 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. • 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 March 31, 2024. 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. 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 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 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. Note 8. Stockholders' Equity Equity Compensation Plans Stock-based compensation expense was included in the condensed consolidated statements of operations as follows: Three months ended March 31, (in thousands) 2024 2023 Cost of revenues $ 1,178 $ 1,146 Research and development 3,998 3,775 Sales and marketing 2,031 1,590 General and administrative 6,345 4,733 Total stock-based compensation expenses $ 13,552 $ 11,244 Note 9. Income Taxes 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. The assessment considers, among other matters: 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. The Company reassesses the realizability of deferred tax assets regularly, and it will adjust the valuation allowance as sufficient objective positive evidence becomes available. Note 10. Fair Value of Financial Instruments 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. 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 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 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) March 31, 2024 Level 1 Level 2 Level 3 Assets: Cash equivalents (1) $ 37,235 $ 37,235 $ — $ — Marketable securities: Corporate bonds 11,656 — 11,656 — Commercial paper 6,978 — 6,978 — U.S. Treasury debt securities 22,325 22,325 — — International debt securities 2,166 — 2,166 — Total marketable securities 43,125 22,325 20,800 — Total Assets $ 80,360 $ 59,560 $ 20,800 $ — (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. 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. Note 11. Earnings Per Share Basic net loss per share attributable to common stockholders is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Because the Company has reported a net loss for the three months ended March 31, 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 Net loss $ ( 11,433 ) $ ( 16,963 ) Weighted-average shares of common stock outstanding - basic and diluted 96,945,232 92,397,341 Net loss per common share - basic and diluted $ ( 0.12 ) $ ( 0.18 ) 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, 2024 2023 Stock options 3,589,090 5,781,937 RSUs (1) 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. Note 12. Commitments and Contingencies 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 13. Leases 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. 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, as of December 31, 2023. 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 March 31, 2024 2023 Operating lease expense $ 669 $ 784 Short-term lease expense and other (1) 303 318 Total lease expense $ 972 $ 1,102 (1) Other lease expense includes variable lease expense and sublease income. Supplemental Cash Flow Information Three months ended March 31, Cash flow information (in thousands) 2024 2023 Cash paid for operating lease liabilities $ 662 $ 938 The future maturities of operating lease liabilities are as follows: (in thousands) March 31, 2024 2024 (nine months remaining) $ 2,003 2025 2,707 2026 2,648 2027 2,620 2028 2,777 Thereafter 14,981 Total minimum lease payments 27,736 Less: present value discount ( 8,429 ) Total lease liability balance $ 19,307 Note 14. 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 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 Finite-lived: Customer Relationships $ 20,470 $ ( 3,161 ) $ 17,309 Developed Technology 27,700 ( 11,489 ) 16,211 Tradenames 750 ( 184 ) 566 Subtotal amortizable intangible assets 48,920 ( 14,834 ) 34,086 Website domain name 25 — 25 Total intangible assets $ 48,945 $ ( 14,834 ) $ 34,111 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 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): 2024 (remaining nine months) $ 5,090 2025 6,786 2026 6,554 2027 3,162 2028 1,435 Thereafter 11,059 $ 34,086