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Item 1. Financial Statements

2025-05-01 compared with 2024-10-31 · 213 added, 145 removed, 299 unchanged (54% 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

21 unchanged sentences

Deferred income taxes 2,346 1,822

Convertible senior notes, net 334,720 —

Revolving loan 60,000 —

Lease liabilities, net of current portion 16,910 17,109

2 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, 2024 and December 31, 2023

Preferred stock, $ 0.001 par value, 10,000,000 shares authorized and 0 shares issued and outstanding as of March 31, 2025 and December 31, 2024

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

and 100,496,654 and 96,722,098 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively

and 103,019,976 and 102,088,783 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively

Additional paid-in capital 817,958 833,129

6 unchanged sentences

(in thousands, except share and per share data)

Three months ended September 30,

Nine months ended September 30,

2024 2023 2024 2023

Three months ended March 31,

Revenues $ 97,835 $ 76,127

8 unchanged sentences

Amortization of acquired intangibles 568 359

Loss on impairment of intangible assets 1,655 —

Total operating expenses 73,156 56,397

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Loss before income taxes ( 15,101 ) ( 11,244 )

Provision (benefit) for income taxes ( 19 ) 39 355 323

(Benefit from) provision for income taxes ( 7,285 ) 189

Net loss $ ( 7,816 ) $ ( 11,433 )

3 unchanged sentences

Basic and diluted 102,430,673 96,945,232

(1) Includes amortization of acquired technology of $ 1.3 million for both the three months ended September 30, 2024 and 2023, and $ 4.0 million for both the nine months ended September 30, 2024 and 2023.

(1) Includes amortization of acquired technology of $ 1.9 million and $ 1.3 million for the three months ended March 31, 2025 and 2024, respectively.

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

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(in thousands, except share data)

Three months ended September 30, 2024

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

Shares Amount

Balance June 30, 2024

98,985,370 $ 99 $ 786,201 $ ( 459,116 ) $ 327,184

Stock-based compensation — — 15,633 — 15,633

Issuance of common stock upon restricted stock unit vesting 716,460 1 ( 1 ) — —

Exercised stock options 794,824 — 5,154 5,154

Payments for taxes related to net settlement of equity awards — — ( 25 ) — ( 25 )

Net loss — — — ( 9,442 ) ( 9,442 )

Balance September 30, 2024

100,496,654 $ 100 $ 806,962 $ ( 468,558 ) $ 338,504

Three months ended September 30, 2023

Three months ended March 31, 2025

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, 2025

102,088,783 $ 102 $ 833,129 $ ( 476,201 ) $ 357,030

Nine months ended September 30, 2024

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

Shares Amount

Balance December 31, 2023 96,722,098 $ 97 $ 760,210 $ ( 435,366 ) $ 324,941

Stock-based compensation — — 16,365 — 16,365

Issuance of common stock upon restricted stock unit vesting 697,506 1 ( 1 ) — —

Common stock issued under Employee Stock Purchase Plan (ESPP) 216,174 — 2,598 — 2,598

Exercised stock options 233,687 — 1,523 — 1,523

Payments for taxes related to net settlement of equity awards — — ( 12,820 ) — ( 12,820 )

Capped call transaction — — ( 33,879 ) — ( 33,879 )

Stock-based compensation replacement awards related to merger consideration and attributable to pre-combination services — — 821 — 821

Net loss — — — ( 7,816 ) ( 7,816 )

Balance September 30, 2024

100,496,654 $ 100 $ 806,962 $ ( 468,558 ) $ 338,504

Nine months ended September 30, 2023

Balance March 31, 2025 103,019,976 $ 103 $ 817,958 $ ( 484,017 ) $ 334,044

Three months ended March 31, 2024

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, 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 ) — —

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

Exercised stock options 309,868 — 1,171 — 1,171

1 unchanged sentence

Net loss — — — ( 11,433 ) ( 11,433 )

Balance September 30, 2023

Balance March 31, 2024

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

3 unchanged sentences

(in thousands)

Nine months ended September 30,

Three months ended March 31,

Cash flows from operating activities:

Net loss $ ( 7,816 ) $ ( 11,433 )

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

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

Depreciation and amortization expense 3,430 2,562

1 unchanged sentence

Stock-based compensation expense 16,093 13,552

Amortization of debt issuance costs 161 110

Amortization of discount and debt issuance costs 192 32

Loss on impairment of intangible assets 1,655 —

Gain on financial instruments — ( 112 )

Gain on lease modification — ( 375 )

Deferred taxes ( 8,312 ) 25

5 unchanged sentences

Deferred revenues 3,521 3,654

Net cash provided by (used in) operating activities 12,486 ( 12,197 )

Net cash (used in) provided by operating activities ( 5,664 ) 951

Cash flows from investing activities:

4 unchanged sentences

( 1,446 ) ( 1,363 )

Net cash provided by (used in) investing activities 26,046 ( 16,358 )

Acquisition of business, net of cash acquired ( 375,499 ) —

Net cash (used in) provided by investing activities ( 389,413 ) 6,808

Cash flows from financing activities:

Principal payments on debt — ( 2,125 )

Debt issuance costs paid ( 779 ) —

Proceeds from ESPP issuances 2,598 2,407

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

Proceeds from issuance of convertible senior notes 335,513 —

Proceeds from borrowing under revolving loan 60,000 —

Purchase of capped call transaction ( 33,879 ) —

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

1 unchanged sentence

Net cash provided by (used in) financing activities 362,378 ( 4,507 )

Net increase (decrease) in cash and cash equivalents and restricted cash 40,029 ( 33,356 )

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

Cash and cash equivalents and restricted cash, end of period $ 80,956 $ 78,981

(1) See Note 3 for additional information regarding non-cash investing activities for the nine months ended September 30, 2024 and 2023 related to capitalized software development costs.

Net (decrease) increase in cash and cash equivalents ( 32,699 ) 3,252

Cash and cash equivalents, beginning of period 94,359 40,927

Cash and cash equivalents, end of period $ 61,660 $ 44,179

Supplemental information and non-cash activities

Accrued but unpaid debt issuance costs $ 1,119 $ —

(1) See Note 3 for additional information regarding non-cash investing activities for the three months ended March 31, 2025 and 2024 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.

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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, 2024, which are included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 28, 2025.

Operating results for the three and nine months ended September 30, 2024 are not necessarily indicative of results that may be expected for any other interim period or for the year ending December 31, 2024.

Operating results for the three months ended March 31, 2025 are not necessarily indicative of results that may be expected for any other interim period or for the year ending December 31, 2025.

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

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

Operating Segment

The Company's chief operating decision maker, the Chief Executive Officer, assesses performance for the Company's single reportable segment and decides how to allocate resources based on the Company’s net loss (see the unaudited condensed consolidated statements of operations).

For single reportable segment-level financial information, total assets, revenues from external customers, depreciation and amortization expense, interest income and interest expense, (benefit from) provision for income taxes, other non-operating expenses, and significant non-cash transactions, see Item 1.

Financial Statements.

Recent Accounting Pronouncements

In November 2024, the Financial Accounting Standards Board (“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.

2024-03, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses” (“ASU 2024-03”).

The amendments in the ASU require disclosures about specific types of expenses included in the expense captions presented on the Condensed Consolidated Statements of Operations, as well as disclosures about selling expenses.

ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, on a prospective basis.

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.

The Company is currently evaluating the impact of adoption on our financial disclosures.

Business Combination

On March 17, 2025, the Company consummated its previously announced merger with Fin Technologies, Inc.

dba MANTL (“MANTL”) pursuant to an Agreement and Plan of Merger (the “Merger Agreement”), dated February 27, 2025 with MANTL surviving as a wholly owned subsidiary of the Company.

MANTL provides onboarding and account opening solutions that allow financial institutions to acquire commercial, business and retail customers through a variety of channels for many deposit account types.

The aggregate consideration paid in exchange for all of the outstanding equity interests of MANTL was approximately $ 375 million, net of cash acquired (the "Merger Consideration").

A portion of the Merger Consideration of approximately $ 9.1 million was placed into escrow to secure certain post-closing obligations as defined in the Merger Agreement.

As of March 31, 2025, the allocation of the purchase price for MANTL has not been finalized, and the one-year measurement period has not ended.

The preliminary purchase price allocations are based upon the preliminary valuation of assets and liabilities.

These estimates and assumptions are subject to change as the Company obtains 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:

(in thousands) Preliminary Fair Value as of March 17, 2025

Trade accounts receivables 1,479

Prepaid expenses and other current assets 2,826

Property and equipment, net 217

Depreciation and amortization expense was $ 1.0 million and $ 2.8 million for the three and nine months ended September 30, 2024, respectively, and $ 1.0 million and $ 2.8 million for the three and nine months ended September 30, 2023, respectively.

Property and equipment, net, includes the following amounts at September 30, 2024 and December 31, 2023:

(in thousands) Useful Life September 30, 2024 December 31, 2023

Goodwill 252,108

Intangible assets 153,500

Right-of-use assets 336

Total assets acquired $ 413,250

Accounts payable $ 1,653

Accrued liabilities 1,163

Lease liabilities, current portion 180

Deferred revenues, current portion 12,056

Deferred tax liability 8,836

Lease liabilities, net of current portion 167

Deferred revenues, net of current portion 10,091

Total liabilities assumed 34,146

Net assets acquired $ 379,104

Less cash acquired ( 2,784 )

Less stock-based compensation replacement awards related to merger consideration and attributable to pre-combination services ( 821 )

Total cash consideration for acquisition, less cash acquired $ 375,499

The table below outlines the purchased identifiable intangible assets:

Weighted-Average Amortization Period Total

(in years) (in thousands)

Customer relationships 15 $ 72,500

Developed technology 5 75,300

Tradenames 10 5,700

Total identifiable intangible assets $ 153,500

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 MANTL, the goodwill is not deductible for tax purposes.

The Company estimated and recorded a net deferred tax liability of $ 8.8 million after offsetting the acquired available tax attributes with the identifiable intangible assets shown in the table above.

Refer to Note 10 for discussion of the partial release of the Company’s pre-existing valuation allowance relating to the net deferred tax liability.

In connection with the acquisition of MANTL, the vesting of certain outstanding unvested equity awards was accelerated.

These awards were settled in cash upon the closing of the transaction and were accounted for as post-combination stock-based compensation expense.

As a result, the Company recognized stock-based compensation expense of $ 3.9 million, of which $ 1.0 million, $ 1.0 million, $ 0.3 million, and $ 1.6 million are included in cost of revenues, research and development, sales and marketing, and general and administrative, respectively, within the condensed consolidated statements of operations for the three months ended March 31, 2025.

For the three months ended March 31, 2025, the Company recognized acquisition-related expenses of $ 2.4 million related to the acquisition of MANTL.

The financial results of MANTL, for the period of March 18, 2025 through March 31, 2025, are included in the Company’s condensed consolidated financial statements and notes.

The revenue contribution from the MANTL acquisition was $ 1.4 million for the same period.

Property and Equipment, Net

Depreciation and amortization expense was $ 1.0 million and $ 0.9 million for the three months ended March 31, 2025 and 2024, respectively.

Property and equipment, net, includes the following amounts at March 31, 2025 and December 31, 2024:

(in thousands) Useful Life March 31, 2025 December 31, 2024

Software 2 to 5 years

7 unchanged sentences

Property and equipment, net $ 22,992 $ 22,075

For both the nine months ended September 30, 2024 and 2023, the Company had non-cash investing activities of $ 0.6 million for capitalized stock-based compensation related to capitalized software development costs.

Additionally, the Company recognized stock-based compensation expense through the amortization of capitalized stock-based compensation associated with capitalized software development costs of less than $ 0.1 million and $ 0.1 million for the three and nine months ended September 30, 2024, respectively, and none for both the three and nine months ended September 30, 2023.

For the three months ended March 31, 2025 and 2024, the Company had non-cash investing activities of $ 0.2 million and $ 0.2 million for capitalized stock-based compensation related to capitalized software development costs.

Additionally, the Company recognized stock-based compensation expense through the amortization of capitalized stock-based compensation associated with capitalized software development costs of $ 0.1 million and less than $ 0.1 million for the three months ended March 31, 2025, and 2024, respectively.

See Note 15 for information related to a capitalized software development costs impairment.

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 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, 2024 and 2023:

Three months ended September 30,

Nine months ended September 30,

The following table disaggregates the Company's revenue by major source for the three months ended March 31, 2025 and 2024:

Three months ended March 31,

(in thousands) 2025 2024

3 unchanged sentences

Total revenues $ 97,835 $ 76,127

The Company recognized approximately $ 6.5 million of revenue during the nine months ended September 30, 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 September 30, 2024, the Company’s remaining performance obligation totaled approximately $ 1.3 billion.

The Company recognized approximately $ 3.7 million of revenue during the three months ended March 31, 2025 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, 2025, the Company’s remaining performance obligation totaled approximately $ 1.6 billion, which includes $ 0.2 billion for MANTL.

The Company expects to recognize approximately 49.1 % of these remaining obligations as revenue over the next 24 months, an additional 34.6 % in the next 25 to 48 months, and the remaining 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 $ 1.2 million and $ 1.5 million as of September 30, 2024 and December 31, 2023, respectively, which are included in other assets in the accompanying condensed consolidated balance sheets.

Contract assets totaled $ 2.4 million, including $ 0.6 million related to MANTL, and $ 1.9 million as of March 31, 2025 and December 31, 2024, respectively, which are included in other assets in the accompanying condensed consolidated balance sheets.

Deferred Cost Recognition

The Company capitalized $ 3.1 million and $ 6.0 million in deferred commissions costs during the three and nine months ended September 30, 2024, respectively, and $ 1.6 million and $ 4.4 million for the three and nine months ended September 30, 2023, respectively, and recognized amortization of $ 1.3 million and $ 3.8 million during the three and nine months ended September 30, 2024, respectively, and $ 1.0 million and $ 2.7 million during the three and nine months ended September 30, 2023, respectively.

The Company capitalized $ 1.0 million and $ 1.2 million in deferred commissions costs during the three months ended March 31, 2025 and 2024 respectively, and recognized amortization of $ 1.5 million and $ 1.2 million during the three months ended March 31, 2025 and 2024, 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 $ 23.4 million and $ 21.2 million as of September 30, 2024 and December 31, 2023, respectively.

The Company capitalized implementation costs of $ 2.4 million and $ 7.6 million during the three and nine months ended September 30, 2024, respectively, and $ 2.3 million and $ 6.4 million for the three and nine months ended September 30, 2023, respectively, and recognized

amortization of $ 1.4 million and $ 4.1 million during the three and nine months ended September 30, 2024, respectively, and $ 1.3 million and $ 3.6 million for the three and nine months ended September 30, 2023, 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 $ 25.4 million and $ 25.9 million as of March 31, 2025 and December 31, 2024, respectively.

The Company capitalized implementation costs of $ 2.5 million and $ 2.9 million during the three months ended March 31, 2025, and 2024, respectively, and recognized amortization of $ 1.4 million for both the three months ended March 31, 2025 and 2024.

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 $ 23.4 million and $ 19.8 million as of September 30, 2024 and December 31, 2023, 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 $ 25.3 million and $ 24.5 million as of March 31, 2025 and December 31, 2024, 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, 2024 and 2023.

No material impairment losses were recognized in relation to these capitalized costs for the three months ended March 31, 2025 and 2024.

Accounts Receivable

Accounts receivable includes the following amounts at September 30, 2024 and December 31, 2023:

September 30, December 31,

Accounts receivable includes the following amounts at March 31, 2025 and December 31, 2024:

March 31, December 31,

(in thousands) 2025 2024

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Accrued Liabilities

Accrued liabilities consisted of the following at September 30, 2024 and December 31, 2023:

September 30, December 31,

Accrued liabilities consisted of the following at March 31, 2025 and December 31, 2024:

March 31, December 31,

(in thousands) 2025 2024

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Accrued hosting services 1,913 2,026

Client credit liability 484 660

Client refund liability 426 443

Accrued consulting and professional fees 646 653

3 unchanged sentences

Total accrued liabilities $ 27,406 $ 24,520

On July 1, 2024, the Company entered into a Second Amendment (the “Second Amendment”) to the Company’s Amended and Restated Credit Agreement dated as of April 29, 2022 (as amended, the “Amended Credit Agreement”), with Silicon Valley Bank, a division of First-Citizens Bank & Trust Company, as administrative agent, and other lenders party thereto.

The Second Amendment, among other things, (i) extended the maturity date of the Revolving Facility from April 29, 2026 to April 29, 2027, (ii) increased the amount of the Revolving Facility commitment by $ 65.0 million, for a total revolving loan commitment of $ 125.0 million, (iii) increased the accordion feature from $ 50.0 million to $ 100.0 million, (iv) modified certain existing covenants, including increasing the minimum trailing four quarters free cash flow requirement to $( 25.0 ) million, and (v) for any fiscal quarter ending after the financial covenant trigger date (which was extended to April 28, 2026 or such earlier date as designated by the Company) (the “Financial Covenant Trigger Date”), replaced compliance with a fixed charge coverage ratio with compliance of a minimum interest coverage ratio of 3.0 x.

Amended Credit Facility

On February 27, 2025, the Company entered into a Third Amendment (the “Third Amendment”) to the Company’s Amended and Restated Credit Agreement dated as of April 29, 2022 (as amended, the “Amended Credit Agreement”), with Silicon Valley Bank, a division of First-Citizens Bank & Trust Company, as administrative agent, and other lenders party thereto.

The Third Amendment, among other things, (i) extended the maturity date of the revolving commitment from April 29, 2027 to February 27, 2030, (ii) increased the amount of the revolving loan commitment by $ 100 million, for a total revolving commitment of $ 225 million, (iii) extended the Financial Covenant Trigger Date (as defined therein) to December 31, 2026 or such earlier date as designated by the Company, (iv) reduced the applicable interest rate margins (1) prior to the Financial Covenant Trigger Date, from SOFR plus 3.00 % to 3.50 % per annum to SOFR plus 2.75 % to 3.25 % per annum, based on the Recurring Revenue Leverage Ratio (as defined therein) and (2) on or after the Financial Covenant Trigger Date, from SOFR plus 1.50 % to 3.00 % per annum to SOFR plus 1.25 % to 2.50 % per annum, based on the Consolidated Total Net Leverage Ratio (as defined therein), (v) permitted the acquisition of MANTL pursuant to the terms of the Merger Agreement, (vi) permitted certain Permitted Convertible Indebtedness and Permitted Equity Derivative Transactions (as such terms are defined therein), subject to certain restrictions, and (vii) modified certain covenants.

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

The Amended Credit Agreement previously provided for a term loan, which was fully repaid in December 2023 and cannot be re-borrowed.

The Company has no outstanding borrowings as of September 30, 2024 related to the Amended Credit Agreement.

The Company had borrowings of $ 60 million on the revolving loan during March 2025, with the proceeds used for the acquisition of MANTL, which remained outstanding as of March 31, 2025.

The interest rate in effect for the revolving loan as of March 31, 2025 is 9.75 %.

Interest expense related to the outstanding borrowings on the revolver loan is $ 0.3 million for the three months ended March 31, 2025.

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.

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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;

(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 at least 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 $ 35.0 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 interest coverage 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 3.00 :1.00.

The Second Amendment revised the free cash flow covenant, as calculated at the last day of each fiscal quarter for the period of 12 consecutive months then ending, requiring free cash flow to be not less than $( 25.0 ) million for the fiscal quarter ended September 30, 2024 and each fiscal quarter ending thereafter.

(i) a Consolidated Total Net 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 5.50 :1.00;

(ii) a Consolidated Interest Coverage Ratio (as defined therein) 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 3.00 :1.00;

and (iii) a Consolidated Senior Net Leverage Ratio (as defined therein) 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.

The Third Amendment revised the free cash flow covenant, as calculated at the last day of each fiscal quarter for the period of 12 consecutive months then ending, requiring free cash flow to be not less than $( 25.0 ) million for the fiscal quarters ending on or prior to September 30, 2025 and requiring free cash flow to be not less than $ 0 for the fiscal quarters ending on or after December 31, 2025 and on or prior to September 30, 2026.

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, 2024.

The Company was in compliance with all covenants as of March 31, 2025.

2030 Convertible Notes

On March 13, 2025, the Company issued $ 345 million principal amount of 1.50 % convertible senior notes due March 15, 2030 (the “2030 Convertible Notes” or “Notes”).

The Notes were issued pursuant to, and are governed by, an indenture (the “Indenture”), dated as of March 13, 2025, between the Company and U.S.

Bank Trust Company, National Association, as trustee (the “Trustee”).

The 2030 Convertible Notes are the Company’s senior, unsecured obligations and bear interest at a rate of 1.50 % per year payable semiannually in arrears on March 15 and September 15 of each year, beginning on September 15, 2025.

Each $1,000 principal amount of the 2030 Convertible Notes will be convertible into 30.4681 shares of the Company’s common stock, which is equivalent to a conversion price of approximately $ 32.82 per share, subject to adjustment upon the occurrence of specified events.

In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change” (as defined in the Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of time.

As the Company issued the Convertible Notes on March 13, 2025 ASU 2020-06 became effective for the Company on January 1, 2025.

The 2030 Convertible Notes are convertible at the option of the holders of the 2030 Convertible Notes before November 15, 2029, only under the following circumstances:

(1) during any calendar quarter (and only during such calendar quarter) commencing after the calendar quarter ending on June 30, 2025, if the last reported sale price per share of the Company’s Common Stock exceeds 130 % of the conversion price for each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;

(2) during the five consecutive business days immediately after any 10 consecutive trading day period (such 10 consecutive trading day period, the “measurement period”) if the trading price per $ 1,000 principal amount of the 2030 Convertible Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price per share of our common stock on such trading day and the conversion rate on such trading day;

(3) if the Company calls (or is deemed to have called) the 2030 Convertible Notes for redemption;

or (4) upon the occurrence of certain corporate events or distributions on the Company’s Common Stock.

From and after November 15, 2029,

noteholders may convert their Notes at any time at their election, until the close of business on the second scheduled trading day immediately before the maturity date.

The Company will settle conversions by paying or delivering, as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s election.

The 2030 Convertible Notes will be redeemable, in whole or in part (subject to certain limitations described below), at the Company’s option at any time, and from time to time, on or after March 20, 2028 and on or before the 62nd scheduled trading day immediately before the maturity date, but only if (i) the Notes are “freely tradable” (as defined in the Indenture) as of the date the Company sends the related redemption notice and all accrued and unpaid additional interest, if any, has been paid in full as of the most recent interest payment date occurring on or before the date the Company sends such notice;

and (ii) the last reported sale price per share of the Company’s common stock exceeds 130 % of the conversion price on (1) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends such redemption notice;

and (2) the trading day immediately before the date the Company sends such redemption notice.

However, the Company may not redeem less than all of the outstanding Notes unless at least $ 75.0 million aggregate principal amount of Notes are outstanding and not called for redemption as of the time the Company sends the related redemption notice.

The redemption price will be a cash amount equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

In addition, calling any Note for redemption will constitute a Make-Whole Fundamental Change with respect to that Note, in which case the conversion rate applicable to the conversion of that Note will be increased in certain circumstances if it is converted after it is called for redemption.

No sinking fund is provided for the 2030 Convertible Notes, which means the Company is not required to redeem or retire the 2030 Convertible Notes periodically.

If certain corporate events that constitute a “fundamental change” (as defined in the Indenture) occur, then, subject to a limited exception for certain cash mergers, noteholders may require the Company to repurchase their Notes at a cash repurchase price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date.

The definition of “fundamental change” includes certain business combination transactions involving the Company and certain de-listing events with respect to the Company’s common stock.

As of March 31, 2025, the conditions allowing holders of the 2030 Convertible Notes to convert were not met.

The net carrying amount of the 2030 Convertible Notes consisted of the following (in thousands):

(in thousands) March 31, 2025

Principal $ 345,000

Unamortized debt discount ( 9,363 )

Unamortized debt issuance costs ( 917 )

Net carrying amount $ 334,720

The debt discount and issuance costs are being amortized to interest expense over the term of the 2030 Convertible Notes using the effective interest rate method.

The effective interest rate used to amortize the discount and issuance costs of the 2030 Convertible Notes is 2.14 %.

For the three months ended March 31, 2025, interest expense related to the 2030 Convertible Notes consisted of the following (in thousands):

(in thousands) Three months ended March 31, 2025

Contractual interest expense $ 216

Amortization of debt discount and issuance costs 136

Total interest expense $ 352

As of March 31, 2025, the 2030 Convertible Notes had a principal amount of $ 345 million and an estimated fair value of $ 372 million.

The estimated fair value of the 2030 Convertible Notes, which are Level 2 financial instruments, were determined based on the quoted bid prices of the 2030 Convertible Notes in an over-the-counter market on the last trading day of the reporting period.

In connection with the 2030 Convertible Notes, the Company has entered into privately negotiated capped call transactions with certain financial institutions pursuant to capped call confirmations (collectively the “Capped Calls”).

The premiums paid for the purchases of the Capped Calls were approximately $ 33.9 million.

The Capped Calls have an initial strike price of approximately $ 32.82 per share, subject to certain adjustments substantially similar to those applicable to the corresponding 2030 Convertible Notes.

The Capped Calls have an initial cap price of $ 47.74 per share, subject to certain adjustments.

The Capped Calls cover, subject to anti-dilution adjustments, approximately 14.5 million shares of the Company’s common stock.

The Capped Calls are generally expected to reduce potential dilution to the Company’s common stock and/or offset any potential cash payments that the Company could be required to make in excess of the principal amount of any converted 2030 Convertible Notes, with such reduction and/or offset subject to a cap.

The Capped Calls are separate transactions and are not part of the terms of the 2030 Convertible Notes.

The Capped Calls do not meet the criteria for separate accounting as a derivative as they are indexed to the Company's stock and meet the requirements to be classified in equity and, as such, are not remeasured each reporting period.

The premiums paid for the Capped Calls were included as a net reduction to additional paid-in capital within stockholders’ equity during the quarter ended March 31, 2025.

Stockholders' Equity

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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) 2025 2024

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Total stock-based compensation expenses $ 20,002 $ 13,552

The Company recorded an income tax benefit of less than $0.1 million and income tax expense of $ 0.4 million for the three and nine months ended September 30, 2024, respectively, resulting in an effective tax rate of 0.2 % and ( 1.1 )%, respectively, compared to income tax expense of less than $0.1 million and $ 0.3 million for the three and nine months ended September 30, 2023, respectively, resulting in an effective tax rate of ( 0.3 )% and ( 0.6 )%, respectively.

The Company’s effective tax rate for the three and nine months ended September 30, 2024 and 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.

In connection with the acquisition of MANTL, the vesting of certain outstanding unvested equity awards were accelerated and settled in cash resulting in $ 3.9 million of stock-based compensation expense for the three months ended March 31, 2025.

See Note 3 for additional information.

The Company recorded an income tax benefit of $ 7.3 million and income tax expense of $ 0.2 million for the three months ended March 31, 2025 and 2024, respectively, resulting in an effective tax rate of 48.2 % and ( 1.7 )%, respectively.

The Company’s effective tax rates for the three months ended March 31, 2025 and 2024 differ from the statutory tax rate primarily due to the impact of the valuation allowance against its deferred tax assets and state tax expense, offset by a deferred tax benefit attributable to the partial release of the Company’s pre-existing valuation allowance related to the MANTL business combination.

The acquisition of MANTL resulted in the recognition of a net deferred tax liability of $ 8.8 million.

to the Notes to the Unaudited Condensed Consolidated Financial Statements for further information.

Prior to the business combination, MANTL 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 $ 8.4 million.

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.

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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.

historical losses, a forecast of future taxable income, 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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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, 2024 and December 31, 2023 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, 2025 and December 31, 2024 and indicate the fair value hierarchy of the valuation:

Fair Value at Reporting Date Using

(in thousands) September 30, 2024 Level 1 Level 2 Level 3

(in thousands) March 31, 2025 Level 1 Level 2 Level 3

Cash equivalents (1)

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Treasury debt securities 22,557 22,557 — —

International debt securities 974 — 974 —

Total marketable securities 33,637 22,557 11,080 —

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Commercial paper 1,580 — 1,580 —

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

Treasury debt securities 15,427 15,427 — —

International debt securities 2,144 — 2,144 —

Total marketable securities 21,375 15,427 5,948 —

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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, 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 and nine months ended September 30, 2024 and 2023:

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, 2025 and 2024, 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.

In connection with the offering of the 2030 Convertible Notes, the Company entered into Capped Calls which are intended to reduce or offset the potential dilution from shares of common stock issued upon conversion.

The impact of the Capped Calls is not included when calculating potentially dilutive shares since their effect is anti-dilutive.

The computation of basic and diluted net loss per share attributable to common stockholders is as follows for the three months ended March 31, 2025 and 2024:

Three months ended March 31,

(in thousands, except shares and per share amounts) 2025 2024

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The following potential shares of common stock were excluded from diluted net loss per share as the Company had a net loss in each of the periods presented:

As of September 30,

Three months ended of March 31,

Stock options 1,063,698 3,589,090

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ESPP 104,466 103,610

2030 Convertible Notes 10,511,495 —

Total anti-dilutive common share equivalents 19,956,483 11,890,901

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

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

Renewal options were not included in the 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.

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 extended the term for the remaining reduced leased space to August 31, 2033.

Operating lease expense consisted of:

Three months ended March 31,

(in thousands)

Three months ended September 30,

Nine months ended September 30,

2024 2023 2024 2023

Operating lease expense

$ 672 $ 745 $ 2,015 $ 2,313

Short-term lease expense and other (1)

297 ( 22 ) 729 611

Total lease expense

$ 969 $ 723 $ 2,744 $ 2,924

(1) Other lease expense includes variable lease expense.

The three and nine months ended September 30, 2023 include sublease income and a gain on lease modification.

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

$ 1,993 $ 2,924

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

(1) For the nine months ended September 30, 2023, the non-cash adjustment includes an increase of $ 8.0 million related to the extension of the office space 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, 2024

2024 (three months remaining) $ 672

(in thousands) March 31, 2025

2025 (nine months remaining) $ 2,178

Thereafter 11,912

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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.

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 September 30, 2024.

Goodwill had a carrying value of $ 148.1 million as of both September 30, 2024 and December 31, 2023.

Total intangibles, net, consisted of the following as of September 30, 2024 and December 31, 2023:

As of September 30, 2024

There were no indications of impairment of goodwill noted as of March 31, 2025.

For the three months ended March 31, 2025, the Company recorded $ 252.1 million to goodwill related to the acquisition of MANTL.

See Note 3 for further information.

Goodwill has a carrying value of $ 400.2 million and $ 148.1 million as of March 31, 2025 and December 31, 2024, respectively.

Total intangibles assets consisted of the following as of March 31, 2025 and December 31, 2024:

As of March 31, 2025

(in thousands) Carrying Value Accumulated Amortization Net Carrying Value

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Total intangible assets $ 48,945 $ ( 19,924 ) $ 29,021

Amortization expense recognized on intangible assets was $ 1.7 million and $ 5.1 million for the three and nine months ended September 30, 2024, respectively, and $ 1.7 million and $ 5.1 million for the three and nine months ended September 30, 2023, respectively.

Amortization expense recognized on intangible assets was $ 2.4 million and $ 1.7 million for the three months ended March 31, 2025 and 2024, respectively.

In March 2025, due to the acquisition of MANTL, the Company assessed all of the assets of MK Decisioning Systems, LLC for potential impairment and determined that $ 1.2 million of developed technology intangible assets, $ 0.1 million of customer relationship intangible assets, as well as $ 0.4 million of capitalized software development costs included in property and equipment, net would not have future economic benefit and the value of the intangibles were written off, resulting in a loss on impairment of $ 1.7 million.

This non-cash charge was recorded to loss on impairment of intangible assets in the condensed consolidated statements of operations.

No impairment was identified for goodwill or any other assets.

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 (three months remaining)

2025 (nine months remaining)

Thereafter 65,051

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