ASURE SOFTWARE INC 10-Q

ITEM 1. FINANCIAL STATEMENTS ASURE SOFTWARE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) (Unaudited) June 30, 2026 December 31, 2025 ASSETS Current assets: Cash and cash equivalents $ 19,679 $ 25,244 Accounts receivable, net of allowance for credit losses of $ 9,717 and $ 7,206 at June 30, 2026, and December 31, 2025, respectively 13,120 15,859 Inventory 2,048 2,826 Prepaid expenses and other current assets 8,059 6,329 Total current assets before funds held for clients 42,906 50,258 Funds held for clients 178,915 228,111 Total current assets 221,821 278,369 Property and equipment, net 31,515 27,810 Goodwill 115,759 115,759 Intangible assets, net 83,526 87,911 Operating lease assets, net 5,164 6,028 Other assets, net 20,093 15,542 Total assets $ 477,878 $ 531,419 LIABILITIES AND STOCKHOLDERS ’ EQUITY Current liabilities: Current portion of notes payable $ 6,665 $ 4,344 Accounts payable 2,035 2,174 Accrued compensation and benefits 4,731 4,723 Lease liabilities, current 1,909 1,956 Other accrued liabilities 6,481 6,422 Deferred revenue 6,730 11,622 Total current liabilities before client fund obligations 28,551 31,241 Client fund obligations 179,836 228,482 Total current liabilities 208,387 259,723 Long-term liabilities: Deferred revenue 1,185 1,909 Deferred tax liability 3,869 3,264 Notes payable, net of current portion 62,234 63,282 Lease liabilities, noncurrent 4,070 5,221 Other liabilities 370 224 Total long-term liabilities 71,728 73,900 Total liabilities 280,115 333,623 Commitments and contingencies - Note 8 Stockholders’ equity: Preferred stock, $ 0.01 par value; 1,500 shares authorized; none issued or outstanding — — Common stock, $ 0.01 par value; 44,000 shares authorized; 28,824 and 28,076 shares issued, 28,824 and 28,076 shares outstanding at June 30, 2026, and December 31, 2025, respectively 288 281 Treasury stock at cost, zero (1) shares at June 30, 2026, and December 31, 2025 — — Additional paid-in capital 522,060 517,432 Accumulated deficit ( 324,170 ) ( 320,352 ) Accumulated other comprehensive income (loss) ( 415 ) 435 Total stockholders’ equity 197,763 197,796 Total liabilities and stockholders’ equity $ 477,878 $ 531,419 (1) The aggregate Treasury stock of prior repurchases of our own common stock was retired and subsequently issued effective January 1, 2024. See the Condensed Consolidated Statement of Changes in Stockholders’ Equity for the impact of this transaction. The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 1 Table of Contents ASURE SOFTWARE, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (in thousands, except per share amounts) (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Revenue: Recurring $ 33,958 $ 28,596 $ 71,715 $ 61,783 Professional services, hardware and other 3,155 1,528 8,155 3,195 Total revenue 37,113 30,124 79,870 64,978 Cost of sales 12,058 10,213 24,345 20,459 Gross profit 25,055 19,911 55,525 44,519 Operating expenses: Sales and marketing 9,098 8,149 17,862 16,535 General and administrative 12,099 10,968 24,847 22,868 Research and development 1,565 1,273 3,222 3,302 Amortization of intangible assets 4,689 4,173 9,661 8,481 Total operating expenses 27,451 24,563 55,592 51,186 Loss from operations ( 2,396 ) ( 4,652 ) ( 67 ) ( 6,667 ) Interest income 168 277 354 448 Interest expense ( 1,753 ) ( 809 ) ( 3,499 ) ( 1,260 ) Other income (expense), net — ( 96 ) — 92 Loss from operations before income taxes ( 3,981 ) ( 5,280 ) ( 3,212 ) ( 7,387 ) Income tax expense 462 843 606 1,134 Net loss ( 4,443 ) ( 6,123 ) ( 3,818 ) ( 8,521 ) Other comprehensive loss: Unrealized gain (loss) on marketable securities ( 262 ) 228 ( 850 ) 670 Comprehensive loss $ ( 4,705 ) $ ( 5,895 ) $ ( 4,668 ) $ ( 7,851 ) Basic and diluted loss per share Basic $ ( 0.15 ) $ ( 0.22 ) $ ( 0.13 ) $ ( 0.31 ) Diluted $ ( 0.15 ) $ ( 0.22 ) $ ( 0.13 ) $ ( 0.31 ) Weighted average basic and diluted shares Basic 28,749 27,237 28,586 27,100 Diluted 28,749 27,237 28,586 27,100 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 2 Table of Contents ASURE SOFTWARE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (in thousands) (Unaudited) Common Stock Outstanding Common Stock Amount Treasury Stock Additional Paid-in Capital Accumulated Deficit Other Comprehensive Income (Loss) Total Stockholders’ Equity Balance at December 31, 2025 28,076 $ 281 $ — $ 517,432 $ ( 320,352 ) $ 435 $ 197,796 Stock issued upon option exercise and vesting of restricted and performance stock units 512 5 — ( 310 ) — — ( 305 ) Stock issued for acquisitions 49 — — 445 — — 445 Share-based compensation — — — 2,150 — — 2,150 Net income — — — — 625 — 625 Other comprehensive loss — — — — — ( 588 ) ( 588 ) Balance at March 31, 2026 28,637 $ 286 $ — $ 519,717 $ ( 319,727 ) $ ( 153 ) $ 200,123 Stock issued upon option exercise and vesting of restricted and performance stock units 138 1 — ( 112 ) — — ( 111 ) Stock issued, ESPP 49 1 — 324 — — 325 Share-based compensation — — — 2,131 — — 2,131 Net loss — — — — ( 4,443 ) — ( 4,443 ) Other comprehensive loss — — — — — ( 262 ) ( 262 ) Balance at June 30, 2026 28,824 $ 288 $ — $ 522,060 $ ( 324,170 ) $ ( 415 ) $ 197,763 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 3 Table of Contents ASURE SOFTWARE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (in thousands) (Unaudited) Common Stock Outstanding Common Stock Amount Treasury Stock Additional Paid-in Capital Accumulated Deficit Other Comprehensive Income (Loss) Total Stockholders’ Equity Balance at December 31, 2024 26,671 $ 267 $ — $ 504,849 $ ( 307,226 ) $ ( 575 ) $ 197,315 Stock issued upon option exercise and vesting of restricted stock units 451 4 — 437 — — 441 Share-based compensation — — — 1,863 — — 1,863 Net loss — — — — ( 2,398 ) — ( 2,398 ) Other comprehensive income — — — — — 442 442 Balance at March 31, 2025 27,122 $ 271 $ — $ 507,149 $ ( 309,624 ) $ ( 133 ) $ 197,663 Stock issued upon option exercise and vesting of restricted stock units 189 2 — 239 — — 241 Stock issued, ESPP 54 1 — 351 — — 352 Share-based compensation — — — 1,891 — — 1,891 Net loss — — — — ( 6,123 ) — ( 6,123 ) Other comprehensive income — — $ — — — 228 228 Balance at June 30, 2025 27,365 $ 274 $ — $ 509,630 $ ( 315,747 ) $ 95 $ 194,252 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 4 Table of Contents ASURE SOFTWARE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited) Six Months Ended June 30, 2026 2025 Cash flows from operating activities: Net loss $ ( 3,818 ) $ ( 8,521 ) Adjustments to reconcile loss to net cash provided by operations: Depreciation and amortization 14,072 12,155 Amortization of operating lease assets 899 740 Amortization of debt financing costs and discount 653 537 Non-cash interest expense 158 309 Net accretion of discounts on available-for-sale securities ( 116 ) ( 236 ) Provision for expected losses 14 20 Provision for deferred income taxes 606 1,134 Loss on extinguishment of debt — 103 Net realized gains on sales of available-for-sale securities ( 1,803 ) ( 1,310 ) Share-based compensation 4,281 3,754 Gain on disposals of long-term assets — ( 7 ) Changes in operating assets and liabilities: Accounts receivable 2,726 4,512 Inventory 778 53 Prepaid expenses and other assets ( 4,443 ) ( 1,462 ) Operating lease right-of-use assets — 21 Accounts payable ( 138 ) 232 Accrued expenses and other long-term obligations ( 104 ) ( 624 ) Lease liabilities ( 968 ) ( 825 ) Deferred revenue ( 5,617 ) ( 5,434 ) Net cash provided by operating activities 7,180 5,151 Cash flows from investing activities: Acquisition of intangible assets ( 4,721 ) ( 6,346 ) Purchases of property and equipment ( 472 ) ( 393 ) Software capitalization costs ( 6,789 ) ( 6,470 ) Purchases of available-for-sale securities ( 23,752 ) ( 12,304 ) Proceeds from sales and maturities of available-for-sale securities 12,529 7,699 Net cash used in investing activities ( 23,205 ) ( 17,814 ) Cash flows from financing activities: Proceeds from notes payable, net of issuance costs — 57,982 Payments of notes payable — ( 5,000 ) Debt extinguishment costs — ( 100 ) Payments made on amounts due for the acquisition of intangible assets ( 449 ) ( 1,280 ) Net proceeds from (settlements for) common stock transactions ( 91 ) 1,034 Net change in client fund obligations ( 48,647 ) 20,461 Net cash provided by (used in) financing activities ( 49,187 ) 73,097 Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents ( 65,212 ) 60,434 Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period 164,703 145,712 Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period $ 99,491 $ 206,146 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 5 Table of Contents ASURE SOFTWARE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (in thousands) (Unaudited) Six Months Ended June 30, 2026 2025 Reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents to the Condensed Consolidated Balance Sheets Cash and cash equivalents $ 19,679 $ 66,000 Restricted cash and restricted cash equivalents included in funds held for clients 79,812 140,146 Total cash, cash equivalents, restricted cash, and restricted cash equivalents $ 99,491 $ 206,146 Supplemental information: Cash paid for interest $ 3,160 $ 498 Non-cash investing and financing activities: Acquisition of intangible assets $ 167 $ 1,884 Notes payable issued for acquisitions $ 622 $ 1,150 Shares issued for acquisitions $ 445 $ — The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 6 Table of Contents ASURE SOFTWARE, INC. NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands, except per share data unless otherwise noted) (Unaudited) NOTE 1 - THE COMPANY AND BASIS OF PRESENTATION Asure Software, Inc. (“Asure”, the “Company”, “we” and “our”), a Delaware corporation, is a provider of cloud-based Human Capital Management (“HCM”) software solutions delivered as Software-as-a-Service (“SaaS”) to businesses of all sizes. We offer human resources (“HR”) tools necessary to build a thriving workforce, provide the resources to stay compliant with dynamic federal, state, and local tax jurisdictions and their respective labor laws, freeing cash flows so these businesses can spend their financial capital on growing their businesses rather than administrative overhead that can impede growth. Our solutions also provide new ways for employers to connect with their employees and strengthen relationships with their talent. At the core of our offering is the Asure HCM platform—a SaaS-based system that includes Payroll & Tax filing, HR management tools, Time & Attendance software, Recruiting, and Insurance and Benefits Administration. This platform serves as the foundation for delivering both our core software and a range of complementary, technology-enabled services. These include AsureMarketplace™, which automates data exchange between our HCM system and third-party providers to increase efficiency, accuracy, and breadth of services. Our HR Compliance services combine expert guidance with scalable digital delivery. AsurePay™, our payroll card, which we provide in association with our partners, offers employees fast, secure access to earned wages. Additionally, through our licensed brokerage, we offer Insurance Services that help employers manage benefits and reduce administrative costs. We deliver our solutions directly and through a national network of Reseller Partners. We strive to be the most trusted HCM resource. Our solutions solve three primary challenges that prevent businesses from growing: HR complexity, allocation of human and financial capital, and the ability to build great teams. We sell our solutions through both direct and partner channels. We supplement our direct sales efforts with partner programs that afford us access to opportunities in various geographic and industry niches. Asure has two types of partners: Reseller Partners that white label our products while providing value-added services to their clients (our indirect clients) and Referral Partners that provide us with client leads but do not resell our solutions. We have and will continue to invest in research and development to expand our solutions. Our solutions reduce the administrative burden on employers and increase employee productivity while managing the employment lifecycle. The Asure HCM suite includes eight product lines: Asure Payroll & Tax, Asure HR Compliance, Asure Time & Attendance, AsureRecruiting™, Asure Insurance and Benefits Administration, AsurePay™, Asure Tax Management Solutions, and AsureMarketplace™ . We develop, market, sell and support our offerings nationwide through our principal office in Austin, Texas, and from our processing hubs in Alabama, California, Florida, Georgia, New Jersey, New York, North Carolina, Ohio, South Dakota, Tennessee, Texas, Virginia, and Vermont. We have prepared the accompanying unaudited Condensed Consolidated Financial Statements in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) and accordingly, they do not include all information and footnotes required under U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. In the opinion of management, these interim financial statements contain all adjustments, consisting of normal, recurring adjustments, necessary for a fair presentation of our financial position as of June 30, 2026, comprehensive loss and changes in stockholders’ equity for the three and six months ended June 30, 2026, and 2025 , and cash flows for the six months ended June 30, 2026, and 2025 . Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period financial statements. These reclassifications had no effect on the consolidated financial position or consolidated results of operations of the Company. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements and notes thereto filed with the SEC in our annual report on Form 10-K for the fiscal year ended December 31, 2025 (our “2025 Annual Report on Form 10-K”). Our results for any interim period are not necessarily indicative of results for a full fiscal year. 7 Table of Contents NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES REPORTABLE SEGMENTS Our chief operating decision maker is our Chairman and Chief Executive Officer, Patrick Goepel, who reviews financial information presented on a company-wide basis. Thus, in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 280, we determined that we have a single reportable segment that primarily derives our revenue in the United States by providing payroll services to customers. USE OF ESTIMATES Preparation of the Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of the assets and liabilities, the disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. These estimates are subjective in nature and involve judgments. The more significant estimates made by management include the valuation allowance for the gross deferred tax assets, the determination of the fair value of our long-lived assets, and the fair value of assets acquired, and liabilities assumed during acquisitions. We base our estimates on historical experience and on various other assumptions management believes reasonable under the given circumstances. These estimates could be materially different under different conditions and assumptions. CASH AND CASH EQUIVALENTS We consider all highly liquid investments with maturity of 90 days or less to be cash equivalents. Cash equivalents include investments in an institutional money market fund, which invests in U.S. Treasury bills, notes and bonds, and/or repurchase agreements, backed by such obligations. Carrying value approximates fair value. INVENTORIES Our inventories consist primarily of finished goods and are stated at the lower of cost or net realizable value with cost determined on an average cost basis. Items included in costs of inventory consist of labor, material, overhead costs, freight in, and additional transactions costs such as taxes and tariffs. Provisions are made if the cost of inventories exceeds their net realizable value and is charged to cost of sales. We did not recognize any provision for the three and six months ended June 30, 2026 and 2025. RECENT ACCOUNTING PRONOUNCEMENTS In July 2025, the FASB issued ASU No. 2025-05, Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides a practical expedient to assume that, for estimating expected credit losses, current conditions as of the balance sheet date will remain constant through the remaining life of the assets. The practical expedient is available to all entities. The standard becomes effective for all entities for annual periods beginning after December 15, 2025. We adopted this standard prospectively for the annual period ending December 31, 2026. This guidance did not have an impact on our financial position, results of operations, or cash flows. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) As of June 30, 2026, and December 31, 2025, accumulated other comprehensive income (loss) consisted of net unrealized gains and losses on available-for-sale securities. 8 Table of Contents NOTE 3 - BUSINESS COMBINATIONS AND ASSET ACQUISITIONS 2026 Asset Acquisitions During the six months ended June 30, 2026, we completed one customer relationship asset acquisition. The total purchase price of this acquisition was $ 6,175 , which consisted of $ 4,730 of cash paid during the six months ended June 30, 2026 , $ 121 of cash to be paid over the next 12 months, the delivery of promissory notes in the amount of $ 879 , net of discounts, and the delivery of 49 shares of Asure common stock, which had an aggregate fair value of $ 445 at the acquisition dates. The acquired customer relationships are recorded as intangible assets and are being amortized on a straight-line basis over eight years . 2025 Business Combinations Effective July 1, 2025, we acquired 100 % of the membership interests of Lathem Time 2025 LLC (f/k/a Lathem Time Corporation, “Lathem”), whose technology will be used to expand the capabilities of our broader suite of HR solutions, specifically in time and attendance systems. The aggregate purchase price that we paid for the membership interests was $ 39,497 , consisting of $ 37,500 paid in cash on hand and the remaining $ 2,221 in the form of a promissory note ($ 1,997 net of discount). The following table summarizes the amounts of assets acquired and liabilities assumed at the acquisition date, valued at their estimated acquisition-date fair value: Acquisition Date Fair Value Accounts receivable $ 2,020 Inventory 3,380 Prepaid expenses and other current assets 177 Property and equipment, net 185 Intangible assets, net 16,500 Operating lease assets, net 826 Other assets, net 777 Total assets acquired 23,865 Accounts payable 474 Operating lease liabilities, current 826 Other accrued liabilities 615 Deferred revenue 3,488 Total liabilities assumed 5,403 Total net assets acquired 18,462 Goodwill 21,035 Total purchase price $ 39,497 The goodwill of $ 21,035 arising from the acquisition consists largely of the synergies and economies of scale expected from combining our operations with Lathem and is expected to be deductible for tax purposes. 9 Table of Contents Asset Acquisitions During the year ended December 31, 2025, we completed seven customer relationship asset acquisitions. The total purchase price of these acquisitions was $ 20,523 , which consisted of $ 16,019 of cash paid during the year ended December 31, 2025, $ 56 of cash paid during the six months ended June 30, 2026 , the delivery of promissory notes in the amount of $ 3,492 , net of discounts, and the delivery of 124 shares of Asure common stock, which had an aggregate fair value of $ 956 at the acquisition dates. The purchase prices for certain of these acquisitions are subject to adjustments for contingent events which are generally expected to occur over the next twelve months following June 30, 2026, including revenue generated from the acquired assets. The acquired customer relationships are recorded as intangible assets and are being amortized on a straight-line basis over eight years . NOTE 4 - INVESTMENTS AND FAIR VALUE MEASUREMENTS Accounting Standards Codification (ASC) 820 “Fair Value Measurement” (“ASC 820”) defines fair value, establishes a framework for measuring fair value under U.S. GAAP and enhances disclosures about fair value measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 describes a fair value hierarchy based on the following three levels of inputs that may be used to measure fair value, of which the first two are considered observable and the last unobservable: Level 1: Quoted prices in active markets for identical assets or liabilities; Level 2: Quoted prices in active markets for similar assets or liabilities; quoted prices in markets that are not active for identical or similar assets or liabilities; and model-driven valuations whose significant inputs are observable; and Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The following table presents the fair value hierarchy for our financial assets and liabilities measured at fair value on a recurring basis for the periods presented below (in thousands): Total Carrying Value Level 1 Level 2 Level 3 June 30, 2026 Assets: Funds held for clients Money market funds $ 5,503 $ 5,503 $ — $ — Available-for-sale securities 99,103 — 99,103 — Total $ 104,606 $ 5,503 $ 99,103 $ — December 31, 2025 Assets: Funds held for clients Money market funds $ 1,784 $ 1,784 $ — $ — Available-for-sale securities 88,652 — 88,652 — Total $ 90,436 $ 1,784 $ 88,652 $ — 10 Table of Contents Cash equivalents and investments classified as available-for-sale within funds held for clients consisted of the following for the periods presented below (in thousands): Amortized Cost Gross Unrealized Gains (1) Gross Unrealized Losses (1) Aggregate Estimated Fair Value June 30, 2026 Cash equivalents $ 5,505 $ 1 $ ( 1 ) $ 5,505 Available-for-sale securities: Corporate debt securities 95,967 95 ( 494 ) 95,568 U.S. Government agency securities 3,551 2 ( 18 ) 3,535 Total available-for-sale securities 99,518 97 ( 512 ) 99,103 Total (2) $ 105,023 $ 98 $ ( 513 ) $ 104,608 December 31, 2025 Cash equivalents $ 1,787 $ — $ ( 3 ) $ 1,784 Available-for-sale securities: Corporate debt securities 83,160 501 ( 77 ) 83,584 Municipal bonds 1,542 — ( 17 ) 1,525 U.S. Government agency securities 3,515 28 — 3,543 Total available-for-sale securities 88,217 529 ( 94 ) 88,652 Total (2) $ 90,004 $ 529 $ ( 97 ) $ 90,436 (1) Unrealized gains and losses on available-for-sale securities are included as a component of comprehensive income (loss). As of June 30, 2026, and December 31, 2025, there were 46 and 127 securities, respectively, in an unrealized gain position and there were 131 and 27 securities in an unrealized loss position, respectively. As of June 30, 2026, these unrealized losses were less than $ 18 individually and $ 512 in the aggregate. As of December 31, 2025, these unrealized losses were less than $ 13 individually and $ 94 in the aggregate. We invest in high quality securities with roughly 68% of our portfolio made up of A ratings and above with unrealized losses primarily attributable to macroeconomic factors rather than credit related. We have no material individual securities that have been in a continuous unrealized loss position greater than twelve months. We do not intend to sell these investments and we do not expect to sell these investments before recovery of their amortized cost basis, which may be at maturity. We review our investments to identify and evaluate investments that indicate possible credit losses. Factors considered in determining whether a loss is a credit loss include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, and our intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value. (2) At June 30, 2026 and December 31, 2025, none of these securities were classified as cash and cash equivalents on the accompanying Condensed Consolidated Balance Sheets. Funds held for clients represent assets that we have classified for use solely for the purposes of satisfying the obligations to remit funds relating to our payroll and payroll tax filing services, which are classified as client funds obligations on our Condensed Consolidated Balance Sheets. Funds held for clients have been invested in the following categories for the periods presented below (in thousands): June 30, 2026 December 31, 2025 Restricted cash and cash equivalents held to satisfy client funds obligations $ 79,812 $ 139,459 Restricted short-term marketable securities held to satisfy client funds obligations 20,840 12,781 Restricted long-term marketable securities held to satisfy client funds obligations 78,263 75,871 Total funds held for clients $ 178,915 $ 228,111 Expected maturities of available-for-sale securities are as of June 30, 2026, are as follows (in thousands): One year or less $ 20,840 After one year through five years 78,263 Total $ 99,103 11 Table of Contents NOTE 5 - GOODWILL AND OTHER INTANGIBLE ASSETS December 31, 2025 Acquisitions June 30, 2026 Goodwill $ 115,759 $ — $ 115,759 We believe significant synergies are expected to arise from our strategic acquisitions and their assembled work forces. This factor contributed to a purchase price that was in excess of the fair value of the net assets acquired and, as a result, we recorded goodwill for each acquisition. A portion of acquired goodwill will be amortizable for tax purposes. As of June 30, 2026, there has been no impairment of goodwill based on the qualitative assessments we have performed. Gross Intangible Assets December 31, 2025 Acquisitions June 30, 2026 Customer relationships $ 182,024 $ 6,003 $ 188,027 Developed technology 19,501 — 19,501 Trade names 880 — 880 Non-compete agreements 1,032 — 1,032 Total $ 203,437 $ 6,003 $ 209,440 The gross carrying amount and accumulated amortization of our intangible assets are as follows for the periods presented below (in thousands, except weighted average periods): Weighted Average Amortization Period (in Years) Gross Intangible Assets Accumulated Amortization Net Intangible Assets June 30, 2026 Customer relationships 8.4 $ 188,027 $ ( 110,998 ) $ 77,029 Developed technology 6.6 19,501 ( 13,075 ) 6,426 Trade names 4.3 880 ( 880 ) — Non-compete agreements 5.2 1,032 ( 961 ) 71 8.2 $ 209,440 $ ( 125,914 ) $ 83,526 December 31, 2025 Customer relationships 8.5 $ 182,024 $ ( 101,343 ) $ 80,681 Developed technology 6.6 19,501 ( 12,348 ) 7,153 Trade names 4.3 880 ( 880 ) — Non-compete agreements 5.2 1,032 ( 955 ) 77 8.3 $ 203,437 $ ( 115,526 ) $ 87,911 We record amortization expenses using the straight-line method over the estimated useful lives of the intangible assets, as noted above. Amortization expenses recorded in operating expenses were $ 9,661 and $ 8,481 for the six months ended June 30, 2026 and 2025, respectively. Amortization expenses recorded in cost of sales were $ 728 and $ 420 for the six months ended June 30, 2026 and 2025, respectively. There was no impairment of intangibles during the six months ended June 30, 2026, based on the qualitative assessment we performed. However, if market, political and other conditions over which we have no control continue to affect the capital markets and our stock price declines, we may experience an impairment of our intangibles in future quarters. 12 Table of Contents The following table summarizes the future estimated amortization expense relating to our intangible assets as of June 30, 2026 (in thousands): 2026 (Remaining) $ 8,951 2027 17,213 2028 15,768 2029 13,604 2030 9,974 2031 8,993 Thereafter 9,023 $ 83,526 NOTE 6 - NOTES PAYABLE The following table summarizes our outstanding debt as of the dates indicated (in thousands): Maturity Cash Interest Rate June 30, 2026 December 31, 2025 Notes Payable – Acquisitions (1) 08/01/26 - 07/01/29 2.00 % - 4.00 % $ 11,395 $ 10,775 Notes Payable – Senior Credit Facility 04/30/30 8.99 % 60,000 60,000 Gross Notes Payable $ 71,395 $ 70,775 (1) See Note 3 — Business Combinations and Asset Acquisitions and Notes Payable - Acquisitions section below for further discussion regarding the notes payable related to acquisitions. The following table summarizes the debt issuance costs as of the dates indicated (in thousands): Gross Notes Payable Debt Issuance Costs and Debt Discount Net Notes Payable June 30, 2026 Current portion of notes payable $ 6,980 $ ( 315 ) $ 6,665 Notes payable, net of current portion 64,415 ( 2,181 ) 62,234 Total $ 71,395 $ ( 2,496 ) $ 68,899 December 31, 2025 Current portion of notes payable $ 4,834 $ ( 490 ) $ 4,344 Notes payable, net of current portion 65,941 ( 2,659 ) 63,282 Total $ 70,775 $ ( 3,149 ) $ 67,626 The following table summarizes the future principal payments related to our outstanding debt as of June 30, 2026 (in thousands): 2026 (Remaining) $ 5,760 2027 4,635 2028 — 2029 46,000 2030 15,000 Total $ 71,395 13 Table of Contents Notes Payable - Acquisitions As of June 30, 2026, we have nine promissory notes related to acquisitions that occurred during the six months ended June 30, 2026, and prior years with a combined outstanding principal balance of $ 11,395 and maturity dates ranging from August 1, 2026, to July 1, 2029. All of these promissory notes are subordinated to our Loan Agreement with MidCap (defined below). See Note 3 — Business Combinations and Asset Acquisitions for further discussion regarding the issuance of notes payable related to acquisitions. On May 15, 2026, we came to an agreement with the seller of a prior asset acquisition to terminate the contingent consideration agreement associated with the transaction, determining the final purchase price of the acquisition as of that date. As a result of the termination, we determined that we were owed $ 306 from the seller, and the principal amount of the promissory note associated with the acquisition was reduced in accordance with the terms of the acquisition agreement. On October 30, 2025, we partially repaid the outstanding balance on one of our acquisition-related promissory notes through the issuance of shares of our common stock and cash payment of accrued interest. Prior to the transaction, the promissory note had an outstanding principal balance of $ 3,000 and would mature on July 1, 2029. In connection with the partial extinguishment, the holders of the promissory note agreed to reduce the principal balance of the portion of the note by $ 300 in consideration of the early repayment. The remaining $ 1,700 of principal was repaid with 201 shares of common stock, having an estimated fair value of $ 1,511 , and $ 20 of accrued interest was paid with cash. After the partial extinguishment, the outstanding principal balance of the note is $ 1,000 . On August 13, 2025, we prepaid the outstanding balance on one of our acquisition-related promissory notes through the issuance of shares of our common stock. Prior to extinguishment, the promissory note had an outstanding principal balance of $ 1,000 and would mature on February 22, 2026. In connection with the extinguishment, the principal balance of the note was reduced by $ 118 for indemnifiable claims related to the acquisition. The remaining $ 956 of principal and accrued interest was repaid with 91 shares of common stock, having a fair value of $ 701 . Senior Credit Facility On April 10, 2025, we entered into a Loan Agreement with MidCap and the lenders from time to time party thereto (such lenders collectively with MidCap, the “Lenders”). Under the Loan Agreement, we may borrow up to $ 60,000 from the Lenders, all of which has been funded as of June 30, 2026. The maturity date of the loan as provided under the Loan Agreement is April 1, 2030 (the “Maturity Date”). Interest on the outstanding loan balance is payable monthly in arrears at an annual rate of Term Secured Overnight Financing Rate (“SOFR”) plus 5.00 %, subject to a SOFR floor of 2.00 %. This rate was 8.74 % as of June 30, 2026. Prior to April 1, 2029 (the “Amortization Start Date”), we must make interest-only payments on the outstanding loan balance. Commencing on the Amortization Start Date and continuing on the first day of each calendar month thereafter, we will pay an amount equal to the total principal of the outstanding loan balance divided by twelve ( 12 ), for a twelve ( 12 ) month straight-line amortization of equal monthly principal payments. Also on a monthly basis, we must pay an administrative agency fee to MidCap equal to 0.25 % of the average end-of-day principal balance outstanding during the immediately preceding month. At the time of final payment under the loan, we will provide a final payment fee of 2.00 % of the amount advanced thereunder except in the case of a refinance of the loan with MidCap and the Lenders. We are subject to customary events of default as described in the Loan Agreement. In such event, and for so long as it continues, the outstanding loan balance will bear interest at 2.0 % per annum in excess of the rate otherwise payable. Under the Loan Agreement, we covenant to maintain a (1) Total Leverage Ratio (as defined in the Loan Agreement), as tested quarterly, no greater than 5.50 to 1.00, and (2) minimum liquidity threshold of $ 10,000 . As of June 30, 2026, we are in compliance with all covenants under the Loan Agreement. In connection with the Loan Agreement and subsequent draw, we incurred $ 2,025 of origination, legal, and other fees that represent debt financing costs to be deferred and amortized over the duration of the Loan Agreement. As a result, net proceeds of all borrowings under the Loan Agreement were $ 57,975 . 14 Table of Contents NOTE 7 – CONTRACTS WITH CUSTOMERS AND REVENUE CONCENTRATION Receivables Receivables from contracts with customers, net of allowance for credit losses of $ 9,717 , were $ 13,120 at June 30, 2026. Receivables from contracts with customers, net of allowance for credit losses of $ 7,206 , were $ 15,859 at December 31, 2025. We had a provision for expected losses of $ 14 , write-offs charged against the allowance for credit losses of $ 37 , and recoveries on previously written off receivables of $ 2,540 during the six months ended June 30, 2026. We had a provision for expected losses of $ 20 , write-offs charges against the allowance for credit losses of $ 69 , and recoveries on previously written off receivables of $ 1,000 during the six months ended June 30, 2025. As of June 30, 2026, we had one customer that accounted for $ 2,158 or 15 %, of our net accounts receivable balance. The receivable balance is not collateralized, and thus the entire $ 2,158 is at risk of loss. As of December 31, 2025, we had one customer that accounted for $ 1,879 or 13 % of our net accounts receivable balance. Contract Assets Costs to Fulfill Contracts Contract assets from contracts with customers were $ 6,487 and $ 3,747 at June 30, 2026 and December 31, 2025 , respectively . Costs to Obtain Contracts Deferred commission costs from contracts with customers w ere $ 15,590 and $ 14,721 at June 30, 2026 and December 31, 2025 , respectively. The amount of amortization recognized for the three and six months ended June 30, 2026 was $ 1,006 and $ 1,814 , respectively, and for the three and six months ended June 30, 2025 was $ 878 and $ 1,615 , respectively. Deferred Revenue During the three and six months ended June 30, 2026, revenue of $ 2,682 and $ 11,556 , respectively, and during the three and six months ended June 30, 2025, revenue of $ 2,567 and $ 8,557 , respectively, was recognized from the deferred revenue balance at the beginning of each period. Transaction Price Allocated to the Remaining Performance Obligations As of June 30, 2026, approximately $ 80,032 of revenue is expected to be recognized from remaining performance obligations. We expect to recognize revenue on approximately 41 % of these remaining performance obligations over the next twelve months, with the balance recognized thereafter. These amounts e xclude remaining performance obligations related to contracts for professional services for tax and payroll offerings whose remaining contractual term is less than one year as of June 30, 2026. Revenue Concentration During the six months ended June 30, 2026 and 2025, there were no customers that individually represented 10% or more of consolidated revenue. NOTE 8 - COMMITMENTS AND CONTINGENCIES Lease Commitments We have entered into office space lease agreements, which qualify as operating leases under ASC 842 (“Leases”). Under such leases, we have commitments to pay annual minimum (base) rent. The leases have original terms (excluding extension options) ranging from one to ten years . Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. We record base rent expense under the straight-line method over the term of the lease. In the accompanying Condensed Consolidated Statements of Comprehensive Loss, rent expense is included in operating expenses under general and administrative expenses. Rent expense was as follows for the periods presented below (in thousands): 15 Table of Contents Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Rent expense $ 643 $ 520 $ 1,290 $ 1,054 For purposes of calculating the lease assets and lease liabilities, extension options are not included in the lease term unless it is reasonably certain we will exercise the option, or the lessor has the sole ability to exercise the option. The weighted average discount rate of our operating leases is 10 % as of June 30, 2026, and December 31, 2025. The weighted average remaining lease term for our operating leases is three years as of June 30, 2026 and December 31, 2025. Supplemental cash flow information related to leases are as follows for the periods presented below (in thousands): Six Months Ended June 30, 2026 2025 Cash paid for amounts included in the measurement of operating lease liabilities: Operating cash outflows from operating leases $ 1,304 $ 1,075 Non-cash activities: Operating lease assets obtained or removed in exchange for new, modified or terminated operating lease liabilities $ 36 $ 1,447 Future minimum commitments over the life of all operating leases, which exclude variable rent payments, are as follows for the period presented below (in thousands): 2026 (Remaining) $ 1,247 2027 2,376 2028 2,110 2029 1,035 2030 208 2031 27 Thereafter — Total minimum lease payments 7,003 Less: imputed interest ( 1,024 ) Total lease liabilities $ 5,979 Contingencies Although we have been, are, and in the future may be, the defendant or plaintiff in various actions arising in the normal course of business, as of June 30, 2026 , we were not currently a party to any material legal proceedings. NOTE 9 - SHARE-BASED COMPENSATION We have one active equity plan, the 2018 Incentive Award Plan (the “2018 Plan”). The 2018 Plan, approved by our stockholders, replaced our 2009 Equity Incentive Plan, as amended (the “2009 Plan”); however, the terms and conditions of the 2009 Plan will continue to govern any outstanding awards granted thereunder. The number of shares reserved for issuance under the 2018 Plan is 6,998 shares. We have an aggregate of 2,175 options, restricted stock units (“RSUs”) and performance stock units (“PSUs”) granted and outstanding pursuant to the 2018 Plan as of June 30, 2026. As of June 30, 2026, the number of shares available for future grant under the 2018 Plan is 2,067 . Share-based compensation for our stock option plans for the three and six months ended June 30, 2026, was $ 2,131 and $ 4,281 , respectively, and for the three and six months ended June 30, 2025, was $ 1,891 and $ 3,754 , respectively . Issuance of common stock related to the exercise of stock options and the vesting of restricted stock units (including restricted stock units that converted from performance stock units) are as follows for the period presented below (in thousands): 16 Table of Contents Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Common stock issued - options (1) 317 296 348 365 Common stock issued - RSU (1)(2) 97 73 638 455 (1) Included in these amounts are 276 and 336 shares withheld for taxes or in connection with a cashless exercise of options during the three and six months ended June 30, 2026, respectively, and 180 shares withheld for taxes or in connection with a cashless exercise of options during the three and six months ended June 30, 2025. (2) Included in these amounts are 21 and 318 restricted stock units during the three and six months ended June 30, 2026, respectively, and 159 restricted stock units during the six months ended June 30, 2025, that were converted from performance stock units which vested during those periods. NOTE 10 - NET LOSS PER SHARE We compute net loss per share based on the weighted average number of common shares outstanding for the period. Diluted net loss per share reflects the maximum dilution that would have resulted from incremental common shares issuable upon the exercise of stock options or vesting of RSUs and in some cases PSUs. In periods of net income, we compute the adjustment to the denominator of our dilutive net earnings per share calculation to include these stock options, RSUs, and PSUs, as applicable, using the treasury stock method. Regardless of the period resulting in net income or net loss, we exclude the adjustment to the denominator of our dilutive net loss per share calculation to the extent that they are anti-dilutive. The following table sets forth the computation of basic and diluted net loss per common share for the periods presented below (in thousands, except per share amounts): Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Basic: Net loss $ ( 4,443 ) $ ( 6,123 ) $ ( 3,818 ) $ ( 8,521 ) Weighted-average shares of common stock outstanding 28,749 27,237 28,586 27,100 Basic loss per share $ ( 0.15 ) $ ( 0.22 ) $ ( 0.13 ) $ ( 0.31 ) Diluted: Net loss $ ( 4,443 ) $ ( 6,123 ) $ ( 3,818 ) $ ( 8,521 ) Weighted-average shares of common stock outstanding 28,749 27,237 28,586 27,100 Diluted loss per share $ ( 0.15 ) $ ( 0.22 ) $ ( 0.13 ) $ ( 0.31 ) 17 Table of Contents NOTE 11 - SEGMENT INFORMATION We manage our business activities on a consolidated basis and operate as one reportable segment. Our chief operating decision maker (“CODM”) is the Chairman and Chief Executive Officer, who reviews financial information presented on a consolidated basis. The CODM uses consolidated net loss, as reported on our Consolidated Statements of Comprehensive Loss, to assess financial performance and allocate resources. These financial metrics are used by the CODM to make key operating decisions, such as the allocation of budget between cost of sales, sales and marketing, general and administrative, and research and development expenses. The CODM does not review assets in evaluating the results of the segment, and therefore, such information is not presented. The operating financial results of our single reportable segment for three and six months ended June 30, 2026 and 2025, are as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Total revenues $ 37,113 $ 30,124 $ 79,870 $ 64,978 Significant segment expenses Compensation 23,536 22,180 47,453 44,968 Non-compensation 10,635 8,560 21,675 18,172 Deferred software and commission costs ( 3,789 ) ( 4,044 ) ( 7,544 ) ( 7,416 ) Amortization, depreciation, and other noncash expenses 9,589 8,920 18,957 17,048 Other segment expenses (income) (1) 1,585 631 3,147 727 Total expenses 41,556 36,247 83,688 73,499 Net loss $ ( 4,443 ) $ ( 6,123 ) $ ( 3,818 ) $ ( 8,521 ) (1) Other segment expenses include interest expense (income) and other business expense (income) 18 Table of Contents