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, 2025 2024 Assets Current assets Cash and cash equivalents $ 61,660 $ 94,359 Marketable securities 33,637 21,375 Accounts receivable, net 46,790 38,739 Deferred costs, current 13,640 13,207 Prepaid expenses and other current assets 18,514 13,697 Total current assets 174,241 181,377 Property and equipment, net 22,992 22,075 Right-of-use assets 14,579 14,565 Deferred costs, net of current portion 37,041 37,178 Intangibles, net 178,801 29,021 Goodwill 400,158 148,050 Other assets 9,349 5,011 Total assets $ 837,161 $ 437,277 Liabilities and Stockholders' Equity Current liabilities Accounts payable $ 5,180 $ 6,129 Accrued liabilities 27,406 24,520 Deferred revenues, current portion 29,137 13,578 Lease liabilities, current portion 1,559 1,343 Total current liabilities 63,282 45,570 Deferred revenues, net of current portion 25,635 15,526 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 Other non-current liabilities 224 220 Total liabilities 503,117 80,247 Stockholders’ Equity 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 103,019,976 and 102,088,783 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively 103 102 Additional paid-in capital 817,958 833,129 Accumulated deficit ( 484,017 ) ( 476,201 ) Total stockholders’ equity 334,044 357,030 Total liabilities and stockholders' equity $ 837,161 $ 437,277 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, 2025 2024 Revenues $ 97,835 $ 76,127 Cost of revenues (1) 40,075 32,095 Gross profit 57,760 44,032 Operating expenses: Research and development 26,885 22,820 Sales and marketing 17,899 13,843 General and administrative 23,771 19,315 Acquisition-related expenses 2,378 60 Amortization of acquired intangibles 568 359 Loss on impairment of intangible assets 1,655 — Total operating expenses 73,156 56,397 Loss from operations ( 15,396 ) ( 12,365 ) Non-operating income (expense): Interest income 1,096 1,082 Interest expense ( 801 ) ( 73 ) Gain on financial instruments — 112 Loss before income taxes ( 15,101 ) ( 11,244 ) (Benefit from) provision for income taxes ( 7,285 ) 189 Net loss $ ( 7,816 ) $ ( 11,433 ) Net loss per share attributable to common stockholders: Basic and diluted $ ( 0.08 ) $ ( 0.12 ) Weighted-average number of shares of common stock outstanding: Basic and diluted 102,430,673 96,945,232 (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. 2 ALKAMI TECHNOLOGY, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (in thousands, except share data) (UNAUDITED) Three months ended March 31, 2025 Common Stock Additional Paid-in Capital Accumulated Deficit Total Stockholders’ Equity Shares Amount Balance January 1, 2025 102,088,783 $ 102 $ 833,129 $ ( 476,201 ) $ 357,030 Stock-based compensation — — 16,365 — 16,365 Issuance of common stock upon restricted stock unit vesting 697,506 1 ( 1 ) — — Exercised stock options 233,687 — 1,523 — 1,523 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 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 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 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, 2025 2024 Cash flows from operating activities: Net loss $ ( 7,816 ) $ ( 11,433 ) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization expense 3,430 2,562 Accrued interest on marketable securities, net ( 279 ) ( 294 ) Stock-based compensation expense 16,093 13,552 Amortization of discount and debt issuance costs 192 32 Loss on impairment of intangible assets 1,655 — Gain on financial instruments — ( 112 ) Deferred taxes ( 8,312 ) 25 Changes in operating assets and liabilities: Accounts receivable ( 6,572 ) ( 218 ) Prepaid expenses and other current assets ( 5,416 ) ( 1,633 ) Accounts payable and accrued liabilities ( 2,002 ) ( 3,873 ) Deferred costs ( 158 ) ( 1,311 ) Deferred revenues 3,521 3,654 Net cash (used in) provided by operating activities ( 5,664 ) 951 Cash flows from investing activities: Purchase of marketable securities ( 21,883 ) ( 7,149 ) Proceeds from sales, maturities and redemptions of marketable securities 9,900 15,626 Purchases of property and equipment ( 485 ) ( 306 ) Capitalized software development costs (1) ( 1,446 ) ( 1,363 ) 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: Debt issuance costs paid ( 779 ) — 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 ) Proceeds from stock option exercises 1,523 1,171 Net cash provided by (used in) financing activities 362,378 ( 4,507 ) 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. 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, 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 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. 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. 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. 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. The Company is currently evaluating the impact of adoption on our financial disclosures. Note 3. Business Combination MANTL 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 Cash $ 2,784 Trade accounts receivables 1,479 Prepaid expenses and other current assets 2,826 Property and equipment, net 217 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. Note 4. 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 $ 198 $ 198 Capitalized software development costs 5 years 21,316 19,728 Computers and equipment 3 years 2,568 2,379 Furniture and fixtures 5 years 14 357 Leasehold improvements 3 to 10 years 10,243 10,229 $ 34,339 $ 32,891 Less: accumulated depreciation and amortization ( 11,347 ) ( 10,816 ) Property and equipment, net $ 22,992 $ 22,075 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. Note 5. Revenues and Deferred Costs 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 SaaS subscription services $ 92,808 $ 73,012 Implementation services 2,272 1,848 Other services 2,755 1,267 Total revenues $ 97,835 $ 76,127 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 $ 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 $ 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 $ 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 $ 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 months ended March 31, 2025 and 2024. Note 6. Accounts Receivable Accounts receivable includes the following amounts at March 31, 2025 and December 31, 2024: March 31, December 31, (in thousands) 2025 2024 Trade accounts receivable $ 36,223 $ 32,866 Unbilled receivables 11,081 6,086 Total receivables 47,304 38,952 Allowance for credit losses ( 328 ) ( 27 ) Reserve for estimated credits ( 186 ) ( 186 ) $ 46,790 $ 38,739 Note 7. Accrued Liabilities Accrued liabilities consisted of the following at March 31, 2025 and December 31, 2024: March 31, December 31, (in thousands) 2025 2024 Bonus accrual $ 3,810 $ 7,989 Accrued vendor purchases 255 161 Commissions accrual 897 1,708 Accrued hosting services 1,913 2,026 Client refund liability 426 443 Accrued consulting and professional fees 646 653 Accrued tax liabilities 1,815 634 ESPP liability 2,392 757 Other accrued liabilities 15,252 10,149 Total accrued liabilities $ 27,406 $ 24,520 Note 8. Debt 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 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. 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. 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 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 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 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. Capped Calls 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. Note 9. 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) 2025 2024 Cost of revenues $ 2,636 $ 1,178 Research and development 5,434 3,998 Sales and marketing 2,847 2,031 General and administrative 9,085 6,345 Total stock-based compensation expenses $ 20,002 $ 13,552 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. Note 10. Income Taxes 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. See Note 3. 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. Management reviews deferred tax assets to assess their future realization by considering all available evidence, both positive and negative, to determine whether a valuation allowance is needed for all or some portion of the deferred tax assets, using a “more likely than not” standard. The assessment considers, among other matters: historical losses, a forecast of future taxable income, the duration of statutory carryback and carryforward periods, and ongoing prudent and feasible tax planning strategies. 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 11. Fair Value of Financial Instruments The Company’s financial instruments consist primarily of cash, cash equivalents, marketable securities, accounts receivable and accounts payable. The carrying values of cash, 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 that 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, 2025 and December 31, 2024 and indicate the fair value hierarchy of the valuation: Fair Value at Reporting Date Using (in thousands) March 31, 2025 Level 1 Level 2 Level 3 Assets: Cash equivalents (1) $ 42,304 $ 42,304 $ — $ — Marketable securities: Corporate bonds 8,351 — 8,351 — Commercial paper 1,755 — 1,755 — U.S. Treasury debt securities 22,557 22,557 — — International debt securities 974 — 974 — Total marketable securities 33,637 22,557 11,080 — Total assets $ 75,941 $ 64,861 $ 11,080 $ — (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, 2024 Level 1 Level 2 Level 3 Assets: Cash equivalents (1) $ 62,434 $ 62,434 $ — $ — Marketable securities: Corporate bonds 4,368 — 4,368 — Commercial paper 1,580 — 1,580 — U.S. Treasury debt securities 15,427 15,427 — — Total marketable securities 21,375 15,427 5,948 — Total Assets $ 83,809 $ 77,861 $ 5,948 $ — (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 12. 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, 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 Net loss $ ( 7,816 ) $ ( 11,433 ) Weighted-average shares of common stock outstanding - basic and diluted 102,430,673 96,945,232 Net loss per common share - basic and diluted $ ( 0.08 ) $ ( 0.12 ) 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: Three months ended of March 31, 2025 2024 Stock options 1,063,698 3,589,090 Restricted Stock Units 8,276,824 8,198,201 ESPP 104,466 103,610 2030 Convertible Notes 10,511,495 — Total anti-dilutive common share equivalents 19,956,483 11,890,901 Note 13. 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 14. Leases 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) 2025 2024 Operating lease expense $ 672 $ 669 Short-term lease expense and other (1) 175 303 Total lease expense $ 847 $ 972 (1) Other lease expense includes variable lease expense. Supplemental Cash Flow Information Three months ended March 31, Cash flow information (in thousands) 2025 2024 Cash paid for operating lease liabilities $ 672 $ 662 The future maturities of operating lease liabilities are as follows: (in thousands) March 31, 2025 2025 (nine months remaining) $ 2,178 2026 2,843 2027 2,636 2028 2,777 2029 3,067 Thereafter 11,912 Total minimum lease payments 25,413 Less: present value discount ( 6,944 ) Total lease liability balance $ 18,469 Note 15. 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, 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 Finite-lived: Customer Relationships $ 92,800 $ ( 4,674 ) $ 88,126 Developed Technology 99,200 ( 14,724 ) 84,476 Tradenames 6,450 ( 276 ) 6,174 Total amortizable intangible assets 198,450 ( 19,674 ) 178,776 Website domain name (Indefinite-lived) 25 — 25 Total intangible assets $ 198,475 $ ( 19,674 ) $ 178,801 As of December 31, 2024 (in thousands) Carrying Value Accumulated Amortization Net Carrying Value Finite-lived: Customer Relationships $ 20,470 $ ( 4,185 ) $ 16,285 Developed Technology 27,700 ( 15,502 ) 12,198 Tradenames 750 ( 237 ) 513 Total amortizable intangible assets 48,920 ( 19,924 ) 28,996 Website domain name (Indefinite-lived) 25 — 25 Total intangible assets $ 48,945 $ ( 19,924 ) $ 29,021 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): 2025 (nine months remaining) 19,859 2026 26,478 2027 23,614 2028 21,887 2029 21,887 Thereafter 65,051 $ 178,776